Retail Insight Fulfilling Consumer Expectations
2
Paula Rosenblum Managing Partner
Retail Systems Research (RSR)
Peter Zaballos Vice President, Marketing & Product SPS Commerce
speaker Speakers
agenda Agenda The State of Omnichannel Retail Retail Insight Report Findings Recommendations Q&A
What is the Retail Insight report?
Survey 100s of retailers, distributors, suppliers and logistics 3
Years of history
Key Findings: consumer expectations
75% Retailers see rising consumer expectations for rapid fulfillment in 2015
44% Suppliers see rising consumer expectations on item information
Everyone needs help keeping pace with the consumer
94% Haven’t executed an omnichannel strategy; 37% have no long-term strategy
The perfect order ‒ then
retailer vendor
On time
Complete
Damage-free
Complete & accurate documentation
Consumer
The omnichannel perfect order
Product Information Social validation
Inventory information Competitive pricing
Convenient fulfillment Convenient returns
retailer
vendor
3PL
SPS Commerce Network for Omnichannel Retail
1 55K trading partners
Membership
1.3M products
Sourcing
7K companies 35M
UPCs
Item Management
4,000 models supported
Fulfillment
360K retail locations
Analysis
$1+T orders annually
Volume
Paula Rosenblum Managing Partner, Retail Systems Research (RSR)
Retail Insight: Fulfilling Consumer Expectations SPS Commerce 2014 Industry Benchmark
PAULA ROSENBLUM, MANAGING PARTNER
OCTOBER 2014
Agenda About RSR & our BOOT Methodology© Survey Respondents
Findings
• Overview
• Business Challenges
• Opportunities
• Organizational Inhibitors
• Technology Enablers
Recommendations
What is RSR? • Market Intelligence, focused on retail
• Context: the business challenges & opportunities that drive technology investments
• Pragmatic insights
• Powered by extensive retail experience
• Fueled by a deep bed of research data
• We help retailers keep their IT strategies aligned with corporate objectives
• We help solution providers align their products and messages with retailers’ needs
RSR’s BOOT Methodology©
Winners sell more “stuff” but… they also think and act differently than their competitors.
Business Challenges Opportunities Organizational
Inhibitors
Technology Enablers
• Third consecutive year • Survey fielded in early September 2014 • Respondents: SPS Commerce ecosystem (N=214)
• Retailers & Distributors (28%) • Merchandise Vendors & Suppliers (65%) • Logistics Providers (LSPs) (7%)
• More details on respondent profiles available in the report
About the SPS Benchmark Survey
Research Overview
Key Takeaways • Expectations for sales growth dampen slightly
• Budgets either increasing or remaining the same
• Omni-channel supply chain harder than we thought! • Respondents rated their execution a bit more poorly than they did last year
Sales Growth Slowing….
Source: RSR Research, October 2014
23%
60%
14% 3%
30%
55%
12% 4%
Much better than 2014 Somewhat better than 2014
The same as 2014 Somewhat worse than 2014
Expectations for Sales Growth in 2015
2014 2013
…but still headed in the right direction
Budgets Generally Stable
Source: RSR Research, October 2014
44% 47%
10%
46% 44%
10%
increased Stayed the Same Decreased
How has the Budget for 2015 Changed Compared to 2014?
2014 2013
Retailers least likely to report an increase (38% vs. 45%) Most likely to report a decrease (13% vs. 7%)
It’s a good thing there is budget available because…..
The More We Learn, The Less We Know…
Source: RSR Research, October 2014
5%
26% 32%
37%
6%
26%
38%
29%
Advanced: We are ahead of most of our
peers and have executed on most of
our strategy.
Moderate: We have identified our strategy
and are executing on it.
In Process: We are developing our strategy
and beginning to execute the plan.
Lagging: We are exploring our omni-channel options and haven’t yet set our long-term strategy.
How Do You Rate Your Omnichannel Strategy and Execution Today?
2014 2013
• General concurrence across the ecosystem • Retailers more apt to have identified strategy (32% vs.22% of all others)
What makes it so hard?
Revenue
€ $ £
Sell More Stuff
The Retail Ecosystem Is As Old As “Forever” And Based On These Assumptions…
€ $ £ Expense
Run Better
€ $ £
Margin & Profitability
Buy Better, Turn It Faster
New Selling Channels Didn’t Change The Model… But Did Add Inefficiencies
Cross-channel: “One Brand Across All Selling Channels” Doesn’t Address Inefficiencies
Omni-Channel: One Brand Across All Selling Channels: Requires Aligning Supply To Demand Differently
And that’s where we want to be now…
The picture looks simpler, but turns out to be very disruptive and hard to achieve
Business Challenges THE CUSTOMER REALLY IS KING
Business Challenges Themes • Concerns over the economy remain constant
• Continued increase in customer-themed challenges • Customer expectations driving change • Retailers pressuring vendors to help solve the problem • Another reflection of ‘omni-channel’ challenges
• Long-term, fear of new consumer technologies and the omni-channel phenomenon on the rise
• Half of surveyed vendors going direct-to-consumers in some way (the ‘frenemy’ effect)
• The Amazon Effect
Consumers Stressing the System
Source: RSR Research, October 2014
10%
16%
34%
65%
60%
64%
16%
35%
44%
63%
68%
75%
Natural disasters/wars
Omnichannel strategy
Rising consumer expectations on item information
State of the global economy
Rising consumer expectations on inventory availability
Rising consumer expectations for rapid fulfillment
Top Three Business Forces Impacting the Supply Chain in the Past Year
2014 2013
32%
23%
23%
19%
16%
29%
69%
77%
19%
20%
24%
30%
31%
38%
66%
67%
Politics/regulations
Globalization
Social media
Mobile commerce
Omnichannel retailing
New consumer technology
Consumer buying preferences
Economy
Top Three External Forces that Will Affect Your Business in the Next Five Years
2014 2013
Source: RSR Research, October 2014
Retailers more concerned about the consumer (42% vs. 36% all others) Less concerned about globalization and politics (12% vs. 25% all others)
Long-term: Mostly More of the Same
The World of Frenemies
Source: RSR Research, October 2014
16%
1%
47%
8%
50%
Our own stores
Our own kiosks
Our own e-commerce
site(s)
Our own mobile apps
We do not sell direct to
consumers
Vendors Selling Direct to Consumers Through...
The term “channel conflict” leaves our vocabulary
More of The Amazon Effect
Source: RSR Research, October 2014
42%
21% 19% 17%
1%
Rapid fulfillment Comprehensive item information
Drop ship capabilities
Accurate visibility to
inventory levels/locations
Streamlined returns
Biggest Challenge Retailers Asking Merchandise Vendors to Solve
Opportunities
THE CONSUMER DEFINES THEM
Opportunities Across the Ecosystem • “What Has Impacted Consumer Buying Decisions?”
• Price • Availability • User reviews
• Continued rise in digital selling channels • Retailer expectation to reduce “ship-from-store”
• Manufacturers/vendors re-focus on their own brands
• LSP’s focus on service
• What’s most important in the retailer/vendor relationship?
Continued Hammering on Price…
Source: RSR Research, October 2014
NA
NA
5%
24%
20%
29%
29%
44%
27%
68%
78%
13%
23%
28%
31%
34%
38%
41%
52%
53%
62%
85%
Digital experience within the store
Promotions (proximity-based)
Visibility in social media conversations
Breadth of product assortment
Images/video
Access to helpful employees (in store, call center, etc.)
Promotions (general)
Product information
User ratings/reviews
Product availability
Pricing
All Factors that Have Impacted Consumer Buying Decisions in the Past Year
2014 2013
..with new tidbits
Retailers Disrupted: A Mélange of Selling Channels
Source: RSR Research, October 2014
74%
16% 2% 2% 7%
19%
67%
12% 2%
7%
47%
40% 7%
3%
12% 52%
33%
7% 7% 28%
5%
53%
1 (drives the most revenue)
2 3 4 5 (drives the least revenue)
Rank Selling Channels Based on Their Revenue
Stores E-Commerce site(s) Mobile sites Mobile apps Catalogs
Shifting the Mix of “Ship from Stores”
Source: RSR Research, October 2014
18%
25%
21%
16%
18%
11%
9%
9%
34%
40%
In 3 Years
Today
What Percent of Online Orders Are Fulfilled From Stores? (Retailers Only)
More than 75% 26%-75% 11-25% 5-10% <5%
The mix will shift, but the activity will continue. Major considerations beyond the scope of this study.
Vendors…Distracted
Source: RSR Research, October 2014
23%
24%
24%
24%
27%
31%
32%
41%
42%
42%
Provide flexibility to the consumer to buy, take delivery and return items through any channel
Deliver a single branded entity across all channels
Deliver a broader product assortment, the “infinite aisle,” to our retail customers
Deliver a broader product assortment, the “infinite aisle,” to consumers
Deliver a consistent crosschannel experience to consumers
Support new order management models for retail customers, especially drop ship
Increase direct sales from our company’s ecommerce site
Drive increased traffic to retail stores
Provide more detailed item information
Build a social community around our company/brand
Top Three Omnichannel Opportunities for Vendors
Logistics Providers…Waiting
7%
7%
7%
7%
13%
13%
20%
27%
Suite of offerings
Scalability
Pricing
Warehouse capacity
Reliability
Warehouse locations
Technology
Reputation
Which Attribute is Most Important to Your Customer's Buying Decision? (LSP Responses)
Source: RSR Research, October 2014
The Dating Game
14%
18%
29%
34%
27%
49%
40%
63%
74%
66%
20%
27%
27%
33%
38%
47%
49%
53%
75%
78%
Digital assets
Size of company
Drop ship experience
Visibility to sales and order status
Years of business
Merchandising programs
Compliance with trading requirements
Item assortment
Product Pricing
Item availability
Most Important Capabilities in Establishing New Retailer/Vendor Trading Relationships? (all that apply)
Retailer/ Distributor Merchandise Vendor
Source: RSR Research, October 2014
These may sound like “thin” opportunities, but omni-channel
IS the opportunity
Organizational Inhibitors
WHAT COULD GO WRONG?
A Mind-blowing Answer….
14%
20%
23%
28%
31%
34%
35%
52%
Misaligned metrics and incentives
Silos of information/operations
Lack of executive direction
Company politics/structure
Cultural resistance to change
Legacy systems
Insufficient budget
Other priorities
What Factors are Hindering Your Omnichannel Strategy and Execution?
Consistent across the ecosystem
The Legacy of Retailing Being “As Old As Forever”….
Source: RSR Research, October 2014
25%
16%
26%
30%
18%
28%
33%
43%
Lack of executive direction
Silos of information/operations
Company politics/structure
Legacy systems
Selected Differences: Factors Hindering Omni-channel Strategy
and Execution Retailers/Distributors All Others
Consumers and Competitors Drag the Ecosystem Along
Source: RSR Research, October 2014
12%
14%
19%
21%
36%
44%
53%
Increased budgets
Cloud technologies
Industry expert advice and recommendations
Flexible workforce
Executive mandate
Competitors are already advancing
Consumer pressure to advance
What Factors are Expediting Your Omnichannel Strategy and Execution?
The CEO as Hercules
Source: RSR Research, October 2014
NA
13%
27%
31%
52%
62%
91%
13%
20%
29%
33%
47%
73%
87%
Switching to cloud computing
Utilization of a mobile workforce
Mergers or acquisitions
Employees’ interpersonal skills
Employees’ technical skills
New technology adoption
Management’s vision/strategic planning
Top Three Internal Forces That Will Impact Your Business in the Next Five Years
2014 2013
The Bottom Line
• “Other priorities” is another word for inertia • Retailers particularly hampered by technology
• Customers are the strongest external forces against inertia
• Management vision is the primary external force against it
• Technology, the great enabler
Technology Enablers
WHAT DOES IT TAKE TO ENABLE OMNI-CHANNEL?
Tech Enablers, An Overview • Omni-channel capabilities dominate investment
opportunities
• Retailers get [some] religion around drop ship capabilities
• Product Information Management (PIM) still dominated by the spreadsheet
E-Commerce, Expanded Assortment and Warehouse Improvements Dominate
Source: RSR Research, October 2014
7%
9%
10%
10%
10%
12%
14%
16%
16%
19%
21%
34%
44%
25%
41%
14%
43%
36%
44%
33%
40%
40%
25%
26%
23%
26%
10%
29%
28%
26%
26%
26%
26%
26%
17%
29%
20%
28%
13%
18%
11%
20%
11%
10%
8%
4%
13%
2%
38%
3%
3%
4%
5%
5%
3%
Mobile commerce
Social media outreach
Expanded drop ship vendor network
Customer intelligence
New stores/locations
Supply chain collaboration
Supply chain visibility
Inventory management
Warehouse improvements
Expanded product assortment
E-Commerce advancements
2015 Investment Priorities
Major Investment Some Investment Minor Investment No Plans Not Applicable
Notable Differences • Retailers and vendors much more invested in social media
outreach than LSP's.
• LSP's planning major investments in warehouse improvements.
• Retailers planning major investments in e-commerce: 40% vs. 14% of vendors. Vendors plan "some investments", but not at the level of their retail peers.
• Retailers also lead in m-commerce investments: 59% planning at least some investment vs. 35% of vendors.
• Inventory management getting some kind of upgrade: 60% of retailers, 62% of vendors, and 54% of LSPs all plan investment in the capability.
Ready for Drop Ship….
Source: RSR Research, October 2014
32%
11%
11%
27%
21%
21%
1%
5%
5%
14%
20%
19%
26%
42%
44%
Drop ship
Mobile commerce
Cross-channel fulfillment
Deployment Status of Omni-Channel Capabilities
Fully Optimized In process Budgeted Planned activity No plans
…Vendors more ready than retailers, but everyone’s working at it.
…Which is Apparently Coming
Source: RSR Research, October 2014
14%
8%
13% 12%
8%
22% 22%
12%
7%
12%
6% 9%
38%
16%
76-100% 51-75% 26-50% 11-25% 6-10% 0-5% Don't know
Percentage of E-Commerce Sales That Are Drop Ship (Retailers)
In 3 Years Today
So Where Do We Go From Here?
Recommendations
STEPS TO SUCCESS
Foundational capabilities critical:
Think Visibility!
Data Sharing
Move beyond spreadsheets
Retailers:
Break the shackles of legacy systems
Manufacturers / Vendors:
Curate Assortments
LSP’s:
LSP’s
Don’t be Afraid to Lead
Questions
© 2014 SPS Commerce
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