Keeping up with

consumer demands
How omnichannel can make or
break retail supply chains

Supported by
Keeping up with consumer demands 2

Contents

3 Executive summary

4 The necessity of an omnichannel business strategy

4 Delivering what customers expect

5 Using technology to improve visibility

7 Traceability is key to sustainability

8 Making returns easier with reverse logistics

8 Redesigning supply chains for omnichannel retailing

9 Collaborate to overcome implementation barriers

10 Reaping the benefits

©Economist Impact 2024

Keeping up with consumer demands 3

Executive summary to improve sustainability and traceability.

Technology is key here, such as artificial
The retail experience has evolved dramatically intelligence (AI) solutions to optimise inventory
to keep pace with changing consumer at each point of the distribution network,
demands. Retailers accelerated their digital shipping management software, warehouse
facilities during the pandemic, but in the management systems software, automated
post-pandemic world, they are recognising data capturing and tracking, and blockchain.
they need more than a multichannel
approach—it needs to be omnichannel. • Customers value being able to return
unwanted products easily through their
Today’s consumers expect a frictionless, preferred channel at no extra cost. But
personalised experience across channels when supply-chain visibility and inventory
and touchpoints. Failing to deliver this leaves management fall short, costs are higher,
retailers at imminent risk of falling behind their customer loyalty is damaged and profitability
peers and losing key customer segments. suffers. In response, retailers are building
their reverse logistics capabilities, better
However, despite recognising the imperative, integrating online and physical store inventory
many retailers are still struggling to build an systems—rethinking the role of brick and
effective omnichannel strategy. Retailers mortar stores in the process—and using
face myriad challenges both within their third-party returns management solutions.
own organisations and across their supply
chains, and while there are a host of • Many retailers are finding it difficult and
potential solutions, they are unsure which expensive to redesign their supply-chain
are best and how to implement them. logistics to meet the requirements of an
omnichannel approach. Unsure that the cost
To help retailers implement effective of digitalising supply chains outweighs the
omnichannel strategies, leaving them better potential benefits to operational efficiency,
placed to capture future consumer demand, they find it difficult to select suitable
this report focuses on the key challenges they technologies to deliver customer value.
are likely to encounter in implementing an Here, collaboration with other retailers,
omnichannel strategy, and potential solutions. as well as software and logistics partners,
can boost innovation and unlock value.
We highlight the following key findings:
• Inefficient use of third-party services for
• Retailers need to integrate physical inventory optimisation and omnichannel
and digital platforms—creating a true fulfilment and a lack of visibility over inventory
omnichannel approach—to provide the transit are the main challenges when
customer-centric, seamless shopping implementing omnichannel strategies. Better
journey that consumers expect. collaboration rests on genuine omnichannel
• Meeting customer demands requires real-time integration internally, with a dedicated
inventory visibility across the supply chain. omnichannel team that works with other
Consumers also increasingly expect retailers stakeholders inside and outside of the business.

©Economist Impact 2024

Keeping up with consumer demands 4

The necessity of an omnichannel Delivering what customers expect

business strategy
In order to provide a customer-centric, seamless
“The customer is always right” is a motto shopping journey retailers need to integrate their
retailers both promote (to encourage better physical and digital platforms—creating a true
customer services in their organisations) omnichannel, not just multichannel approach.
and fear (as they strive to keep pace with
changing customer expectations). While many retailers already operate
multichannel platforms, developing an
Today’s consumers expect a lot from retailers—a omnichannel proposition goes a step further.
frictionless, personalised experience across According to Loek Berendsen, former global
channels and touchpoints, that allows strategic advisor on digital customer experiences
them to research, buy and return what they stores for IKEA, omnichannel differs from
want, where and when they want. To meet multichannel by giving the customer, rather than
these demands, retailers are increasingly company, the ability to select their shopping
implementing omnichannel strategies. channel of choice. “Omnichannel really has to
be about the customer, putting him or her in
But while the pandemic accelerated the control”, he says. Omnichannel is part of the
adoption of digital facilities1, some retailers are broader challenge of meeting the seemingly
still struggling to build an effective omnichannel paradoxical needs of the modern consumer:
strategy. Meeting customer expectations a personalised human touch, as well as the
requires real-time inventory visibility, product efficiency and convenience of digital services.
traceability, sustainable logistics and efficient
reverse logistics. This means redesigning supply Survey respondents say that improving the
chains by reassessing the role of physical customer experience is the most critical outcome
stores, genuinely integrating all channels of their organisations’ omnichannel approach.
within the organisation and improving
collaboration with supply-chain partners.

It is a tall order, but retailers with the ability “Omnichannel really

to keep pace with customers› rapidly evolving has to be about the
expectations are better placed to capture
future consumer demand. Those that fail to customer, putting him
deliver an effective omnichannel strategy
are at imminent risk of falling behind their
or her in control.”
peers and losing key customer segments. Loek Berendsen, former global strategic advisor
on digital customer experiences stores for IKEA

1
https://db42aa43a2d5ed566294-81964d36a501d7a15be4d8350b0feec4.ssl.cf3.rackcdn.com/YouGov-International-FMCG-Re-
port-2021%20(2).pdf

©Economist Impact 2024

Keeping up with consumer demands 5

Figure 1: QC5. What are the main outcomes of your organisation’s omnichannel business strategy?

Rank 1 Rank 2 Rank 3 Not Answered

Expanding consumer market

18.0% 16.9% 14.1% 51.0%

Redistributing sales

9.9% 11.1% 10.8% 68.2%

Building brand loyalty

11.8% 14.5% 14.5% 59.2%

Integrating supply-chain touchpoints

13.5% 12.4% 12.8% 61.3%

Selecting suitable marketing mechanisms

10.8% 11.1% 13.2% 64.8%

Responding to pressure from competitors

12.7% 12.0% 14.1% 61.3%

Improving the customer experience

21.0% 15.6% 12.3% 51.1%

A true omnichannel approach has three pillars: Using technology to improve visibility
• omnichannel marketing, using online and social Having an accurate, real-time view of
media to target customers more accurately; inventory across the supply chain is critical in
• omnichannel services, such as live chat, email meeting customer demands. However, lack
support, chatbots and phone support; and of inventory visibility, outdated inventory
management processes and lack of visibility
• omnichannel sales. over inventory transit are among the
main challenges survey respondents say
Mr Berendsen aligns with this, viewing
their organisations face when it comes to
omnichannel as “selling on websites,
implementing an omnichannel supply chain.
marketplaces, brick and mortar stores, pop-up
stores. It requires the full transformation of a
retailer or a brand around how you deal with
this from a financial point of view, how you
create a business case, customer experience,
employee experience, fulfilment, last-mile
delivery and everything that’s related.”

©Economist Impact 2024

Keeping up with consumer demands 6

Figure 2: QC7. What main challenges is your organisation facing when

it comes to implementing an omnichannel supply chain?

Lack of visibility over inventory transit 28.1%

Inefficient use of third-party services for inventory
optimisation and omnichannel fulfilment 27.8%

Lack of multiple distribution centres and/or retail stores 27.5%

Outdated inventory management processes 26.8%

Inefficient return logistics 26.1%

Lack of inventory visibility 25.1%
Lack of process standardisation and connected systems
across omnichannel supply chain 24.5%
Inefficient processing of orders 24.5%
Insufficient funding for omnichannel strategies 22%
Inefficient selection of shipping solution(s) 21.5%

Don't know 1.0%

Other 0.0%

0% 5% 10% 15% 20% 25% 30%

Survey respondents recognise that technology Survey respondents see giving consumer
is key to overcoming these hurdles. Inventory choice in fulfilment options as one of the top
management (i.e. forecasting, batch tracking) priorities that will inform their organisation’s
is one of the main aspects of the supply chain omnichannel strategy for 2023 and beyond,
where companies are focusing their investment along with improving visibility and traceability.
on technology upgrades. For example, artificial
intelligence (AI) solutions can optimise inventory
at each point of the distribution network,
including shipping and warehouse management.
GPS-enabled visibility technology, such as
radio frequency identification (RFID) is highly
integral to the supply-chain operations of more
than four-in-10 (43%) survey respondents.

Warehouse management systems software also

plays an important role, allowing employees
to identify the best pick-up and stocking
paths, and providing real-time access to
data, including inventory levels and returns
status. Forty-one percent of global retailers
have already adopted warehouse automation
software and 44% are planning to do so.

Walmart’s omnichannel strategy is considered a

major success due to their targeted investments
in omnichannel data and automation to build
predictability and responsiveness within their
fulfilment and inventory management practices.2

2
https://www.supermarketperimeter.com/articles/9582-walmart-succeeds-as-an-omnichannel-retailer

©Economist Impact 2024

Keeping up with consumer demands 7

Figure 3: QC11. Which of the following priorities will inform your

organisation’s omnichannel strategy for 2023 and beyond?

Improving visibility and traceability 30.0%

Omnichannel fulfilment options 24.8%

Increasing sustainability on last-mile transportation 24.6%

Centralising inventory 23.8%

Flexible returns processes 21.6%

Customer notifications 17.9%

Adding warehouses closer to purchase points 17.6%

Offering pre-orders 16.9%

Offering backorders 14.0%

Other 0.0%

Don't know 0.3%

0% 5% 10% 15% 20% 25% 30% 35%

Traceability is key to sustainability and the internet-of-things (IoT), which improve

traceability. The same proportion say that
Consumers also increasingly expect retailers to blockchain, which can be used to create a
improve traceability as part of broader transparent and secure ledger of supply-
expectations around sustainability. About a third chain data, is moderately or highly integral
(31%) of retailers are focusing their technology to their companies’ supply-chain operations.
upgrades and investment on procurement, such And almost three quarters (71%) say their
as supplier identification and procurement organisation partners with logistics suppliers to
policies, to support traceability. develop sustainable supply-chain solutions.
Retailers cite improving their Environmental,
Social and Governance (ESG) credentials—by
increasing traceability, reducing CO2 emissions, “About a third (31%) of
improving labour conditions and ensuring safe
and responsible operations—as one of their
retailers are focusing
top strategic objectives regarding their supply their technology upgrades
chains. This has made increasing sustainability
on last-mile transportation another top and investment on
priority for their omnichannel strategies. procurement, such as
A majority (85%) of survey respondents supplier identification and
use, or are planning to use, automated data
capturing and tracking, such as radio frequency
procurement policies, to
identification (RFID), Bluetooth, voice systems support traceability.”

©Economist Impact 2024

Keeping up with consumer demands 8

Making returns easier Redesigning supply chains

with reverse logistics for omnichannel retailing
Logistics, supply-chain visibility and inventory Flexibility in the returns process, as well as the
management must increasingly come together potential to use stores for fulfilment, are factors
post-sale as well, as customers want to return prompting the reassessment of the role of
unwanted products easily through their physical stores. Gad Allon, director of the Jerome
preferred channel at no extra cost. It is an Fisher Program in Management & Technology,
important part of building brand loyalty: nine- University of Pennsylvania, states: “I think the
in-10 consumers state they would buy again realisation is that it’s not only the forward
if the product return process was easier.3 logistics, but also the reverse logistics, that makes
the existence of the store much, much better.”
But the volume of returns is high, making it
expensive for retailers. Consumers› inability Clothing and home retailer Next is seeking to
to see, feel and try products results in a navigate increasing e-commerce return rates by
30% return rate for e-commerce.4 Products blending its offline and online retail spaces. By
may be returned in a different condition keeping loss-making physical stores open—at
from when they were purchased and to a potential cost of US$44m per annum—Next
alternative locations from those originally will be positioned to service e-commerce
used. Retailers can only process that demand demand, offer store-based fulfilment and make
at scale if their inventory management can in-store returns/exchanges easier. At the same
link a returned item to its original location. time, to counter ‘free riding’ behaviours such
as ‘showrooming’ (researching merchandise
Inefficiency is costly. US-based retailers lost at brick-and-mortar stores only to purchase
US$761bn in 2021 due to merchandising products online, potentially from a different
returns.5 “What I’ve seen is that companies have retailer) retailers are increasingly seeking ways
different systems connected to ecommerce, to positively position their sales, discounts
data and reporting, and retail stores”, says Mr and product information online to give their
Berendsen. “There needs to be more synergy.” value proposition a competitive advantage.
To overcome this challenge, retailers are building According to Mr Berendsen, retailers need to
their reverse logistics capabilities. This will totally rethink their physical stores. “You need
involve better integration of online and physical to have a business case for your square metres
store inventory systems (so returns from either of brick and mortar store, because in the old
can be made to both) and possibly the use of days, it was all about sales, sales, sales”, he says.
third-party returns management solutions. “But now, you need to have sales, customer
services, experience, and a warehouse mini-
hub. By this, I mean if you have a city store, for
example, you can distribute customer orders
“What I’ve seen is that companies from that store to specific neighbourhoods.”
have different systems connected to Alongside inventory management systems
ecommerce, data and reporting, and retail that offer better online and offline integration,
half of surveyed retailers are using shipping
stores. There needs to be more synergy.” management software to manage merchandise
Loek Berendsen, former global strategic advisor on returns, reduce wastage and resell items more
digital customer experiences stores for IKEA easily. These solutions all help to reduce costs.

3
https://presentations.boussias.com/files/_boussias_conferences_content/presentations/shopx/2022/Scott_ShopX_22.pdfps://www.
invespcro.com/blog/ecommerce-product-return-rate-statistics/
4
https://www.lse.ac.uk/PBS/assets/documents/PEL-coursework/Free-Returns-Reducing-Returns-in-the-Online-Fashion-PEL-course-
work-2020-2021.pdf
5
https://www.invespcro.com/blog/ecommerce-product-return-rate-statistics/

©Economist Impact 2024

Keeping up with consumer demands 9

Collaborate to overcome “Management support

implementation barriers
should be reflected in
While technology offers varied solutions, many
retailers are finding it difficult and expensive to
KPIs and making sure
redesign their supply-chain logistics to meet the there is capacity in the
needs of omnichannel retailing. Almost half (47%)
say their organisation finds it difficult to select existing themes for making
suitable technologies to deliver customer value decisions and supporting
and even more (58%) say the cost of digitalising
supply chains outweighs the potential benefits of the transition into an
operational efficiencies. Part of this problem is a omnichannel company.”
scarcity of employees with advanced digital and
analytical skills, which was cited as a technology- Loek Berendsen, former global strategic advisor
related barrier by over a third (35%) of retailers. on digital customer experiences stores for IKEA

Therefore, collaboration is key. Building

partnerships and integrating supporting product delivery. Typically, these providers
technologies is paramount to managing the can be chosen using app platforms such as
challenges of omnichannel retailing. The Kosmo, which give the user the opportunity
industry experts interviewed pointed out to pick the most suitable delivery option
that collaboration with other retailers, and and initiate delivery/return logistics.6
with partners in software and logistics, can
boost innovation and unlock value. Survey Despite the need and desire for collaboration,
respondents say that improving collaboration there are barriers, most obviously in relation to
with key supply-chain partners globally is a cost transparency. Businesses are concerned that
top strategic objective for the supply chain. sharing more information with partners increases
the risk of being cut from the supply chain or
Retailers tend to use external partners for losing competitive advantage, and they hold
support in their last-mile strategies, however, back from collaborating more deeply as a result.
there are noticeable regional variations in the
type of logistics collaborations. “In the Americas, Survey respondents also identified inefficient
they tend to use huge platforms to support use of third-party services for inventory
their needs—Oracle, SAP, Salesforce—companies optimisation and omnichannel fulfilment,
that have a solution and can integrate it with and a lack of visibility over inventory
your other solutions”, Mr Berendsen explains. transit as the main challenges when
“On the other side of the spectrum, there’s implementing omnichannel strategies.
Asia, where they have much smaller applications
that seamlessly interact with each other.” Here the issue may not be the partner but
the way in which retailers are collaborating
Examples such as Lalamove and Pickupp with them. Omnichannel strategies must
are popularly used in Asia Pacific to offer start internally with a dedicated omnichannel
retailers and consumers flexible and speedy team that works with other stakeholders in
the business and has management support,
for genuine omnichannel integration
within the organisation. It can then work
(47%) say their organisation finds it with third parties to enhance visibility and
difficult to select suitable technologies transparency, as well as reduce costs and
other inefficiencies, across the supply chain.
to deliver customer value and even
Mr Berendsen adds: “Management support
more (58%) say the cost of digitalising should be reflected in KPIs and making
supply chains outweighs the potential sure there is capacity in the existing themes
for making decisions and supporting the
benefits of operational efficiencies.” transition into an omnichannel company.”

6
https://www.kosmo.delivery/blog/top-local-courier-singapore

©Economist Impact 2024

Keeping up with consumer demands 10

Reaping the benefits Done right, an omnichannel strategy can also

improve efficiency and reduce costs. But to do
Retailers know they need an effective so, retailers must have a strong understanding of
omnichannel strategy, and a redesigned their customers and organisation to know where
supply chain to support it. Customers expect to invest for maximum impact. For example,
a personalised, frictionless experience, from beauty retailer Sephora invested in enhanced
first interaction and sale to support and return. data-management capabilities and process
Delivering this not only improves customer integration, which showed that customers who
satisfaction, sales and loyalty, it allows retailers visited the retail website within 24 hours of
to more easily reach new consumer segments coming to the store were three times more likely
and increase revenue. According to a study by to make a purchase and the order values were
Harvard Business Review, retailers that implement 13% higher than for other customers. Knowing
an omnichannel strategy see a 10% increase in that online engagement was driving in-store sales
customer loyalty and a 5% increase in sales.7
helped Sephora to plan its future investments,
Scott Roberts, former director of international including expanding its physical store footprint.9
clothing and home and supply chain, Marks
To drive efficiency and cost reductions, the
and Spencer (M&S), says that what drove
omnichannel approach must be integrated
omnichannel adoption at M&S was “the
within the organisation and across supply-chain
realisation that customers who shopped
partners. Mr Roberts explains: “Changing the
across all channels were more valuable
than customers who solely shopped in culture is critical, to make sure that we drive
stores or solely shopped online… if you get long-term gain and long-term brand loyalty.”
omnichannel right, it is about customer data.” Enhancing omnichannel retailing and
Mr Roberts’s experience at M&S is supported by improving supply-chain agility has become
research from Deloitte that found omnichannel a key competitive differentiator that can
customers have a 30% higher lifetime value than also help futureproof a retailer’s operations,
customers who shop through a single channel.8 and the industry more widely.

“The realisation that customers who

shopped across all channels were more
valuable than customers who solely
shopped in stores or solely shopped
online… if you get omnichannel
right, it is about customer data.”
Scott Roberts, former director of international clothing and
home and supply chain, Marks and Spencer (M&S)

7
https://hbr.org/2017/01/a-study-of-46000-shoppers-shows-that-omnichannel-retailing-works
8
https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/consumer-business/deloitte-nl-amc-omnichannel1-peak-perfor-
mance-2022.pdf
9
https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-survival-guide-to-omnichannel-and-the-path-to-
value

©Economist Impact 2024

Keeping up with consumer demands 11

While every effort has been taken to verify the accuracy of this
information, Economist Impact cannot accept any responsibility
or liability for reliance by any person on this report or any of
the information, opinions or conclusions set out in this report.

The findings and views expressed in the report do

not necessarily reflect the views of the sponsor.

©Economist Impact 2024

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