Retail winners put their money where their mouths are and incent for order fulfillment.
One of the biggest challenges retailers face today is meeting consumer demand in unexpected places by leveraging inventory across channels. While early efforts to meet this channel have met with relative success, as the volume of cross-channel sales and fulfillment grows, retailers face the question of whether or not they are actually being profitable.
RSR’s latest research on Profitable Customer Engagement: The Unmet Promise asked respondents to list the ways they incent store employees to manage the fulfillment process. The study found that Retail Winners put their money where their mouths are when it comes to rewarding fulfilment. They are more likely to pay money for completing orders, give the stores sales credit for fulfilling other channels’ orders, dedicate resources to getting the product out, and add labor budget to those stores that are burdened with fulfillment.
As the study asserts, In the context of fulfillment, omni-channel means much less than cross-channel. While omni-channel might mean meeting every consumer demand with whatever inventory a retailer has, wherever they might have it, the reality of omni-channel fulfillment is that whenever an order requires inventory form another channel than the one where demand has been captured, it is a more expensive order to fulfill.” And yet, despite all of the current challenges, 42 percent of retailers say that they believe that their cross-channel fulfillment activities are very profitable, with another 32 percent calling them somewhat profitable. And when asked to identify future opportunities to improve profitability, retailers revealed that they belief even greater profitability is possible in the future.
Those retailers who fall below Winner status are less likely to use most of these techniques. According to the data, those retailers will give sales credit for order fulfillment, but more often out of accidents of accounting rather than through conscious choice.
The survey also found that Retail Winners tend to drive the priority behind unpredictable consumer demand, rising volumes of consumer returns, and consumer expectations for fast shipping, and have clearly kept their focus on consumers and not competitors.
And when it comes to the ability to assess the profitability of omni-channel operations, 27 percent of respondents said that they have no capability to track when fulfillment happens in a different location from where demand was generated. This often leads to sending inventory to the wrong places again in the future, continuing an expensive fulfillment cycle.
Ultimately, the top three opportunities for improving cross-channel fulfillment are found in more flexible enabling technologies, dedicated personnel in stores and distribution centers, and a connection between improving planning and forecasting and better defined procedures. The study concludes, “In other words, people, process, and technology are all in play for delivering improvements to cross-channel profitability.”
Sponsored by Aptos, the report is part of RSR Research’s ongoing efforts to provide market intelligence on retail technology trends. Profitable Customer Engagement: The Unmet Promise contains analysis of the business drivers, opportunities, and organizational constraints surrounding retailers’ omni-channel order fulfillment strategies. It also offers baseline recommendations for navigating this brave new world for retailers.
The full study is available for download here.
