With a multichannel offering being crucial to keeping up with customers' new demands for shopping on-the-go, a new study, released by IMRG and Hitachi Consulting, has highlighted how the lack of oversight across sales channels is the cause of significant profit leakage.
John Lewis recently stated that £2 of online sales is needed to make the same profit as £1 of in-store sales and this new report reveals how over one in four (28 per cent) of multichannel retailers do not know the cost of sales by channel, while 63 per cent accept website returns in-store and 50 per cent hold the same item in four or more sales channels, increasing transportation and administration costs.
‘The New Economics of Multichannel: Now is the Time’ report states that due to the evolving nature of commerce, retailers’ profitability is being adversely impacted by customer demands for ever-increasing options around instant gratification across different channels and fulfilment systems.
With 28 per cent of multichannel retailers not knowing how much they are spending to fulfill each sale via different channels e.g. home delivery, click & collect, in-store, less than 15 per cent of retailers have real-time stock visibility across all their fulfilment locations.
The issue is worse where third parties are responsible for maintaining stock positions, which directly impact delivering on the retailer’s customer promise – lack of real-time stock visibility for fulfilment centres (46 per cent) and drop-ship suppliers (34 per cent).
Interestingly, only 54 per cent had real-time visibility of stock held in their owned stores - presenting a real hurdle to same-day 'click & collect' services.
The report identifies four areas where retailers should be focusing investment in order to maximise profitability while developing their multichannel sales strategies as follows: Integration of existing order capture & fulfilment systems in order to provide a more holistic view of real-time stock availability, eliminate physical stock silos which increase stock holding cost, reduce flexibility and increase markdown, develop a capability to split an order across multiple fulfilment channels to enable optimal balance of customer service, stock turn and supply chain cost across all markets, and build reliable and efficient returns processing from all channels to enable items to be quickly recycled and resold to minimise likelihood of markdown.
Commenting on the report's findings, Andrew McClelland, chief operations and policy officer at IMRG, said: “The financial impact of tightening up stock visibility processes, improving the flexibility of stock management and making sure stock is utilised efficiently should not be underestimated.
He continued: “Multichannel retailers need to focus on this single view of orders across all channels to maximise the opportunities available to their customers, and implement systems that can distribute orders and automatically orchestrate fulfilment optimised to deliver the highest service levels with the lowest cost.”
Chris Gates, director of retail at Hitachi Consulting said: “Britain’s retailers have been aggressive in their pursuit and adoption of multichannel retailing and the rapid growth of online and mobile retailing reflects this. However, traditional fulfilment systems are failing to keep up, meaning retailers are sacrificing profitability for bottom-line growth."
By implementing the right technology to give a single view across channels and the supply chain, retailers can "unlock efficiencies to drive a better brand experience and ultimately, more profit", he added.
‘The New Economics of Multichannel: Now is the Time’ is available to download here.
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