The eCommerce Revolution: How Retailers Can Gain New Ground

Global business-to-consumer e-commerce sales will top the 1 trillion euro ($1.25 trillion) sales mark by 2013. The total number of Internet users will increase to approximately 3.5 billion from around 2.2 billion at the end of 2011. This is according to a new report by the Interactive Media in Retail Group (IMRG), a U.K. retail trade organization.

The report states that the U.S. remains the world’s single biggest e-commerce market, followed by the U.K and Japan. IMRG estimates that growth rates in those countries will be approximately 10-15 percent a year while China’s e-commerce market is growing 130 percent a year.

This e-commerce revolution has created a newly empowered consumer – the “always-on” consumer who has higher expectations for the retail shopping experience than ever before. Cleary, the retail industry is undergoing a revolution. How ready are retailers to support the omni-channel delivery of products to these new consumers?

Earlier this year we partnered with Kevin O’Marah, senior fellow of the Stanford Global Supply Chain Management Forum, to take a deeper look at this changing retail environment. We conducted survey of more than 100 retailers to examine the effects of e-commerce on the retail value chain. Following are some highlights from the survey.

The E-Commerce Explosion

We asked retailers how they planned on adjusting their store operations to support the increased adoption of e-commerce. More than half of the respondents identified the buy online and pick-up in-store capability as essential, whereas 34 percent thought it would become a common occurrence. Further, 12 percent said that they would need to support this capability at least sometimes. While the retailers view the capability to purchase online and ship from-the-store as less essential, more than two-thirds believed that the buy online and ship-from-store option will become part of the normal retail landscape moving forward.

Shifting Brand Loyalties

When we asked retailers if their e-commerce enabled future favors brand loyalty for the manufacturers, the retailers or neither, the respondents were split. Seventy percent of the respondents believe that shoppers will expect brick-and-mortar retailers to be able to trade off product availability, convenience, price and assortment to get to the right deal for them.

IKEA and Costco are well-known examples. Both brands have demonstrated that customers will absorb some of the traditional supply chain functions such as assembly and inventory holding in return for lower prices. In contrast, other brands such as Nike and Apple have proven that customers will pay a premium for convenience and value-added service.

Balancing supply and demand in the e-commerce-enabled future will call for more than just a good assortment that is reliably in stock.

Supporting New Levels of Complexity

Retailers must consider the structure and functions that are involved when exploring how to accommodate this new level of complexity. The results from the research were divided in terms of who will own the demand surge resulting from e-commerce. Forty-two percent of retailers think these roles – supply chain, merchandising, store operations – will need to converge to some degree. More than a third of respondents envision that the roles will remain separate, but be required to integrate more intensively. Better integration between the store and the supply chain will be crucial.

The New Value Chain

Retailers are heading toward building a single organization that can respond to demand across multiple channels. This requires integrating processes from source to sale as well as greater collaboration between retailers and suppliers – all the way from the manufacturer through to the shelf or point of sale.

Retailers must rethink their business in terms of how consumer demand will now be felt by the value chain and putting in place the right strategy – store layout, merchandise assortment, pricing and bundling, change management and innovative technology investments.

The ones who will lead and thrive are those who embrace both the sales side and the supply side. By striking the right balance between creating the ideal in-store experience and building an agile supply chain that supports bottom-line savings, retailers will be positioned to remain competitive and ahead of the curve.

,p>If you want to learn more, read The Changing State of Retail in Real Results magazine. To download the full report, visit http://jda.com/retailsurvey.

  1 Comment   Comment

  1. Informative article. I work for McGladrey and there”s a white paper on US online retail on the website ( http://bit.ly/HJbEFy ), with information on E commerce, defining its scope within the retail industry

    Reply

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