Retail's Surprising Weakness: Omnichannel Fulfillment

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Retail's Surprising Weakness: Omnichannel Fulfillment

By Joe Skorupa - 08/28/2017

Omnichannel fulfillment is an essential retail function and yet few retailers claim they do it well. Major weaknesses include efficiency, accuracy, cost effectiveness and speed.

This is a surprising finding because it risks lost sales to competitors, customer churn, and diminished loyalty to the brand. To find out how retailers are responding to the threat, RIS conducted a Targeted Research study in August that finds many retailers are in the process of upgrading their omnichannel fulfillment capabilities or are making plans prior to a major upgrade.

As retailers prepare their upgrade plans, insights from this study will help shed light on key areas of competitive strength, weakness, opportunity and threat. Here are key takeaways from the study.

  • By a wide margin (63%), retailers believe it is “extremely important” to deliver omnichannel fulfillment from all sales channels with speed, accuracy and cost effectiveness.
  • Overall, retailers give themselves high marks (75%) for fulfillment maturity but do so only for the store channel. Digital channels (online and mobile) rank high for just a third (32%) of retailers.
  • This pattern repeats itself across the study’s other maturity assessment questions, i.e. stores rank high in maturity for speed that matches Amazon (63%), efficiency and accuracy (65%), and cost effectiveness (58%) while all other sales channels rank low.
  • The area where retailers show the greatest weakness is in speed of fulfillment that approximately matches Amazon. This weakness is especially evident in the digital channels (online and mobile) where just 17% of retailers believe their systems and processes are at a high level of maturity.
  • The conclusion reached from these findings is clear: a majority of retailers can fulfill orders from stores with high speed, efficiency, accuracy and cost effectiveness, which is good news. The bad news is that all other sales channels in the omnichannel universe lag far behind.
  • Just 29% of retailers have a high level of maturity in inventory accuracy and reliability. Even more surprising, more than a fifth (21%) actually rate themselves low on the maturity scale.
  • In the area of transparency and visibility, just 24% of retailers say they have high maturity levels, which is matched by an equal number (24%) who say their ability to make accurate data available everywhere is low.
  • The area where the least mature levels of inventory management accuracy occur is in real-time reporting. Just 20% of retailers say they are able to do this and a huge 44% say their ability to do it is low.
  • The key finding in this section about inventory management is that only 29% of retailers rate themselves as having high maturity levels in accuracy and reliability of data.
  • The top obstacles that prevent retailers from improving their omnichannel fulfillment functions are DC or warehouse technology is too limited (46%), order management system is too limited (38%), and an inability to manage drop shippers or third-party shippers (25%).
  • The top five top benefits that can produce hard metrics needed to set ROI expectations are: improved customer retention and frequency rates (cited as a top benefit by 76%), overall margin improvement (68%), improved customer satisfaction (68%), increased store sales (64%), and increased customer acquisition rates (52%).
  • More than a quarter of retailers are actually working on major upgrades of two key functions: ship-from-store technology (29%) and click-and-collect (25%).

 

It is surprising to find significant weakness in such an essential retail function – omnichannel fulfillment – especially in today’s highly competitive environment. Weakness in this area exposes retailers to lost sales, customer churn, and any chance of improving frequency or conversion rates.

Findings in the study indicate there is a conflict within many retail organizations that results in lagging support for new fulfillment projects and postponement of necessary upgrades. This is a risky place to be in a fast-moving industry, because retailers don’t just compete with each other. They also compete with speed.

To download the study and see the complete set of charts and analysis click here.

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