The Great Perils of Omnichannel

If a job's worth doing, it's worth doing right.

We've all heard this. It's one of those axioms that seem self-evident. But when it comes to omnichannel, it is a lot easier said than done. Most retailers are attempting to offer omnichannel shopping experiences for their customers, but few are doing it right (or profitably) so far.

That is the conclusion of two surveys conducted for JDA Software this year. More importantly, the surveys show retailers who perform poorly on delivering omnichannel experiences are at great peril of losing the customers they are trying to serve.

Delivering on promises
The element of omnichannel that retailers have been offering the longest, and therefore should be finely tuned by now, is ecommerce. However, according to the JDA Consumer Survey of more than 1,000 consumers conducted in October 2015, one in four experienced an issue with delivery of an online order over the past year. The biggest reported problem (45 percent) was orders showing up later than promised, followed by damaged goods (25 percent), receiving the wrong items (23 percent) or not receiving the items at all (18 percent). The real peril for retailers is that more than 35 percent of those who experienced these issues say they will not continue to shop with the retailers that disappointed them.

Cost matters
While retailers are working to offer the many conveniences of omnichannel shopping that consumers are demanding, shoppers are reluctant to pay for these services. In the JDA survey, 50 percent say that cost of delivery is a factor in where they shop and 64 percent say they won't pay extra for added conveniences such as choosing convenient delivery time slots. Services such as Amazon Prime and free holiday shipping have trained consumers to expect free deliveries even though providing these services can be costly for retailers.

That is the crux of the problem for retailers. They understand that they must provide seamless omnichannel shopping experiences for their customers, but they are not yet doing it well and profitability is difficult to achieve. In a global survey of retail and consumer goods CEOs conducted by PwC for JDA, only 16 percent said they were delivering on omnichannel demand profitably.

Here is another example of how cost matters to consumers and the difficulties retailers are having responding to consumers' needs. In the JDA Consumer Survey, of those who have tried a retailer's buy online/pickup in-store (BOPIS) service, 60 percent say they did so to avoid home delivery fees. But here is the great peril for retailers — one in two who have tried this service reported issues with pickup, mainly unacceptably slow service or store associates not able to locate their orders. Given consumers' low tolerance of service issues, it raises the question of whether some retailers are hurting themselves more by offering these omnichannel services poorly than if they did not offer them at all.

Overcoming the perils of omnichannel
Establishing omnichannel operations begins with achieving end-to-end supply chain visibility. This must include accurate store inventory counts. If you are going to offer BOPIS or ship-from-store, or if you want associates to save the sale by locating merchandise in other stores, you must have an accurate view of what is in each store or you will disappoint your customers.

Many retailers have a long way to go in achieving this level of inventory visibility, however. In its Retail Supply Chain Execution report published in October 2015, Retail Systems Research (RSR) found that 75 percent of retailers say their inventory counts in stores are inaccurate. With automated receiving at the back door, proper scanning at POS checkout or when consuming inventory in the store, and periodic cycle counts to account for shrinkage, as well as proper accounting for returns, retailers can greatly increase in-store inventory accuracy to meet omnichannel fulfillment requirements.

The next hurdle retailers have to overcome for successful omnichannel operations is properly scheduling, directing and motivating the workforce. This starts with accurately forecasting the demands on labor in each store. Where using historical store sales and budgets used to be adequate for forecasting and scheduling associates, this process now also must include a forecast of expected fulfillment requirements based on online, mobile and other ecommerce channels. Forecasts and schedules must now reflect the total demand on associates' time.

In-store fulfillment also requires directing associates on where to pick the order from, how to package it, where to store it for in-store pickup, or how to manifest and ship the order for home delivery. They also may need instructions for how to process the expected higher volume of returns from ecommerce orders. This requires task management capabilities similar to what is used in distribution centers.

Finally, distribution center operations may need to be altered for omnichannel fulfillment to reflect increases in single item order picking and returns volume. Much higher volumes of single item order picking and returns must now be handled. This is more complex and labor intensive than normal replenishment, and it's also more volatile. This affects training, labor scheduling and task management, and may involve wave planning, slotting and automation technologies.

Doing it right
Offering consistent, seamless omnichannel shopping experiences for your customers is not only worth doing, but it also will be an imperative to be competitive going forward. That means it is worth doing right. The perils of not doing it right are too drastic to ignore — losing customers or failing to make a profit. Retailers that are struggling to meet customer expectations must transform their store and distribution operations with end-to-end inventory visibility, improved workforce management and redesigned distribution processes in order to do it right for omnichannel success.

James Prewitt is vice president, retail industry strategy, North America, for JDA Software.
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