In this guest post, Procurement Leaders invites LCP’s Phil Streatfield to look at lessons for retailers’ supply chains in the wake of a hectic festive season.
A sustained rise in online sales has placed an emphasis on consumer confidence in the ability of retailers to deliver either Click-and-Collect or home delivery orders. This, fuelled with a desire to ‘get that bargain present’, meant high sales volumes ran up closer to Christmas. But while many have seen impressive figures, the trend comes with margin implications and some are now counting this cost.
Against this backdrop, retailers need to invest in building omni-channel capabilities that can consistently deliver to consumers and be easily integrated with suppliers to provide strong financial results for their business.
Ultimately this means strategies need to look at a number of key factors including current operating models, channel economics, distribution and fulfilment networks, inventory and range deployment as well as returns.
Omni-channel investment needs to address the following critical areas:
Develop brand loyalty and trust:
The journey starts and ends with the customer. Retailers need to recognise that customers are already trying to transact with them in an Omni-channel way and design approaches to understand and apply insights from the huge amounts of customer data now available. In addition, it is important to manage the customer interface through customer relationship management capabilities supported by tightly integrated IT systems. Interestingly US businesses tend to be further ahead than their UK counterparts in utilising data this way.
Build capability from a customer perspective:
Traditional silos that currently exist need to be set aside. Changes to the supply chain have to be part of wider business reform: buying, retail operations, supply chain and IT all need to be on the same page to deliver a single, consistent customer experience. Both online and sales stores need to be integrated, rather than run as separate channels. This is an important difference to current practice and will mean changing roles and skill requirements within leadership teams, as well as re-purposing stores and the roles of front line colleagues.
Changes are complex and challenging:
Major alterations to IT and supply chain infrastructure are required. This involves significant investment and commitment from the whole business to become truly competitive. Timeframes do however tend to be extended, so while the return on investment may not be immediate – the journey must continue.
Retailers need to fundamentally change how their companies are run:
A new, flexible, business operating model is a significant enabler for success. Done properly this will deliver increased sales, enhanced margins and improved availability of stock. Such fundamental change needs to come from from a fully committed CEO who will typically need to lead a transformation programme of 3 years or more.
Omni-channel is becoming the ‘must have’ for the retail industry – as the channel matures, the winners will be those that master the costs as well.
The bottom line is that retailers are at a tipping point. If they tackle this they will be well-positioned, not only for next Christmas, but for today’s constantly evolving customer expectations and retail marketplace.
Phil Streatfield is retail partner at LCP Consulting