The rising number of shoppers projected to buy goods outside of brick-and-mortar stores is expected to boost consumer goods and retail sales, especially in emerging economies. But most businesses’ supply chains aren’t set up to function profitably on multiple channels, research by EY and the Consumer Goods Forum suggests.
E-commerce alternatives offered across multiple devices are expected to help strengthen consumer loyalty, create a competitive difference, and increase sales, according to 42 supply-chain executives from the world’s largest consumer goods and retail companies. The executives participated in a survey EY and the Consumer Goods Forum conducted.
Profits, however, seem largely elusive. Only one-third of the survey respondents projected that a multi-channel strategy would increase profits.
Turning the additional sales generated by a multiple-channel approach into higher profits will require significant organisational transformation, global supply-chain experts at EY and the Consumer Goods Forum stated in the survey report. “To succeed, we believe companies must embed omni-channel into their strategy, transform their supply chain to be truly agile and responsive, and build robust data and analytics capabilities.”
Consumer goods businesses that continue to rely on traditional sales channels will miss out on a critical growth driver, especially in emerging economies where they may want to cater to increasing demand.
The executives polled by EY and the Consumer Goods Forum projected revenues generated by brick-and-mortar stores to drop from 93% in 2015 to 81% in five years as more consumers take advantage of the convenience of e-commerce.
Compound annual growth rates released by British market intelligence provider Euromonitor suggest that global store-based retail sales will increase 5% in the next five years, while online sales are projected to increase by 15% worldwide. The difference is even more dramatic in developing economies: 40% for online sales to 10% for store-based sales in India; 21% for online sales to 8% for store-based sales in China; and 79% for online sales to 18% for store-based sales in Nigeria.
Supply chains will play an important part in how much e-commerce sales growth consumer goods businesses can capture, according to EY and the Consumer Goods Forum. “In an omni-channel world, the supply chain has become the consumer-facing front office and a key determinant of whether shoppers have a good or bad experience.”
Of the survey respondents, 81% said their supply chains were not ready to deliver successfully across multiple channels.
Three key enablers
Only 34% of the respondents said their companies had made omni-channel part of the overall strategy. Consumer goods companies that want to follow suit, the report said, should:
- Focus on the real needs of the consumer and don’t over-engineer the multi-channel offer.
- Dedicate resources to prioritise multi-channel and collaborate across channels to remove silo behaviour.
- Embed a continuous improvement mindset to keep up with fast-changing technology platforms and behaviours.
- Design products and packaging for the requirements of multiple channels.
Only 24% of the respondents said their companies have a responsive, combined omni-channel and traditional supply-chain infrastructure. Consumer goods companies that want to attain that should:
- Plan for supply-chain needs of the future, not today, to avoid always being behind.
- Segment the supply chain to meet different product and channel demands.
- Make existing assets work harder in a creative way to support the needs of multiple channels.
- Get click-and-collect right as a priority over home delivery.
Only 26% of respondents said their companies had IT systems and capabilities that enable seamless visibility and fulfilment to end consumers. Tips in the report include:
- Incentivise data sharing to get an end-to-end view of the value chain.
- Move beyond traditional sales forecasting to sense and shape demand.
- Use your data to create a single view of the customer across all channels, including returns.
- Leverage advanced analytics platforms to drive detailed information on cost to serve to understand real profit drivers.
Related CGMA Magazine content:
“Consumer Industry Executives Look to Improve Analytics, Supply Chain”: Technology is rapidly changing how consumers shop and what is on the minds of senior executives in the consumer industry.
“Digital Age to Require Greater Supply-Chain Agility”: Supply-chain executives believe digitally enabled customers in the future will be willing to pay for value-added services rather than demanding the lowest prices, according to a recent survey. That may force supply chains to become more agile as complexity is pushed upstream.
“How to Make Your Supply Chain Hum”: Companies that sell into and source from markets worldwide compete on their supply-chain capabilities. Find out what supply-chain leaders do to boost their revenue and earnings.
—Sabine Vollmer (firstname.lastname@example.org) is a CGMA Magazine senior editor.