Global retailers investing in mobile for digital transformation, despite profitability challenges

According to a recent survey by JDA/PwC, almost 70 per cent of of CEOs in the world’s leading 350 retailers are investing in digital technology to improve customer service – and much of this investment is being targeted at mobile.

This assessment comes from a recent report – “CEO Viewpoint 2017: The Transformation of Retail” carried out for JDA Software, by PwC.

When it comes to physical stores, CEOs have invested, or plan to invest in;
• clienteling (76 per cent),
• personalised mobile ‘push offers’ and beacons (76 per cent), and
• smart mobile devices for staff in stores (79 per cent).

Outside of the store, big data (86 per cent), mobile-enabled applications (85 per cent), and use of social media data (85 per cent), are the top technologies survey respondents are investing in, or plan to invest in over the next 12 months, along with automation and the Internet of Things (IoT).
The use of social media and big data is becoming an important tool for retailers by offering deep insights into rich sources of customer information, allowing them to create credible customer segments, while understanding shopper preferences.

Despite the obvious importance of having a digital transformation strategy in place, more than half (52 per cent) of respondents (47 per cent in the UK) have not yet defined or begun to implement a digital transformation strategy. This reflects the fact that many retailers still have work to do in terms of fitting the strategy piece into the digital transformation puzzle.

“The investment in digital technologies was a major undercurrent within this year’s survey results. This is no surprise, since retail CEOs understand just how important it is to invest in the technology that will improve the customer experience, particularly in store. However, when you consider the amount of time and money global retailers are set to spend on digital technology,” says Lee Gill, group vice president, global retail strategy, JDA.
“The report findings also reveal the continued balancing act retailers are struggling to maintain with ensuring omnichannel excellence and profitability – all while meeting the demands of the modern shopper and keeping pace with the digital transformation underway across the supply chain.”

Omnichannel profitability remains a challenge

As omnichannel retailing continues to mature, and retailers have blurred the lines between online and store, their attention has shifted to implementation and profitability. Among global retailers, omnichannel continues to lag in areas of order fulfilment and profitability is still a challenge, with only 10 per cent of those surveyed able to make a profit while fulfilling omnichannel demand; this figure falls to just three per cent for the UK market.

Only 12 per cent of CEOs surveyed, down from 19 per cent in 2014, provide a seamless shopping experience across channels. These retailers are finding their omnichannel offerings to be too complex or expensive and are choosing to scale back.

Returns impacting on profitability, click & collect on the march

Seventy four per cent of respondents believe the cost of customer returns is impacting profits to at least some extent, a figure that rises to 85 per cent for the UK. As CEOs look to regain profitability, their chosen areas for order fulfilment investment are prioritised by those that are the most important and net the most financial return.

However, many are yet to perfect the fulfilment part of the supply chain picture. Stock-outs proved a particular concern for UK retailers, with more than a third (37 per cent) stating that when it comes to supply chain issues, this was their number one concern.

The survey found that retail CEOs are increasing their investment in Click & Collect; 51 per cent either offer or plan to offer it in the next 12 months – up from 47 per cent in 2016. ‘Buy online, ship to store’ has picked up steam in the past year, with 48 per cent of retail CEOs investing in this service or planning to, in the next 12 months. Conversely, fulfillment options that are becoming costlier and less profitable are areas where CEOs are decreasing investments in 2017. These include same day delivery, which was 43 per cent (35 per cent in the UK) last year, but is just 33 per cent (28 per cent for the UK) this year, and specific delivery slots, which were 48 per cent (51 per cent in the UK) last year, but are just 27 per cent (25 per cent in the UK) this year.

The rising costs involved in fulfilling orders is also pushing executives to rethink their overall strategy. 2017 will see increased charges for online orders; 57 per cent plan to or will make this change in the next 12 months, up from 29 per cent last year. There will also be a rise in minimum order thresholds for free standard home delivery (62 per cent plan to or will make this change in the next 12 months), which is up from 39 per cent last year. Raising the minimum order value for Click & Collect (55 per cent plan to or will make this change in the next 12 months), is also more likely than last year, when just 31 per cent said they would take this approach.

“While retailers have increased fulfilment options over the last year to meet consumer demands, as Click & Collect becomes a staple and ‘buy online, ship to store’ emerges as another fulfilment capability, retailers now need to balance the effectiveness and profitability of the fulfilment channels they offer with customer satisfaction. Because if shoppers experience a problem with home delivery or in store pickups, that is a lost sale – and customer – that retailers can’t afford in a highly competitive market,” notes Gill.

“We have witnessed unprecedented change sweeping the retail industry that continues in earnest as retailers reimagine their strategies to transform the customer experience, making it seamless and personalised, no matter how they shop. Supply chain complexities and cost will continue to challenge retailers, and the difference between winners and non-winners will be how much, or how little, retailers understand their customers moving forward,” concludes Gill.