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ASCM Insights

Omnichannel and the Storehouses of the Future

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Back in 2008, during the Great Recession, the toll of a retail apocalypse began to sound. The expectation was that e-commerce would kill the brick-and-mortar store. It was a common refrain for several years, but it turned out to be an inaccurate prediction. It is true that many retailers declared bankruptcy and shuttered their businesses; likewise, many nations were over-stored and rationalization was needed. However, thanks to the rise of e-commerce, more retailers were actually opening stores than closing them.

The retailers in the best position to capitalize on this shift were those that had already established brick-and-mortar locations, which could modify for omnichannel operations swiftly. They achieved this by gaining one view of inventory (and one view of the consumer) across the enterprise. In fact, omnichannel shoppers have been shown to be more profitable than single-channel shoppers.

But getting fulfillment right in an omnichannel environment profitably is difficult. Some retailers are still tackling the basics. Effective fulfillment that does not eat up profits requires digital transformation — the ability to automate data, integrate that data across platforms, gain visibility into that data, and be able to analyze and make decisions in real time. Furthermore, infrastructure and processes — when combined with the analysis enabled by digital transformation — permit the optimal combination of inventory and labor, location, shipping time, cost and delivery to ensure customer delight and bottom-line profitability.

The current global crisis has put a whole new set of strains on supply chain and forever altered retail. Over time, some shopping behaviors and patterns will return to some semblance of normal. But the pandemic is accelerating and changing the adoption of business models, such as fulfill-from-store, that were already evolving and will likely leave some retailers in a better position to navigate new retail landscapes.

As many non-essential brick-and-mortar stores closed, inventory — some of which was perishable — sat idle and unsold. Meanwhile, warehouses and fulfillment centers, often operating with skeleton crews, were not equipped to keep product moving swiftly. This state of affairs prompted many retailers to quickly convert their dark, unoccupied stores to mini fulfillment centers to keep up with orders and keep inventory moving. Others added curbside delivery. These are smart moves and prime examples of how brick-and-mortar offers key competitive advantages that e-commerce-only retailers cannot access.

Consumers are clamoring for more fulfillment options. IDC surveyed more than 1,500 U.S. residents to see how COVID-19 is changing their shopping habits and other behaviors. We found that 27% of consumers were not offered all of the fulfillment options they wanted. In addition, 61% of respondents ages 18-24 preferred to buy online and pick up in store over home delivery. Of those in the same age cohort, 29% wanted curbside delivery but did not receive that option.

As increasing numbers of retailers step up to offer more channels, customers will grow accustomed to this service and will continue to want these options, regardless of current events, but especially during periods of social distancing. Those retailers that gain the ability to ship from a location close to the consumer will enjoy lower shipping costs and faster deliveries. Curbside delivery offers yet another option for customers to receive what they want quickly, while maintaining social distance, and for retailers to minimize fulfillment costs.

To be effective in these endeavors, retailers must implement and integrate order management systems, in-store fulfillment, and other digitally enabled systems. When asked how likely it is that a digitally native competitor (one whose business model is based on digital competencies) could emerge in their industry and gain a competitive advantage, 47% of retailers responded that this had already happened or was highly likely within the next year. Is your business on the winning side of that equation?

The pandemic has inspired many supply chains to quickly pivot and adapt to new realities. It is pushing retailers to develop new practices that will turn out to be smart business models in the long term. Just be sure you are equipped to handle them efficiently and intelligently.

About the Author

Jordan K. Speer Research Manager of Global Supply Chain , IDC Retail Insights

Jordan K. Speer is research manager of global Supply Chain at IDC Retail Insights. Contact Speer through idc.com.

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