The rise of omnichannel retailing and the age of ‘me commerce,’ in which the consumer is the new boss (complete with higher expectations), has led retailers to transform their business models. Retailers have moved toward providing a more integrated, seamless experience for consumers, regardless of which channel they choose to shop.
However, to succeed at developing an omnichannel model also means doing so profitably, no small feat for retailers today. Ultimately, it’s necessary to remove omnichannel silos in order to create significant competitive advantages.
CEO Viewpoint 2016: The Journey to Profitable Omni-Channel Commerce, the third annual survey by PwC of more than 300 retailers and consumer goods CEOs, breaks down the realities of omnichannel. The survey, conducted late in 2015 on behalf of JDA, finds that while only 18% of executives say they have eliminated operational silos and are delivering seamless omnichannel shopping experiences for their customers, this small group is:
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- More confident in revenue and profit growth;
- Less likely to make changes that could decrease customer loyalty;
- Investing in advanced applications for forecasting and analyzing consumer demand;
- More confident in the ability to meet customers’expectations for seamless omnichannel shopping; and
- Less likely to be experiencing increased costs for omnichannel fulfillment
Conversely, the survey’s key findings for silo-modeled businesses include:
- 74% are failing to meet customer expectations across all channels;
- 71% are failing to keep pace with technological innovations;
- 74% are failing to integrate business silos and integrate physical stores with e-Commerce;
- 68% are failing to sustain brick and mortar sales; and
- 71% are failing to manage the growing costs of online returns
With numbers like these, it is apparent that the elimination of such silos speaks not only to stronger positioning for revenue and profit growth in the year ahead, but considerable differences in omnichannel maturity across the companies and countries surveyed (which include China, Germany, Mexico, the UK and the U.S.). CEOs who have removed silos are also achieving significant competitive advantage through lower costs and increased investments in customer-centric services.
So, where are CEOs investing in omnichannel? The one area that is costing them the most, and potentially impacting their profitability: order fulfillment options. CEOs surveyed are spending 26% of their investment capital on omnichannel readiness in 2016. Some of these investments center around extending omnichannel fulfillment options for customers (51 percent), providing a seamless customer shopping experience (49 percent) and most importantly, understanding social media for business use (49 percent). Understanding and analyzing customer data is critical to mastering omnichannel in 2016 and beyond.
When asked to rank their top three priorities for IT investments, the CEOs without silos were putting much more emphasis than their peers on understanding their customers through forecasting and replenishment (42% vs. 25%) and customer data (42% vs. 23%). In contrast, the CEOs who still have silos were focused more on the basics such as e-Commerce, order management and supply chain, areas the more mature omni-channel companies have already mastered.
Also revealed in the survey, emerging markets (China and Mexico) are offering more fulfillment options to their customers, or plan to over the next 12 months, than the companies in more mature markets (Germany, UK, U.S.). This is important to note for companies who want to compete in emerging markets. These more mature omni-channel companies are more likely to offer in-store Click & Collect (56% vs. 47%) than their peers with silos, but are less likely to offer any of the other Click & Collect options. These companies appear more focused on the speed of delivery. They favor same day over next day deliveries and are more likely to offer specific time slots for customer deliveries. In mature markets, speed to delivery can be a loyalty-building competitive advantage.
These findings reflect Retail TouchPoints survey report What’s Important To Retailers In The Omnichannel Age, especially in emerging markets, in which retailers were putting a marked emphasis in responding to shoppers needs for order fulfillment and breaking in to the realm of personalization. Emerging markets in particular are spending heavily in these areas, as well as in understanding social media, improving supply chains and creating new in-store experiences. Regardless of mature or emerging markets, omnichannel leaders are not standing pat waiting for their peers to catch up.
“The survey results indicate that retailers poised to become omnichannel leaders are investing more in capabilities that allow them to better understand their customers, delivering richer customer shopping experiences,”said Wayne Usie, Senior Vice President, Global Industries and Value Delivery, JDA. “Companies who want to successfully compete with these leaders, therefore, must not only remove the business silos that hinder seamless operations, but also rapidly increase their investments in omnichannel capabilities before they fall further behind omnichannel leaders. These actions will define retail winners and losers going forward.”
Download the JDA survey here.
