SPECIAL REPORT
By Ben Ames
It’s a rare retailer these days that relies on a single chan- nel to generate sales. By now, many, if not most, have mbraced the omnichannel model, selling everything
from groceries to consumer goods to apparel via brick-and-mortar stores, websites, and catalogs and call centers.
But in the rush to meet customer demand for swift delivery, some retailers forget about their own bottom lines.
“People are shooting themselves in the foot because
they’re so eager to sell the product. They think they have to
keep up with Amazon to the point where they
erode their profit,” said Zach Zalowitz,
practice lead for omnichannel supply chain at the Boulder, Colo.,
consulting firm SCApath LLC.
Many retailers like the
idea of fulfilling online
orders from their brick-and-mortar stores but
are dismayed to find
the practice can be
very expensive. “The
second you start fulfilling from more
than one store for
the same order, your
profitability is shot,
because there are twice
as many hands touching
it, twice as many boxes
to pack, twice as many
internal invoices to track,”
Zalowitz said.
While customers may love it,
there’s no denying that omnichannel
is expensive. Whether a retailer is mailing
online orders from retail storefronts, arranging to
have orders drop-shipped directly from suppliers, or
holding online orders in stores for pickup, those services
cost money to provide. Converting a conventional retail
operation to an omnichannel one can require investments
in new software or material handling equipment, corporate
realignment, specialized consultants, changes in transpor-
tation routes, DC redesigns, and retraining for store staff.
The pain is real: Many retailers are seeking to offset
their rising fulfillment costs by raising prices elsewhere
in their operations, according to a recent survey of retail
and consumer goods CEOs conducted by PwC on
behalf of JDA Software. As for specifics, the
PwC study, CEO Viewpoint 2016: The
Journey to Profitable Omni-Channel
Commerce, found that commonly
used strategies included raising
the minimum order value for
free home delivery, raising
the minimum order value
for free click-and-collect
orders, raising product
prices, increasing the
cost of home delivery,
charging for click-and-
collect orders, differen-
tially charging based on
customer profile, and
charging for returns.
Those strategies can help
cap the expense of fulfill-
ment, but some experts say
there’s a risk inherent in shifting
costs to fickle consumers. Another
approach for keeping omnichannel
operations affordable is to seek out and
leverage the hidden benefits and eliminate inef-
ficiencies. Here are three approaches for squeezing the
most from your investment in omnichannel operations.
RETAILERS STRIVE TO MEET CUSTOMER EXPECTATIONS IN THE AGE OF
AMAZON WITHOUT BREAKING THE BANK ON OMNICHANNEL FULFILLMENT.
THREE WAYS TO MAKE
OMNICHANNEL AFFORDABLE
