Why omnichannel is Proving Key to Retailers’ Survival in the Digital First Era

A series of challenges over the last year have brought with them a wealth of era-defining moments for retail. Within a brief and turbulent window of time, we have seen some of the biggest hallmarks of the changing retail landscape. Most notably, the already wavering high street was hit hard after accumulating lockdown measures, and Arcadia’s recent sell-offs to ASOS and Boohoo have proven major milestones in the ongoing shift towards a new breed of retail giant.

Of course, it hasn’t been smooth sailing for the online retailer either. The UK’s exit from the European Customs Union brought momentous logistical issues for businesses relying on shipping in and out of the EU. With customers on both sides of the channel suddenly faced with unexpected charges, many are returning products to avoid paying extra fees. The notoriously complex and expensive nature of reverse logistics has led many retailers to simply abandon the process altogether, with some retailers even threatening to burn returned products.

The message for retail throughout all these headlines is the same – do not put all your eggs in one basket. The time when brands could rely on a sole method of fulfilment is no longer viable within a constantly changing retail landscape. Retailers are beginning to realise that customer experience standards do not take a day off during a crisis. As such, it is becoming increasingly clear that future growth, especially during times of turbulence, will require brands to proactively invest in multifaceted omnichannel fulfilment models.

Reflecting on the recent peak season

The extra-ordinary circumstances of 2020 set the stage for one of the most challenging peak seasons yet. Namely, when coupled with the closure of non-essential stores, the increased online demand acted as a measuring stick for what approaches have been best suited to weathering the pandemic storm.

Recent research by PFS has shown that only 50% of retail businesses felt they were adequately prepared for the recent peak season, and more worryingly, 53% said they did not have enough internal resources to make the operational changes needed to be optimally prepared. This resulted in over one-in-six (17%) missing out on critical sales.

On the flip side, however, retailers that pre-emptively invested in omnichannel capabilities fared much better. Buy Online Pick-Up In-Store (BOPIS) initiatives, for example, proved to be a game-changer, with two-thirds of retailers (67%) who invested in this capability seeing an increased sales volume. Cementing this trend was curbside pickup, which led to the next strongest performance with 55% of retailers reporting increased sales.

Adapting to a digital-first era

Under the extraordinary circumstances of the most recent peak season, preparation proved invaluable in ensuring retailers were malleable to the rapidly changing consumer behaviours of 2020. These changes in consumer behaviours, however, are not limited to the pandemic.

PFS’s previous research found that, in addition to the 53% of consumers shopping more online since lockdown began, more than three quarters (77%) of consumers expect to continue purchasing online more once the lockdown is lifted.

For the brands that struggled to adapt during the peak season, this remains a daunting prospect moving forward. Alarmingly, despite the clear shift towards online purchases, 45% of retailers felt their technology stack was unprepared for the increase in peak online transactions. Following this, lack of visibility and supply issues remained a serious concern, with 53% of retailers admitting difficulty locating available inventory. All of this suggests an undeniable need for brands to invest and put emphasis on future delivery-times, stock replenishment and, ultimately, customer experience as they move forward into the forthcoming ‘digital-first’ era.

The urgent need to invest in hybrid future

Peak season was a wake-up call. Following what proved to be the eye of the storm for many brands keeping up with changing consumer behaviours, over a third (36%) of retailers are now planning to increase their investment in fulfilment capabilities as a result of peak season. Additionally, three-in-ten (30%) are looking to invest in curbside pick-up competences; 28% in ship from store capabilities; and almost a quarter (24%) in BOPIS.

The same research found that a startling 52% of retailers, however, are planning to outsource all or portions of their eCommerce operations, which is perhaps the biggest indicator of the current scope of demand on retail fulfilment capabilities.

While BOPIS and ship from store capabilities remain a key factor in adapting to consumer behaviours, particularly for retailers banking on the survival of the high-street, they don’t form the full picture by themselves. Consumers want to be able to access products online, in-store, and most importantly, now. Without a cohesive plan in place including inventory management and distributed order management (DOM) capabilities, brands will struggle to meet all of these unique demands at once, let alone meet the high standards of customer experience that come with them.

As the landscape becomes more difficult to anticipate, omnichannel investment and operational infrastructure will prove make or break for retailers in 2021. For both digital and brick and mortar retailers, a hybrid fulfilment approach to retailing will ensure not only survival, but growth. Not only will this enable retailers to inject value back into brick-and-mortar retail, but also keep up in a digital-first era.

By Christophe Pecoraro, Managing Director of PFS Europe