Businesses today are undergoing massive changes as a result of three enablers: Globalisation, Technology and Supply Chain. This trend is most evident in the retail industry where globalisation has allowed products to be designed for global taste and be produced at the lowest cost; and supply chain fundamentals have supported businesses with flow of goods, information and money. Technology, on the other hand has not only enabled the other two, it has in-fact redefined the scope of retail itself.
A few decades ago we saw the rise of e-commerce. The world of brick and mortar retail was being challenged by internet based models. Though considered to be a fad during then, evolving technology made sure that e-commerce flourished and well. Real estate advisor Savills estimates that by 2025, 20-25% of all retail sales will be generated online. Certainly, e-commerce is here to stay.
But only when one thought that the ultimate horizon in retail was breached, along came “Omnichannel”. With the growth of mobile internet and the changing profile of the customer, the need to integrate the traditional retail with e-commerce arises. Today the customer wants to see a product on the high street, order it on their smart phone and pick it up at a store next to their office; and maybe return it through a drop-in locker at the tube station. This blending of marketing and distribution channels is bringing a different set of challenges into the retail board rooms.
Stores are responding by putting more and more inventory into the stores, which in turn are becoming warehouses. But it is getting harder to blend these inventories as they really don’t know where everything is. As most of these facilities are not well equipped to handle returns, the costs are bound to go up in the short term. Adding to the issue is the fact that there is a lack of omnichannel strategy which requires retailers to answer three fundamental questions:
- What are the offerings and what channels are to be used so as to minimise channel conflicts?
- Who is the customer and how does she or he see the overall offering? What is important to which customer group?, and
- How can the internal functions be aligned to the omnichannel strategy – this will include all departments including marketing, logistics and procurement.
Procurement in the omnichannel era will need to be at the top of its game. They need to be tech savvy and forward looking. Procurement’s role shall emerge from being a back office, cost cutting machine, to a growth enabler and an active contributor to competitive advantage. Never has been such a strong need for procurement to understand the various facets of the customer side of business.