New research indicates that more than a third of retailers are on track with omnichannel execution. By Peter Zaballos, senior vice president and chief marketing offer of SPS Commerce
Throughout the past decade, omnichannel retail has been top-of-mind for industry executives and those who manage supply chain ecosystems. And for the last half of that decade, SPS Commerce has worked with Retail Systems Research (RSR) to benchmark and translate omnichannel challenges and opportunities into planned technology investments for retailers, manufacturers, and distributors and logistics services providers.
In this year’s report, Retail Insights 2017: Moving Beyond Omnichannel, a big shift was evident.
The report revealed omnichannel retail has moved from a standalone “initiative” to being the center of business strategy and operations, especially for retailers. It’s now driving the entire business.
According to the report, more than 35 percent of survey participants believe their omnichannel strategies are on track, up nearly 200 percent year over year. Yet, some of those respondents are keeping a close eye on consumers’ demands to see how they affect their plans – possibly derailing some of their progress. And they’re not the only ones watching consumers’ behavior as 75 percent of respondents are increasingly concerned and cite it as the top factor driving their business over the next five years.
Retailers see fewer opportunities for growth in 2017, making them less optimistic about the future than their ecosystem peers. Contributing to retailers’ less optimistic viewpoint is increased competition: more and more manufacturers and distributors are selling direct to consumers with 60 percent of manufacturers and 58 percent of distributors running websites that do just that.
As a result, the race is on. All ecosystem participants are working hard to improve consumers’ e-commerce experience and grow e-commerce sales, which more than 60 percent of all retailers, manufacturers and distributors rank this as their number one priority for 2017.
Retailers are eager to reinvigorate the store experience by bringing in more digital experiences. As a result, they are looking for manufacturers and other ecosystem partners who are willing to use data to collaborate and make quick and informed business decisions.
An area survey respondents consider an enormous challenge is inventory visibility, which hinders both omnichannel execution and profitability. Only 78 percent of retailers have full visibility into their in-store inventory and only 77 percent have full visibility into their distribution center inventory. The percentages are even worse for distributors and manufacturers: 47 percent of distributors and 45 percent of manufacturers have no visibility into their partners’ inventory. This lack of inventory visibility creates ripples far beyond omnichannel execution. Without accurate and reliable visibility, retailers often over-invest in slow moving or dying products, while starving fresh, unexpectedly hot items.
Item attributes are another area where data and the sharing of it play a crucial role. Retailers originally hoped to speed product onboarding and trim costs by getting manufacturers to create and share item attributes. Now, retailers are looking to work hand in hand with manufacturers to create item attributes that help increase product visibility in response to consumer searches and social media activity. Such item attributes also enable retailers to create more personalized opportunities to connect with consumers.
Its no wonder 43 percent of respondents across the ecosystem expect their use of item attributes to increase. And as retailers get deeper into personalized assortment and product recommendations, the need for expanded item attributes and more accurate inventory data—and the ability to share this data in real time—will continue to increase as well.
Here are some other recommendations from this year’s report:
* Retailers: Collaborate with other ecosystem players. You must focus on the future of your stores, but this doesn’t need to be an internal-only project. By including other players in both planning and execution, you’re more likely to create stores your partners—and your shoppers—will actually support.
* Manufacturers: Pay attention to retail channel health. With retailers struggling, it is critical to offer greater inventory visibility and more item attributes.
* Distributors: Add services. With retailers ramping up drop shipping and manufacturers selling direct to consumers, you could be squeezed out unless you find ways to improve or add services.
* Logistics service providers: Breed speed. Although speed for speed’s sake isn’t the answer, you can increase your value by helping your partners achieve the gold standard, which is every order shipped the same day it’s received.
Those companies that fail to make these changes will likely be in for a rough ride, while those that succeed at moving beyond omnichannel retail will become the leaders of tomorrow. Which will you be?
Peter Zaballos is senior vice president and chief marketing offer of SPS Commerce, a retail cloud services platform provider.