CSCMP's Supply Chain Quarterly
October 16, 2018
Forward Thinking

Companies struggle to find profits from omnichannel retailing

Omnichannel efforts are being hampered by high logistics costs associated with fulfilling orders.

While many companies today are busy chasing omnichannel sales opportunities, few have been able to do so profitably, according to The Omni-Channel Fulfillment Imperative, a report by the consulting firm PwC.

According to the report, which was based on a survey of more than 400 retail and consumer goods chief executives from around the world, only 16 percent of respondents said they can fulfill omnichannel demand profitably today.

These findings are in line with a February 2015 report from the consulting firm EY, Reengineering the Supply Chain for the Omni-channel of Tomorrow, which found that only 33 percent of respondents expected to see increased profits from omnichannel retailing efforts, and only 38 percent had achieved improvement in their margins due to omnichannel initiatives.

Both studies pinpointed the same reasons for the failure to turn a profit: the high cost of fulfilling orders. In the PwC study, which was commissioned by JDA Software Group, the highest costs associated with omnichannel selling related to handling returns from online and store orders (71 percent of respondents), shipping directly to the customer (67 percent), and shipping to the store for customer pickup (59 percent).

Likewise, in the EY study, 81 percent of respondents said that they did not believe their current supply chain was well suited to omnichannel retailing. EY maintains that in their rush to sell products online, companies "bolted on" order fulfillment processes and systems without integrating them with those that already existed for store fulfillment.

Despite being aware of these shortcomings, the PwC study found, companies are not making investments that will help them reduce logistics costs. Instead, 57 percent are spending capital to create "new customer experiences," and 53 percent are investing in reformatting their brick-and-mortar stores to expand e-commerce business.

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