Thursday 27th Oct 2016 - Logistics Manager

Retailers investing £5bn in move to omni-channel

Retailers in the non-food sector, are set to invest some £5 billion in making the transition to omni-channel over the next five years.

A new study by LCP Consulting, Retail Supply Chain Management: The Omni-channel Revolution, suggests that the omni revolution is accelerating with retailers, now spending on average the equivalent of three per cent of annual turnover on the change.

The study found that the board level view among retailers was that omni-channel is a revolutionary change which will profoundly alter the future of retail, and require significant re-engineering of the retail business operating model.

However, the  return on investment in omni-channel remained unclear, with many retailers investing in omni-channel simply to compete.

The relative immaturity of the omni model meant that ROI was still difficult to measure given a lack of robust metrics, particularly in relation to customers, their behaviours and interfaces with the business and fulfilment needs.

The study also found that directors see fulfilment as a source of competitive advantage and not simply a cost of doing business. Speed of fulfilment remains a perceived differentiator and one that is still being pursued aggressively. However many questioned whether this is actually driven more by the retailers, with customers valuing convenience and consistency.

The major benefits cited in moving to omni are not just in terms of sales and margin, but in providing real motivation to design and deliver enhanced business operating models.

Phil Streatfield, retail partner at LCP, said: “In our experience, regardless of cost, omni-channel is becoming the ‘need to have’ model for the retail industry. It has almost reached the tipping-point of change or fail.”

The report includes interviews with Graham Barnes, supply director of Argos; David Wild, former chief executive officer of Halfords and group supply chain director of Tesco; Dino Rocos, operations director of John Lewis Partnership; and Neil Ashworth, chief executive officer of Collect+.

Wild said: “I think that retailers are some way off completing the Omni-channel revolution, but no sector is there yet. Change is continuing because technology is evolving so quickly and customers’ habits are adjusting still.”

Other findings from the report include:

* Retailers need to implement a truly integrated brand experience, using the whole organisation to deliver uniformity of service through a deep understanding of the customer, optimised assortment, re-aligned store operations, fulfilment excellence (regardless of channel) and integrated IT systems.

* More than a third of Board Directors stated 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 need to become more influential in the Boardroom. Enhanced employee training and incentives topped the list of measures to ensure effective internal cultural alignment in an Omni-channel world.

* There are challenges in offering a uniformity of service; through the behaviour of staff, managing partners effectively, balancing the role of the store against the ever-increasing online demand and fulfilling the needs of all. Meeting these challenges will require a revolution in end-to-end supply chain operations and management.