Time to buy an online retailer?

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The word “relentless” might have been invented to describe the pace of change in online retail – and it clear that many retailers still have some way to go in integrating their online and physical stores to maximise potential sales. The latest move has come from Walmart with a deal to buy US online retailer Jet.com for $3.3 billion in a bid to close the gap to Amazon.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

At the same time, research by UPS suggests that retailers in Europe are facing significant challenges in investing enough in IT, organising logistics and making management responsive to omni-channel operations.

Walmart says the acquisition of Jet will “infuse Walmart with fresh ideas and expertise, as well as an attractive brand with proven appeal, especially with Millennials, the first generation of true digital natives”.

Jet is only a couple of years old but has grown rapidly targeting a younger generation of buyers. Walmart’s plan is to keep the Jet brand separate from its existing online offering but exploit the supply chain synergies, notably in sourcing, distribution and technology.

The UPS “Pulse of the Omni-channel Retailer” survey suggests that retailers need to look at the traditional store in a new light and use it as part of the inventory and distribution network.

It found that 65 per cent of UK retailers use stores to provide value added services such as click & collect, but only 19 per cent enable consumers to reserve the product either online or in the physical store in case of out-of-stock situations.

Some 27 per cent of European retail companies use stores as fulfilment centres for online orders, and 31 per cent plan to use store locations for the collection of online orders over the next two years.

Retailers across Europe also highlighted returns as a continuing challenge – notably managing defective goods and performing quality checks. And over 60 per cent said they needed multiple third party logistics partners to manage returns.

For retailers with a large store network, there is always going to be a significant level of inertia to overcome, as the UPS survey reveals, and it takes time to remodel supply chains to meet the changing needs. But can buying a pure play online retailer short-circuit the process? The success of the Walmart-Jet deal will provide some evidence.


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