Report: Hitachi finds Retailers Losing Profit in Pursuit of Multichannel Sales

Hitachi Consulting, a subsidiary of Hitachi, has found that retailers are losing money as they look to offer multiple ways for customers to buy their products.

The report by IMRG and Hitachi Consulting, entitled ‘The New Economics of Multichannel: Now is the Time’, found that 63 percent of retailers accept website returns in store, of which only half return the items to distribution centres.

Due to the evolving nature of commerce, the report shows retailers’ profitability is being adversely impacted by customer demands for ever-increasing options around instant gratification across different channels and fulfilment systems.

The report reveals that more than one in four (28 percent) multichannel retailers do not know how much they are spending to fulfill each sale via different channels (e.g. home delivery, Click and Collect, in-store).

Less than 15 percent of retailers have real-time stock visibility across all their fulfilment locations. The issue is worse where third parties are responsible for maintaining stock positions, which directly impact delivering on the retailer’s customer promise – lack of real-time stock visibility for fulfilment centres (46 percent) and drop ship suppliers (34 percent). 

Interestingly, only 54 percent had real-time visibility of stock held in their owned stores, presenting a real hurdle to same day click and collect.

The report identifies four areas where retailers should be focusing investment in order to maximise profitability while developing their multichannel sales strategies:

1.       Integration of existing order capture & fulfilment systems in order to provide a more holistic view of real-time stock availability

2.       Eliminate physical stock silos which increase stock holding cost, reduce flexibility and increase markdown

3.       Across all markets, develop a capability to split an order across multiple fulfilment channels to enable optimal balance of customer service, stock turn and supply chain cost

4.       Build reliable and efficient returns processing from all channels to enable items to be quickly recycled and resold to minimise likelihood of markdown 

Chris Gates, Director of Retail, Hitachi Consulting said: “Britain’s retailers have been aggressive in their pursuit and adoption of multichannel retailing and the rapid growth of online and mobile retailing reflects this. However, traditional fulfilment systems are failing to keep up, meaning retailers are sacrificing profitability for bottom-line growth.

“By implementing the right technology to give a single view across channels and the supply chain, retailers can unlock efficiencies to drive a better brand experience and ultimately, more profit.”

 ‘The New Economics of Multichannel: Now is the Time’ is available to download here.