Why retailers need to take back control of their channels

Retail is now omnipresent – but so are rising costs. After two years of reacting to unprecedented events, retailers need to regain control of their agendas and understand the impact on their margins, says Martyn Cole, Director of Commercial Operations at Retail Directions.

Retailers have done an astonishing job over the last couple of years.

Faced with an unprecedented crisis in public health it was retailers that went above and beyond the call of duty to create ecommerce sites and home delivery networks out of thin air, allowing shoppers to stay at home and carry on their lives with some degree of normality.

It was retailers who delivered the new laptops, printers and homeware that allowed home-schooling and WFH; it was retailers who delivered groceries to our aged grandparents.

Even shoppers who had never considered online shopping were won over, suddenly seeing the benefits of next day delivery, click & collect, stock checking and free returns, supported by live chat customer service and real time problem solving. They have quickly come to expect a level of service they didn’t even know could exist just five years ago.

Unfortunately, as the dust settles on this period of breathless change retailers are finding that their forced evolution into retail is far from over. In fact, by responding so ably to rapid-fire demands for new services they have raised the bar.

Shoppers now expect the entire contents of local supermarkets and the nearest apparel, footwear and DIY stores to be available as though it were in a vintage Martini ad: at any time, any place, and anywhere.

Worse – and just as a cost of living squeeze sees sales fall sharply – many retailers find themselves offering a slew of added value ecommerce features that might not even be covering their own costs. In a high tech battle for market share, some retailers face a very old-fashioned problem: they may not know if it is making them any money.

Such is the speed with which retailers have pushed through change it is fair to say many don’t know what their move into retail is costing, or what it is contributing to their bottom line.

From retailers with warehouses where returned garments are piling up faster than they can be processed, to those facing shortages of popular ranges in stores because they give priority to online orders (which might then join the pile of returns), some companies are discovering their dream of omnipotence has a nightmare element.

Privately, some will admit that they don’t know if it is feasible or sustainable – in either commercial, or environmental terms – to run an omnipresent retail business. Ironically, their agility and flexibility may have caused the problem.

With a business model that has evolved rapidly using heritage systems, many have no single source of truth when it comes to what is now going on. The view across their business is strewn with hidden costs and pain points, ready to trip them when they least expect it.

Picture a retailer selling a shirt online for A$19.95 – the same price as in-store – and offering free ship-from-store delivery within 48 hours, then facing a 35% return rate because customers can’t try it on until it arrives, factor in the cost of processing that return on top of the original delivery, take into account marketing costs…and try to work out the profit margin.

Make no mistake, this is what keeps retailers awake at night. Thankfully, there is a solution.

In retail, as in so many other walks of life and business, it pays to be in control. Faced with runaway demands while the natural world order was upset, retailers had little choice but to react. Now, they need to stop being reactive, get back into the driving seat and manage the expectations of their passengers. To continue with the driving metaphor, they must start by finding a decent map and working out exactly where they are.

That means developing processes that have sight of every part of their network and every item within it. Without full visibility of entire supply chains, omnipresent retail quickly provides opportunities to disappoint customers in the most expensive ways possible.

However, a business that does have control – in the form of a single source of truth that provides full visibility of its inventory through the use of data – is in a very different position. This is a business that won’t disappoint customers but instead surprise and delight them. A single source of truth based on data lets retailers know where products are and manage and fulfil them efficiently and – crucially – enabling them to open up their entire retail ecosystem as a virtual distribution centre.

Retailers that have a clear and accurate picture of these factors can use that knowledge to build the foundations for a more connected network and unified connected retail strategy, for example using click and collect or endless aisle services more effectively to pull customers into their physical stores.

With some expensive store estates literally gathering dust, that has to be a key goal.

For many retailers, developing these processes will highlight that, ultimately, they must now help customers to moderate their expectations. Retailers manage the expectations of customers who enter physical stores, and they need to take back control of their online operations too.

Presently, the agenda is being set by their customers. And while customer-centricity is rightly applauded, it needs to be tempered by those with oversight of what is achievable, sustainable and – of course – profitable.

Shoppers – quite rightly – don’t care a jot about the hurdles that retailers clear to get things to them. They just know that after ordering they receive a package. Their expectations are formed from their experience of just this happening.

Some retailers are now questioning whether that relationship can continue on its current path, or whether a re-evaluation is required. What is clear is that somebody needs to pay the piper.

It just remains to establish who is picking up that bill.