When Macy’s started using its stores as fulfillment centers, it zeroed in on solving a particular inventory management problem. Most retailers don’t offer the last inventory unit of items for online sale as locating and shipping these can be a challenge. These ‘last units’ comprised at least 15 to 20 percent of Macy’s inventory, and would be either marked down or written off, resulting in significant loss. Investing in an RFID-based inventory management solution allowed Macy’s to drive inventory visibility to the last unit, resulting in higher fulfillment and reducing inventory requirements by one third.
This is just one example of retailers driving efficiency and optimization benefits through investments in omni-channel capabilities. Adopting the key themes of standardization, integration and digitization, retailers are investing in robust back-end capabilities in Customer Relationship Management (CRM), order management and fulfillment, inventory management, and logistics. The standardization and centralization of these systems cuts down inefficiencies, while the integration of the back-end systems with front end customer touch points is critical to delivering a seamless customer experience. Digital technologies, especially big data and analytics, and mobility, are driving important transformations in areas such as logistics, payments, CRM and marketing.
Accomplishing this change is not easy though, and requires retailers to prioritize process and technology investments. In many cases, retailers are rationalizing their traditional retail model by shutting down stores and channeling those dollars toward omni-channel investments. The WNS DecisionPoint™ study shows that the leading omni-channel investment areas are IT and supply chain management, with focus on the integration of inventory and CRM systems. Other focus areas include:
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More customer touch points including drive-throughs and kiosks
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More and aggressive delivery options with focus on same-day delivery, and pickup within a few hours
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Digitized payment options to factor in growing number of mobile wallets
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Flexible delivery points such as train stations and curbsides
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Additional pick up services such as self-collect and endless aisles
Our study shows that the omni-channel related Capital Expenditure (CapEx) for specialty retailers accounts for 45 percent of all investment spending, up by 20 percent year-on-year in FY13. This is also borne out by the investment plans shared by some of the big retailers. Nordstrom expects to invest USD 4.3 Billion up to 2020, with 35 percent of the CapEx earmarked for IT solutions for integrated merchandising and fulfillment. Target was expected to spend USD 2 Billion on omni-channel in 2015, half of it on IT infrastructure and supply chain. With such significant investments being made in achieving omni-channel status, retailers need to ponder on the next-generation capabilities needed to protect omni-channel businesses from further disruption.