The retailer and the revolution
The report, ‘Retail supply chain management: The omni-channel revolution’ was based on a survey of around 50 UK and US retail board directors by supply chain strategists LCP Consulting. It suggested that board directors saw fulfilment as a source of competitive advantage and not simply a cost of doing business.
However, delegates attending the report’s launch questioned senior retail directors’ level of understanding of the technological challenges presented by the omni-channel.
Omni-channel is a term used to describe a seamless customer sales experience, regardless of the shopping channel through which goods are purchased – mobile internet devices, computers, stores, television, catalogue, etc.
12%
As the amount of groceries purchased online increases, retail Boards would also have to face the economic challenge of competing directly with ‘pure-play’ retailers such as Amazon, which operate on net margins of 1–2% rather than the 12% typically made by the likes of Marks & Spencer, said David Wild, former group supply chain director for Tesco, who sat on a panel that fed into the report.
“Retailers are some way off completing the omni-channel revolution, but no sector is there yet,” said Wild. “Change is continuing because technology is evolving so quickly and customers' habits are adjusting still.”
Since Amazon entered the grocery sector in 2010, the challenge it presented to traditional supermarket chains is clear — even though its growth in food and drink has been relatively slow. Morrisons was the last major multiple to announce its intention of moving into online sales, following a deal agreed with Ocado.
The report predicted that the UK’s non-food retail sector would invest almost £5bn in the omni-channel within the next five years. This represents about three per cent of annual turnover per retailer. However, one delegate thought it far underestimated the expenditure required.
‘Bricks and mortar’
More than one-third of the directors surveyed reported that an aligned Board was essential in delivering a truly ‘omni-brand’ to the market. Many agreed that functions such as operations, supply chain and IT needed to become more influential in boardrooms that are more attuned to the needs of "bricks and mortar” stores.
Speed of fulfilment remained a perceived differentiator and one that was still being pursued aggressively, the report found. However, many questioned whether this was actually driven more by the retailers. In contrast, customers valued convenience and consistency of experience more.
“Putting a customer at the heart of your operations is an enormous change,” said LCP retail partner Stuart Higgins. “Technology must be at the heart of any omni-channel strategy, supporting improvements to the back-office systems.”
Higgins added: “The impact of omni within the food and beverage sector is likely to focus on sales channels; easing the customer transaction at the point of purchase through enhanced use of mobile technology and QR [quick response] codes to provide improved nutritional data, enhanced price comparisons and to fast-track purchases.”
The report predicted that the omni-channel revolution would accelerate within the next two years. It is expected to profoundly alter the future of retail, and require significant re-engineering of the retail business operating model.
