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Retailers struggle to make omnichannel profitable

 

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Retail CEOs have reported struggling to make omnichannel a profitable strategy, citing the cost and complex nature of fulfilling orders across multiple platforms in a new report.

The fourth annual survey from JDA Software Group surveyed more than 350 retail executives from around the world, finding that only 10 per cent of respondents were able to make a profit while fulfilling omnichannel demand.

Fulfilment costs causing execs to rethink delivery strategies

Only 12 per cent of CEOs surveyed said they were able to provide a seamless shopping experience across channels, down from 19 per cent in 2014. These retailers are finding their omnichannel offerings to be too complex or expensive and are choosing to scale back.

Respondents said they are increasing investment in click & collect, with 51 per cent reporting they plan to offer it in the next 12 months. This is up from 47 per cent in 2016. Buy online, ship to store has also picked up steam in the past year with 48 per cent investing in this service or planning to in the next 12 months.

Executives are decreasing their investment in costlier fulfilment options including same day delivery and providing specific delivery time slots.

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The cost of customer returns was seen by 74 per cent of respondents as impacting profits and the rising costs of order fulfilment overall is causing executives to rethink their fulfilment strategy.

This year will see increased charges for online orders, with 57 per cent saying they plan to or will make this change in the next 12 months, and a rise in minimum order thresholds for free standard home delivery (62 per cent plan to or will make this change in the next 12 months). Over half (55 per cent) also plan to raise the minimum value order for click & collect purchases.

Patrick Viney, JDA’s vice president – retail industry strategy APAC, said that the Australian retail industry needs to adapt in order to remain profitable.

“We are witnessing unprecedented change sweeping across the Australian retail industry that continues in earnest as retailers re-imagine their strategies to achieve profitability as well as transform the customer experience, making it seamless and personalised, no matter how they shop,” he said.

“Supply chain complexities and cost in the region will continue to challenge our retailers and the difference between winners and non-winners will be how much, or how little, retailers understand their customers moving forward.”

Digital tech increasingly important

The survey also found that the retail industry is becoming more focused on digital technologies like the Internet of Things (IOT), big data, automation and augmented reality. In fact, 69 per cent of executives say they plan to increase their investment in digital transformation over the next year.

Retailers are using these technologies to better understand and connect with their customers. Mobile enabled apps, big data and use of social media data are the top technologies CEOs are investing in, while automation and IoT are lower on the list but gaining momentum as they are seen as game changers.

The use of social media and big data is seen as highly valuable, as it gives retailers deep insights into customer information, allowing them to learn about shopper preferences.

“If Australian retailers invest in ‘digital-aware’ supply chain capabilities, they could be more than competitive as the next wave of digital technologies rolls in,” said Viney.

“It’s a big if, however, given the high prevalence of planning and execution issues we see with current digital retail strategies.”

 

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