More than 85% of retailers say direct to consumer fulfillment will command a greater level of their attention in the future, as they aim to create a seamless customer experience regardless of channel, according to a Retail Industry Leaders Association (RILA) report [download page] released in March 2012. And although 63% of respondents to an RSR Research survey also released in March indicate that they have a single source of inventory that they can use to meet demand across any channel, only 10% of the RILA respondents strongly agreed that they had achieved a desired level of integration between their retail stores and direct-to-consumer fulfillment operations.
Retailers May Be Falsely Confident
Although the majority of respondents to the RSR survey say they have a single source of inventory across all channels, current direct-to-customer fulfillment strategies are used by relatively few. For example, only 40% of winners (those with comparable store/channel sales growth of over 6% in 2011) and 29% of others say they physically co-locate their direct channel’s inventory in a store, and only 35% of winners and 18% of others say they have a dedicated space for the inventory. In fact, only one-quarter of winners and 36% of their peers say they ship from stores, which RSR insight suggest seems somewhat optimistic given anecdotal evidence.
Consumers’ Price Sensitivity Challenges Supply Chains
Consumer demands for the lowest price (68%) and the unpredictability of demand in an uncertain economy (68%) are the leading supply chain business challenges to retailers. After these leading challenges, there is a significant drop-off to others such as making sure the supply chain can keep up with demand (43%), uncertainty about variable supply chain costs (38%), and the network strain from cross-channel shoppers (29%).
- 36% of retailers agree that channel proliferation has caused them to re-think their buy-side strategies.
- Lost sales from out of stocks, supply chain merchandising and merchandising management being in conflict, and past sales no longer being enough to predict future demand (all at 51%) are the biggest operational supply chain challenges to winners.
- 52% of winners cite their systems not adequately supporting cross-channel activity on the buying side as a top 3 organizational inhibitor.
- The top supply chain technology adoption plan for retailers is cross-channel inventory optimization (30%).
- According to the RILA report, more than 4 in 5 respondents plan to maintain or increase their spending levels on supply chain technologies.
About the Data: The RSR results are from a survey conducted online from November 2011 – February 2012, with responses from 103 qualified retail respondents. 33% of respondents were from companies with more than $1 billion in 2011 revenue.
Information for the RILA report was gathered via senior executive interviews and an online survey. A total of 199 retail supply chain executives took part in the research. Two-thirds were from companies with revenues exceeding $1 billion, and 68.3% were from a company with multi-channel operations. 72.9% were direct-level or above, with an average retail experience of 17.1 years.