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Retailers' Shifting Priorities
Changing customer behavior is forcing companies to address operational issues related to omnichannel retailing.
Dec 16, 2015—
Warren Buffet famously said: "When the tide goes out, you can see who's been swimming naked." His point was that when there is an economic downturn, you can suddenly see the weaknesses in many businesses, which had been hidden by the growing economy. Similarly, shifting customer-purchasing behaviors are exposing some of the weaknesses in retail operations—not to Wall Street, necessarily, but to retailers themselves.
A company called Retail Systems Research (RSR) surveys retailers annually. It categorizes them as "winners" (companies outperforming others in the market) and "others" (laggards and companies between laggards and winners), and asks: "What are the top business challenges retailers face?" In 2012, 72 retailers, two-thirds based in the United States and 44 percent with sales of more than $1 billion, responded as follows:
• Need to improve customer service while holding the line on payroll costs (47% and 39%, respectively)
• Store managers lack information they need on the selling floor—too much time spent in the back room (37% and 17%)
• Lost sales due to store out-of-stocks (32% and 11%)
• Customer dissatisfaction caused by lack of integration between the store and other selling channels (26% and 22%)
For this year's survey, conducted in October, RSR surveyed 91 retailers, 89 percent of them headquartered in the United States. Roughly one-quarter are focused on apparel retail, and another 31 percent are general merchandise retailers. The remaining 44 percent sell fast-moving consumer goods, food and health-care products (15 percent); hard goods, home décor or home-improvement products; automotive equipment (19 percent) or other goods (10 percent).
Asked about the top business challenges they face, here is how they responded:
Three years ago, most of the issues retailers faced related to store execution and internal problems (need to improve customer service, for example). Today, retailers feel challenged to meet the changing ways consumers shop and to compete with online retailers, which generally fulfill orders accurately and reliably.
More people are buying online, and when they don't like an item, they either ship it back or return it to stores. That's created a reverse-logistics problem for retailers, which have to handle the large volume of returns. In addition, roughly 40 percent of retailers surveyed this year said their stores were not designed for current or projected volumes of omnichannel order fulfillment.
Retailers were asked which customer order-fulfillment processes are "very valuable." The responses show how important omnichannel retailing has become:
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