In his keynote address at NRF, JDA CEO Hamish Brewer noted that retailers seem to be spending a lot more time and investment on generating eCommerce revenue than on establishing supply chain practices to effectively execute on those orders. When well-known financial analyst Deborah Weinswig, formerly with Citi Research and now Chief Customer Officer at Profitect, tweeted her agreement, Supply Chain Nation decided to get her expert insights on this topic. The following is a summary of her comments.
SCN: Retailers seem to have spent a lot more time and investment on the front-end, revenue generating aspects of eCommerce than on the back-end fulfillment side. Why do you think this has been the case?
Weinswig: I think when you look at it, the backend is not nearly as sexy. It reminds retailers of the enterprise-wide systems that they sometimes don’t want to dig into. When I look at some major retailers over the past year or two, they have made major announcements concerning Oracle or SAP implementations. These are very difficult, large projects, not only in terms of dollars, but also in terms of resources in the organization. Retailers have been reluctant to take on what they may perceive to be similarly large projects for eCommerce fulfillment.
However, I think a lot of current interest in supply chain has been generated as a result of omni-channel. The large organizations are saying, “Wow, if we really want to compete or be effective, especially against Amazon, we really need to do this.” Macy’s and Nordstrom’s are early adopters with this. They want to ship out of their stores, so there obviously is a lot of necessary investment in both training their people and in making sure they’ve got the ordered items in the store.
When you think about the front-end revenue generating aspects and you can show, “Okay, I’ve gotten these additional sales and I’ve been able to drive ROI,” it’s easier to show an increase in your revenues. If that’s changing how you’re fulfilling orders, is that adding value? I really love what Walmart did, which was allowing customers to pay by cash in the store when picking up online orders. Walmart actually said that their order sizes increased 50 percent when they did pay-by-cash, and they ended up with a more affluent consumer who didn’t want to put their credit card online.
The bottom line is that you’ve seen retailers—not only in terms of dollars, but in terms of energy—focus more on revenue-driving initiatives as opposed to the backend. Interestingly, if we go back to when Walmart was really starting to emerge as the king of retail, it was all about supply chain. Now you’ve got Amazon utilizing Kiva robots, so they’ve got this amazing approach in their warehouses that, since they bought Kiva, is their own proprietary technology. To compete, retailers need to rethink their supply chains. Whether it’s working with JDA or others in terms of the total thought process behind your supply chain, you really need a true partner. This is so important because I don’t think you can necessarily do it on your own.
SCN: How is consumer demand for seamless, all-channel shopping experiences changing retailers’ perspective on this?
Weinswig: We’re starting to see a lot of things that I think retailers didn’t necessarily expect from the consumer. The thing is, the consumer is promiscuous. They’re not loyal. It used to be that I was a Sears shopper, I was a T.J. Maxx shopper; you were loyal to a retailer. But price is such a driver now. It’s so easy to compare prices online and just shop based on price. I think there’s a lot of investment by retailers in proper mechanisms to make sure that they’ve got the right price at the right time.
If you are lucky enough to get the consumer into your store, how do you make that in-store experience fun—this idea of retail entertainment. What does it mean to people to visit the store? I think the millennial consumers, for the most part, can be sufficient on their phone. In that case, how do retailers provide good service? Millennials want service in a different way than older consumers. Helping your salesperson to identify service needs for different types of shoppers is critical.
I thought it was interesting that J.C. Penney recently brought back commissions. But how do you incent your sales people for service? I just think that it’s becoming even more important with the rise of eCommerce and omni-channel. I know eCommerce is just about 10 percent of total revenue right now, but that’s growing. I think it’s going to be even more difficult to measure results with omni-channel. You see something online and come in the stores to buy it. You see something in the store, and then go home and purchase it online. Or at Kohl’s, for example, you’ve got the kiosks in the stores and that’s actually generating a decent amount of sales.
The way the consumer shops is continuing to evolve at a very fast pace. I feel the future is very strong for supply chain, because the consumer wants same-day. I think that pretty soon it’s just going to be the standard—you have to have same-day shipping—and the customer doesn’t want to pay for it. Retailers will have to figure out ways to adapt their supply chains in ways they never have before. I just think that’s happening quicker than retailers expected.
SCN: Thanks for those insights, Deborah. In Part II launching April 1 we will discuss what retailers should be doing now to adapt to omni-channel and the factors that will separate leaders from laggards.