Omni-channel affecting retailers’ profits

Omni-channel retailing uses a range of channels for customers to complete their purchases. Channels include high street stores, online stores, mobile app stores, telesales and more. Basically, any method of interacting with the customer, where they are able to purchase a product, counts as a channel.

Shoppers’ visits to brick and mortar shops have been in decline for a number of years while online retailing is thriving. Omnichannel retailers provide an instore shopping experience as well as through digital channels.

Although it sounds like a good idea for businesses, a new study has shown the retailers aren’t making the most of it and aren’t all making profits.

A PwC study questioned 410 retailers’ CEOs around the world, including the UK. Globally, only ten per cent of those surveyed were making a profit when fulfilling omni-channel demand. This decreased to just three per cent of UK retailers.

What’s preventing profits?

The factor that is eroding retailers’ margins as they sell and deliver products across multiple channels is the high cost of fulfilling orders. Over two thirds (67 percent) of respondents reported that these costs are growing as they increase their focus on selling across multiple channels.

Although an obvious solution, reducing logistics costs or finding a solution is not their primary focus. CEOs’ top initiative for improving business operations is spending capital on “creating new customer experiences” (57 per cent).

The modern generation of consumers, who shop more online, expect next-day delivery, click and collect or even same-day delivery. New distribution networks and processes are designed to cater for this demand. This makes supply chain and logistics one of the most critical success factors in an omnichannel business model.

Ensuring that the supply chain is cost-effective goes a long way in ensuring that the retailer can use omni-channel profitably.

Thursday, 20th April 2017
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