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These and other findings are highlighted in CEO Viewpoint 2016: The Journey to Profitable Omni-Channel Commerce, a new report prepared for JDA Software Group by PwC. The study is based on a global survey of more than 300 retail and consumer goods CEOs conducted in late 2015.
This year’s report highlights crucial differences between CEOs surveyed who eliminated operational silos and now deliver a customer-centric omnichannel shopping experience (18 percent) vs. those who had not eliminated such silos. Companies without operational silos expressed greater confidence in revenue growth (59 percent vs. 48 percent average for all CEOs) and profit growth (63 percent vs. 43 percent) than their peers. The elimination of such silos speaks not only to stronger positioning for revenue and profit growth in the year ahead, but considerable differences in omnichannel maturity across the companies and countries surveyed (these include: China, Germany, Mexico, the United Kingdom and United States). CEOs that have removed silos are also achieving significant competitive advantage though lower costs and increased investments in customer-centric services.
Omnichannel Fulfillment Costs
Not only are CEOs who have removed business silos less concerned about the impact of omnichannel operations, they also may have significant cost advantage over those companies still operating in silos. While a staggering 74 percent of CEOs in companies operating in silos say their costs for omnichannel fulfillment are increasing, only 59 percent of the companies that have eliminated silos say these costs are increasing. The highest costs for omnichannel fulfillment centers around shipping to consumers:
Some 32 percent of CEOs who have eliminated silos and 45 percent for those with silos indicate shipping directly to consumers from a distribution center is their highest omnichannel fulfillment cost. Processing returns was second-highest; 51 percent without silos vs. 67 percent with silos.
This data strongly suggests that removing silos from omnichannel operations can give companies a competitive cost advantage. To deal with the high costs of omnichannel fulfillment – particularly for those operating in silos – CEOs are planning to offset increased costs in the following ways: raising the minimum order value for free home delivery (39 percent); raising the minimum order value for free click & collect services (31 percent); and increasing the cost for home delivery (29 percent).
However, putting cost increases back on the consumer may dissuade consumers from shopping with them, as the recent JDA 2015 Consumer Survey indicates that consumers are unwilling to pay for returns and may choose an alternate retailer instead.
Click & Collect Options
This survey also reveals that retailers who wish to compete in global markets (China and Mexico) realize they must offer a wider range of fulfillment offerings to their customers, to compete with companies in those markets already offering such services. Over the next 12 months:
60 percent of retailers in emerging markets are offering or plan to offer in-store click & collect services vs. 41 percent of retailers in mature markets; 46 percent of retailers in emerging markets are offering or plan to offer click & collect services in commuter travel hubs vs. 22 percent of retailers in mature markets; and 42 percent of retailers in emerging markets are offering or plan to offer click & collect services via third-party retailers vs. 18 percent of retailers in mature markets.
Of note, more mature omnichannel companies (non-siloed) are more likely to offer in-store click & collect (56 percent vs. 47 percent) than their peers with silos, but are less likely to offer any of the other click & collect options such as picking up purchases at lockers or commuter travel hubs. These companies appear more focused on the speed of delivery, favoring same-day over next-day deliveries and are more likely to offer specific time slots for customer deliveries. In mature markets, speed to delivery can be a loyalty-building competitive advantage.
Order Fulfillment Options
Ultimately, the data from this survey reveals that CEOs are investing in the one area that is costing them the most, and potentially impacting their profitability: order fulfillment options. CEOs surveyed are spending 26 percent of their investment capital on omnichannel readiness in 2016, with some of these investments centering around extending omnichannel fulfillment options for customers (51 percent), providing a seamless customer shopping experience (49 percent) and most importantly, understanding social media for business use (49 percent). Understanding and analyzing customer data is critical to mastering omnichannel in 2016 and beyond.
Source: JDA Software Group
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