FULFILLING DEMAND PROFITABLY
How do you manage omni-channel retail and make a profit? That’s the trillion-dollar question retailers around the world are struggling to answer. The fact is many retailers lose money on e-commerce. Or, at best, break even.
A traditional bricks-and-mortar retailer typically operates at a profit margin of five percent or below. However, the cost of fulfillment and logistics for online orders can be up to four times higher per unit than traditional bricks-and-mortar models. Final mile delivery is expensive, fulfillment costs for picking order quantities of one (“eaches”) are higher than case picks; and high return volumes further erode margins.
Given that 78% of purchases during the Black Friday promotional period in 2018 were made online, and with 42% of those customers tracking the delivery of goods through apps, it’s a challenge that retailers have to face.
So, what’s the solution? The answer is complex, but a big par t of the solution is designing a supply chain that can fulfill omni-channel demand profitably.
Easier said than done. According to the CFFA Retail Development Survey, retailers are unsatisfied with their current supply chain management set up and consider this issue their top challenge. In addition, a study of CEOs from across the retail and consumption industry states that the most significant internal challenge of omni-channel transformation is being unable to fulfil consumer demands across all the channels they have in place (55% of respondents). This is followed by concerns about keeping up with technology and innovation (43%) and being unable to integrate isolated online and offline channels (42%).
Given this, what does the “right” omni-channel supply chain look like and how can it contribute to profitability? DHL Supply Chain explored these questions in a research study, and presented the findings at a DHL Fashion Masterclass in Germany. From this research, DHL Supply Chain, together with DHL Consulting, developed a strategic framework for helping to build a profitable omni-channel retail supply chain.