Retailers are having to rapidly re-adjust business models to keep up with the demands of the hyper-connected consumer.
Supply chain has gone from simply being a case of getting products from A to B to now being central to the customer experience. Get it wrong, and retailers face losing share of wallet to their competitors in what is a very crowded retailing environment.
So how do retailers put forward a competitive and comprehensive delivery and returns offer while also delivering return on investment?
This was the challenge debated among a panel of retailers present at Retail Week’s recent roundtable, held in collaboration with Oracle.
Many consumers expect free delivery and returns, particularly at the more affordable end of the market.
A supply chain director at one value retailer said: “Charges are a significant factor in consumers’ minds and it means we have a very low take-up of next-day delivery because of that.
“We do offer free delivery over a certain threshold. Yet it is a perennial challenge for us, so our focus is on driving cost out of the delivery proposition so that we can offer a cost-competitive service.”
The role of shops in driving efficiencies
While there are some moves in the market towards same-day delivery, the attendees agreed that it is hard for retailers to offer the service and deliver return on investment due to the difficulty in having full coverage of the country, unless they have a network of shops that can act as distribution centres and fulfil from store stock.
The challenge for many bricks-and-mortar retailers is that they now have to adapt to becoming distribution centres, and put the processes in place in stores to make that happen.
“An answer put forward by one supply chain director is that we may see more ‘partnering’, with retailers taking advantage of each other’s distribution network and capabilities in order to remain competitive”
This is particularly the case with the continued rise of click and collect. Customers appreciate the certainty of knowing that their parcel will be delivered to a shop. “It’s all about convenience,” one supply chain director said.
So how do those retailers that don’t have a large store network, or those that are online, compete?
An answer put forward by one supply-chain director is that we may see more “partnering”, with retailers taking advantage of each others distribution networks and capabilities in order to remain competitive.
Further ahead, the retailers present agreed that it is not just staff in shops that need to be trained with a distribution centre mindset, but that it also works the other way, with home-delivery representatives needing greater training to make sure they fully represent the brands they are delivering on behalf of.
Why data insight is key
Data, the attendees agreed, is critical to supply-chain accuracy and therefore the customer service and experience that retailers are able to offer.
While stores do enable retailers to reduce supply-chain costs, they can also present a data challenge.
“Largely, retailers can rely on stock-counts at distribution centres to be accurate, but this is much harder in stores, where the presence of customers means products are not always sat on shelves”
Largely, retailers can rely on stock-counts at distribution centres to be accurate, but this is much harder in stores, where the presence of customers means products are not always on shelves.
Radio frequency identification (RFID) tags could be the answer, the retailers said.
Oracle Applications head of retail James Credland said that to understand the increasing number of customer segments and serve them profitably, data becomes absolutely central.
“You may actually need to segment your supply chain to ensure each customer gets an appropriate experience. You cannot afford a separate stock for online channel and physical stores anymore.”
Crucially, the retailers present agreed businesses are going to have to invest in the right processes and systems to ensure they have the right view of stock and are able to deliver on the retail promise they offer.
One supply-chain director added that too many businesses make a fulfilment promise to customers that they can’t keep, and that it was the job of her peers in the room to make sure that the businesses they worked for knew where to invest and to do it at a sustainable price.
She added that there is currently a lack of supply-chain talent on boards, and with the function now being so central to the customer experience, those that didn’t have this expertise in the boardroom would soon begin to suffer.
However, while there are challenges, the opportunities ahead are clear.
Credland concluded: “Leading companies are putting supply chains at the heart of their business. This shift will require new approaches, putting the customer at the heart of everything they do and leveraging technology to do so.”