Omnichannel puts retailers in the red
Buried by the high cost of fulfilling online orders across multiple channels, only 16 percent of companies can fulfill omnichannel demand profitably today, according to a new study from JDA.
The "Omni-Channel Fulfillment Imperative" report, based on a global survey of more than 400 retail and consumer goods CEOs, also found 67 percent of respondents reporting that these costs are growing.
The highest costs associated with omnichannel selling:
- Handling returns from online and store orders (cited by 71 percent of respondents);
- Shipping directly to the customer (67 percent);
- Shipping to the store for customer pick-up (59 percent).
The fulfillment capability most cited as needing attention was transportation and logistics, named by 88 percent of CEOs as a priority for the future. The second was improving inventory availability to fill orders, cited by 85 percent.
JDA pointed out that every time an online order arrives, retailers can either pull the product from a local store, send it from a centralized warehouse or ship it directly from the supplier. However, they "lack the insight to make these decisions in a profitable manner — and are not sufficiently focused on this critical capability gap," according to Kevin Iaquinto, chief marketing officer at JDA.
Seventy-one percent ranked omnichannel fulfillment as either a high or a top priority. The respondents planned to invest an average of 29 percent of their total capital expenditures for 2015 on improving their omnichannel fulfillment performance.
Mr. Iaquinto said retailers need intelligent logistics and fulfillment solutions that can reveal the hidden costs and customer service trade-offs associated with every delivery option. He added, "In addition, to truly win in the omnichannel marketplace, retailers need the upfront demand forecasting tools to make sure products are already distributed across all locations in a manner that supports profitable delivery."
- The Omni-Channel Fulfillment Imperative – JDA
- Retailers Investing Heavily in Omni-Channel Selling – But Where Are the Profits? – JDA
Will the costs of seamless omnichannel fulfillment be absorbed as companies learn to work more efficiently? Will expectations around omnichannel capabilities and/or expected costs to consumers likely have to be reconsidered?