How successful are Retailers in the Omnichannel?

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Bricks and Clicks (B&C) retailing is with us for more than two decades. The adding of the online channel to their physical business has allowed retailers to survive and grow even during tough trading conditions.  However, a recent report by Andria Cheng in eMarketer suggests that B&C retailers are struggling to the get their omnichannel strategies to work.

Andria refers to a 2016 survey of about 350 retail and consumer goods CEOs in countries such as the US and China. The survey was conducted by PricewaterhouseCoopers (PwC) for JDA, a supply chain software provider for retailers from Ann Taylor parent company Ann Inc. to grocer Albertsons. Several worrying aspects about the use of the omnichannel in the retail industry came to the fore with this survey.

How effective are Bricks and Clicks retailers using the omnichannel?

The reasons for retailers to become Bricks and Clicks were discussed previously by this author: “Crossing the digital threshold – adding Clicks to Bricks for sustainable retail outcomes”.  However, the implementation of an omnichannel retail strategy seems not that straightforward.

Results from the survey commissioned by PwC (reported by eMarketer) indicated the following:

  • More than half of retailers haven’t started implementing, are struggling to define or don’t even have plans to develop a “digital transformation strategy”.
  • Only 10% of CEOs say they are able to make a profit while fulfilling omnichannel demand because of delivery and other supply chain complexities.
  • 75% of retail executives said their online operating costs as a percentage of sales have seen either “significant” or “some” increase in the past 12 months. One key driver of that increase: 74% of retailers said customer returns are hurting profit to “a great extent” or “to some extent.”
  • CEOs, especially those in the soft-lines (like apparel) and hard goods (like appliances) sectors, said that their greatest concern is inventory exhaustion, or “out of stock.” Out of stock is a big problem hurting retailers’ ability to convert sales when consumers visit stores.
  • More than half (51%) of respondents said they offer or plan to offer pick up in store in the next 12 months.
  • With the high costs of free shipping and other delivery offers, 33% of survey respondents said they would offer same-day delivery in 2017, down from 44% last year. Meanwhile, a third of respondents said they plan to increase the minimum order value. The percentage of retailers offering specific delivery time slots also has declined.
  • Almost three-fifths of retailers surveyed said they have no plans to reduce their store investment and said their online sales are “additional” sales that aren’t hurting their physical store sales.
  • Automation and internet of things rank lower on their investment list for now, even though these are the areas that are gaining ground as retailers consider them “true game changers,” according to the survey.

Digital technology such as artificial intelligence (AI) and self-service technology (SST) are for long now available for retailers to use.

How to add digital technology seamlessly to your retail business

Digital communication technology is part of the retail setup and is here to stay.  However, retailers are reluctant to adopt the technology for a number of reasons. Retailers should consider the following when deciding to add digital:

  1. Visualize what your business will achieve by adding digital and how your customers will respond to it;
  2. Develop a business plan to integrate the digital with the physical operations of your business;
  3. The integration will cost you money – find out how much and where the funds will come from;
  4. Before your spend a cent on it – discuss and argue the process with all the stakeholders – allow everyone to have their say;
  5. If possible, do a quick survey with your customers to get their opinion on the matter;
  6. Once everyone has agreed with the integration, develop and implement an integration strategy;
  7. Measure the results and make corrections as the process moves forward;
  8. If you lose money continuously, start again or discard the process.

Most of the reactions of the CEOs coming from the PwC survey can probably be because they didn’t plan properly. To be honest, failing to plan is planning to fail.

A strategic planning session

Concluding

The digitization of retail is as revolutionary as it gets. Not only that, it is disruptive. Integrating the digital with the physical is no more ‘a nice to have’. Retailers ignoring the revolution facilitated by digital communication technology, and driven by their customers 1, will fail. Strategic planning may help retailers to do the integration orderly and seamlessly. Only then retailers can enjoy success in the omni retail channel.

Note:

1 Picot-Coupey, K., Huré, E. and Piveteau, L. 2016. Channel design to enrich customers’ shopping experiences: Synchronizing clicks with bricks in an omni-channel perspective–the Direct Optic case. International Journal of Retail & Distribution Management, 44(3):336-368.

A well researched and written Business Plan helps to get your business started the right way.

Further reading

  1. How do Customers Respond to Self-Service Technology in Retail Shops?
  2. Artificial Intelligence – Digital Outcomes or Digital Disruptions for Retailers?
  3. Retail and the Internet of Things

Images:

  1. Pixabay.com
  2. Wikimedia

Published by

Douw G Steyn

Douw G Steyn

Management consultant, blog writer, dreamer

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