Retailers losing profit in pursuit of multichannel sales

Hitachi Consulting, a subsidiary of Hitachi, Ltd. and provider of IT consulting and management consulting solutions and services, today released a new report by IMRG and Hitachi Consulting, entitled 'The New Economics of Multichannel: Now is the Time'. Due to the evolving nature of commerce, the report shows retailers' profitability is being adversely impacted by customer demands for ever-increasing options around instant gratification across different channels and fulfilment systems.

The report reveals that more than one in four (28%) multichannel retailers do not know how much they are spending to fulfil each sale via different channels (e.g. home delivery, Click and Collect, in-store). Less than 15% of retailers have real-time stock visibility across all their fulfilment locations. The issue is worse where 3rd parties are responsible for maintaining stock positions, which directly impact delivering on the retailer's customer promise – lack of real-time stock visibility for fulfilment centres (46%) and drop ship suppliers (34%) Interestingly, only 54% had real-time visibility of stock held in their owned stores, presenting a real hurdle to same day click & collect.

The report identifies four areas where retailers should be focusing investment in order to maximise profitability while developing their multichannel sales strategies:

  1. Integration of existing order capture & fulfilment systems in order to provide a more holistic view of real-time stock availability
  2. Eliminate physical stock silos which increase stock holding cost, reduce flexibility and increase markdown
  3. Across all markets, develop a capability to split an order across multiple fulfilment channels to enable optimal balance of customer service, stock turn and supply chain cost
  4. Build reliable and efficient returns processing from all channels to enable items to be quickly recycled and resold to minimise likelihood of markdown

Andrew McClelland, Chief Operations and Policy Officer at IMRG, said: "The financial impact of tightening up stock visibility processes, improving the flexibility of stock management and making sure stock is utilised efficiently should not be underestimated.

"Multichannel retailers need to focus on this single view of orders across all channels to maximise the opportunities available to their customers, and implement systems that can distribute orders and automatically orchestrate fulfilment optimised to deliver the highest service levels with the lowest cost."

Chris Gates, Director of Retail, Hitachi Consulting said: "Britain's retailers have been aggressive in their pursuit and adoption of multichannel retailing and the rapid growth of online and mobile retailing reflects this. However, traditional fulfilment systems are failing to keep up, meaning retailers are sacrificing profitability for bottom-line growth.
"By implementing the right technology to give a single view across channels and the supply chain, retailers can unlock efficiencies to drive a better brand experience and ultimately, more profit."

Percentage of Retailers with Real-Time Visibility

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