I wish omni-channel was easy
Perhaps the dirtiest word in retail at the moment: “omni-channel”. Just one word causing retailers some of the biggest headaches. The biggest challenge is developing a supply chain infrastructure that is at best affordable and capable of coping.
Many global supply chains are not equipped to cope with the world we are entering. Most were engineered to manage stable, high-volume retail through the single channel, however to meet the customer’s rising demand for convenience and hyper-fast deliveries, retail supply chains lack both insight and agility. This is forcing many retailers (if not all of them) to revamp heavily antiquated distribution frameworks that are now rendered ineffective to handle today’s demand.
Click + Collect, four-hour deliveries, mobile shopping and free returns are firmly in the appetites of the modern consumer and they’re here to stay. But boy are they expensive. Unforgivingly, consumers now demand that retailers cater to their delivery needs, provide the service but pass on very little of the cost or face losing market share to competitors.
Retailers therefore are faced with a choice:
- a) win new customers with competitive but wholly unprofitable delivery solution
- b) focus on clawing back costs, rely on making money the old fashioned way and run the risk of rapid loyalty erosion
Click + Collect is an interesting option. It provides a reasonable alternative to same day delivery and gives shoppers more purchasing options. Plus, it’s popular and ties the online and instore shopping experience together. Most importantly for retailers, it drives footfall meaning that instore staff still play a vital role in the customer experience and the omni-channel ‘production’, making it imperative that retailers invest carefully but decisively in the look and feel of their physical presence.
In relation to controlling the cost of Click + Collect, there is a widespread discussion as to whether this service should be provided free of charge. In my opinion, this depends on what you’re selling, as some retailers charge customers a flat fee, some charge for orders under a certain value and some don’t charge at all. Interestingly John Lewis, which has seen online sales triple over the past nine years introduced last year a £2 charge for its “click + collect” service, which is responsible for more than 50% of its online deliveries. According to the June 2016 edition of Drapers, the operations boss was quoted saying that John Lewis’s decision to introduce a charge for ‘click + collect’ has been a huge success. In contrast, Tesco initially provided the service free of charge, yet has recently passed some of the operational cost to their customer with charges between £2 and £4 for next day/same day delivery respectively, attracting some widespread backlash in across social media.
Amazon has always been a pioneer of fast delivery. Its drone delivery service has recently provided London based Amazon Prime subscribers the ability to order items for same day delivery at no additional cost and with no minimum value. Shoppers in London, Birmingham and the northeast can order items for delivery within an hour for £6.99, which analysts suggest is unlikely to cover the costs of the operation, but vital in securing loyalty in the north.
It’s starting to become a little clearer as to why omni-channel excellence is such a challenge to achieve within a budget. Only a few have got it working beautifully but the results for those that have demonstrated that it is certainly worth it. Despite the challenges, some retailers are still finding ways and efficiencies to introduce cheaper and faster delivery solutions but we have found that much of this starts with a transformation of supply chain.
Therefore, it perhaps goes some way to explain why the Interim Partners retail practice is busiest in areas of brand/customer experience/merchandising transformation from a stores and units perspective, eCommerce from a digital transformations perceptive and extensively within supply chain operations to underpin the whole lot.
We are working with some of the market’s most effective, interim game-changers across the retail industry and we are heavily resourced and networked with the specialists that we’re providing to the market’s leading retailers to effect operational and commercial change in their business.
Above you will have seen a chart from JDA & Centro, which shows expectations for the consumer’s shopping preferences over the next five years. Is your business ready for this?
Richard Lindsay is Principal of Retail and Leisure