Hitachi Consulting: Omnichannel hurting retailer profits

29 September 2014 3 min. read
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A new research report from Hitachi Consulting and retail association IMRG reveals that the growing focus on multichannel sales is actually hurting retailers’ profits due to a lack of overview.

The option of different sales channels is becoming more and more valued by customers, who appreciate the possibility to order things online, via their mobile, or even through TV in addition to the option of going to the store. As a result, offering multichannel shopping options is crucial for retailers to retain their customer’s business. Just recently, Hitachi Consulting, a provider of IT consulting and management consulting solutions and services, together with IMRG, UK's industry association for online retail, released the research report ‘The New Economics of Multichannel: Now is the Time’. This report focuses on retail and the available sales channels, and identifies the complexity of supply chain & IT infrastructure as barriers to profit growth.

Growing amount of different sales channels

The overall conclusion of the report: retailers are currently losing profit due to their pursuit of multichannel sales as a result of their lack of oversight across their different channels. Large retailers will typically operate four of more sales channels in addition to the physical store, and the report shows that 28% of these multichannel retailers do not know how much they spent on each sale through the different channels. The research also shows that the vast majority of retailers are losing track of stocks, with less than 15% of retailers having real-time visibility of stock all fulfilment locations, resulting in mismatches between demand and supply. This mismatch can cost retailers dearly, either by losing customers over a lack of products or by having a surplus that does not get sold.

Hitachi Consulting and IMRG identify four key areas in which retailers should be focusing investment if they want to maximise profitability while simultaneously developing omnichannel sales strategies:

  • Integration of existing order capture & fulfilment systems
  • Eliminate physical stock silos
  • Develop a capability to split an order across multiple fulfilment channels
  • Build reliable and efficient returns processing from all channels

Chris Gates - Andrw McClelland

“Britain’s retailers have been aggressive in their pursuit and adoption of multichannel retailing and the rapid growth of online and mobile retailing reflects this. However, traditional fulfilment systems are failing to keep up, meaning retailers are sacrificing profitability for bottom-line growth,” says Chris Gates, co-author of the report and Director of Retail at Hitachi Consulting.

Co-author and Chief Operations and Policy Officer at IMRG, Andrew McClelland, adds: “The financial impact of tightening up stock visibility processes, improving the flexibility of stock management and making sure stock is utilised efficiently should not be underestimated. Multichannel retailers need to focus on this single view of orders across all channels to maximise the opportunities available to their customers, and implement systems that can distribute orders and automatically orchestrate fulfilment optimised to deliver the highest service levels with the lowest cost.”