Innovative Retail Technologies

MAR-APR 2017

Innovative Retail Technologies (formerly Integrated Solutions For Retailers) is the premier source for innovative yet pragmatic technology solutions in the retail industry.

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Operational Disconnec ts So how does this opportunity translate into operational focus? The largest percentage of retail respondents say that their highest- value opportunity comes from improving operational execution across all channels. The next highest "significant opportunity" is to allow the customer to purchase or return through the channel of their choice, though here respondents increasingly believe that this is merely a survival requirement, rather than one that delivers the opportunity for value. The opportunities that should theoretically tie most closely to the idea of focusing on consumer needs rather than selling them products — creating a single brand identity across channels, using digital channels to provide rich content about products and services, and using digital channels to build a sense of community around the brand – fall into the middle section of opportunities from investments. There is clearly a disconnect here. The disconnect grows ever larger when looking at the results by revenue bands. The largest retailers, those over $5 billion in revenue, were less likely to rate these opportunities as driving "significant" value than their peers across the board. And in many more cases, they were more likely than peers to say that a capability was merely a survival requirement, rather than something that drives value. The Right Aspirations, The Wrong Focus So far, retailers have told us the following: Omni-channel is a huge priority to them. They identify business challenges being driven both by consumer expectations and by competitors changing the game. But when it comes down to it, they don't appear to honestly believe that digital has much impact on their store business. And while they talk a great talk about wanting to be something more to consumers than just a place that sells products, when it comes to the tactical opportunities they want to pursue, aspirations fall to the tactics of physically dragging inventory across channels. Retailers prioritize opportunities related to cross-channel sales and fulfillment and improved omni-channel execution because they understand that they're falling behind. But if they don't have a transformation strategy in place — one focused on customer needs and differentiated services — they will never catch up. All of this investment is merely covering for old processes and old ways of thinking that many retailers in this benchmark appear to feel no urgency to change. How has it gone so wrong? Let's read on to find out. Organizational Inhibitors Operational Processes Lack Synchronization We've learned that retailers view "improving operational execution Mar-Apr 2017 16 Our merchandise planning functions are not designed for cross-channel demand Our supply chain is not designed for cross-channel fulfillment We are not doing enough to leverage our assets (digital, inventory, or otherwise) across channels Siloed organizational structures inhibit cross-channel collaboration internally We struggle to effectively integrate new processes driven by cross- channel strategies into the store Our return volume is rising faster than our sales growth We need to control labor costs while integrating new processes driven by cross-channel strategies into our operations — especially the store 76% 40% 70% 49% 43% 55% 41% 45% 38% 19% 27% Top 3 Cross-Channel Operational Challenges Others Winners 28% 26% 14% 11% 19% Figure 6: Winners Focus On The Store We don't have metrics capable of measuring cross-channel activities or costs

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