According to the latest annual CEO survey conducted by PwC on behalf of JDA Software (Global Retail & Consumer Goods CEO Survey: The Omni-Channel Fulfillment Imperative), CEOs expressed confidence in revenue growth in 2015 compared to last year. Online and mobile commerce continue to be key drivers of this revenue growth, with a U.S. growth rate of 14.6 percent for ecommerce sales in 2014. This is significantly higher than the 3.7 percent growth rate in total U.S. retail sales, according to the U.S. Department of Commerce. But the CEO survey also found that profits from ecommerce and other omni-channel revenue streams were elusive, as only 16 percent of the CEOs say they are fulfilling omni-channel demand profitably.
The CEO survey received responses from 410 retail and consumer goods companies across Australia, China, France, Germany, Japan, Mexico, the United Kingdom, and the United States. Twenty-two percent of responses came from top 250 retailers (> $5 billion revenue), with another 51 percent classified as top 250-1,000 retailers. Respondents identified themselves as coming from hard goods, soft goods, CPG, ecommerce and grocery verticals, as well as related retail and consumer goods sectors.
In the survey, 44 percent of CEOs said they were ‘very confident’ in revenue growth over the next 12 months, up from 40 percent last year, while 55 percent were ‘very confident’ in growth over the next three years, the same percentage as last year. And despite some media reports of sluggish growth in China, 70 percent of CEOs in China say they are ‘very confident’ in growth over the next three years. Overall, CEOs said they were ‘somewhat confident’ or ‘very confident’ in growth 85 percent and 88 percent, respectively, over the 12 month and three year time horizons.
Despite this confidence in growth, CEOs are worried about escalating omni-channel fulfillment cost, with 71 percent saying it is a top or high priority for them. It is no wonder when 30 percent say they are still operating distinct channels individually, and another 31 percent say that while they can offer omni-channel front-end shopping experiences, they struggle to handle the back-end fulfillment. Even the 19 percent of those who say they can offer both front-end and back-end omni-channel service to their customers, say it is too complex and expensive. That leaves just the 16 percent mentioned earlier who believe they can deliver omni-channel profitably.
The survey provides some pretty clear clues as to why profitability is so challenging. Sixty-seven percent of respondents reported that cross-channel fulfillment costs are rising. Specifically, the top order fulfillment costs identified were for handling online and store returns (71%), shipping direct to consumers (67%), and shipping to stores for customer pickup (59%). All three top costs are either direct or indirect consequences of the increase in omni-channel shopping by today’s digitally-aware consumers.
CEOs are not sitting idly by as omni-channel costs and complexities increase, however. On average, CEOs say they are spending almost 30 percent of their total capital budgets this year on improving their omni-channel fulfillment capabilities. For the top 250 retailers, this investment represents an over 60 percent increase compared to last year. Further underscoring the importance of omni-channel fulfillment to corporate success, 25 percent of CEOs say they will directly oversee investment in this area over the next three to five years, with an additional 53 percent saying they will assign this responsibility to their heads of either supply chain or ecommerce.
To hear a more in-depth discussion of the CEO survey results by Bruce Rogers, Chief Insights Officer for Forbes Media, and Wayne Usie, SVP – Retail global business unit at JDA, register for the Forbes-JDA webinar on May 14, 2015.
In my next post on this CEO survey, launching April 21, I’ll look at some of the key internal and external challenges CEOs identified and what they are planning to do about them. In the meantime, you can access the full report here.