Creating Supply Chain Excellence

The Tompkins International Blog

Smoke and Mirrors – What is the Actual Discount?

October 20, 2014

Freight Shipping Costs

By Tony Nuzio – Guest Blogger
Founder/CEO, ICC Logistics Services, Inc.

For years now the transportation industry has been using the “Retail Sell” to attract customers. Do you know what we mean by the “Retail Sell?” Does this sound familiar? 

“Buy 1 at regular price and get two free!” Or on the TV Infomercials “But wait, if you order within the next 10 minutes we’ll double your order at no additional cost, just pay the additional shipping and handling charges!” These are just two examples of how we, as consumers, are constantly being bombarded by the “Retail Sell.” The “Retail Sell” attempts to convince the buyer they are receiving a great deal and not to pass it up.

Well, not much is different for transportation service providers who use their version of the “Retail Sell”, (which we call the “Discount Game”), to attract their customers. Today, it’s not uncommon for shippers to be receiving discounts in the high 80% range. Wow, that’s impressive….maybe.

You see if the carriers are offering discounts at these high percentages, one has to question just how high are the base rates their carriers are discounting.  How else can these carriers afford to offer these huge discounts? Unfortunately, many shippers just accept these discounts as being a great deal for their company and the truth is; they very well may be, but wait, there’s more.

There is much more shippers should be doing to make sure they fully understand what their actual discounts are and, more importantly, what they should be.  There are several reasons for this: 

  • Most shippers are not aware of the fact that each carrier publishes their own base rates to meet their individual revenue needs. So comparing discounts from one carrier to another carrier is of no use. And, shifting business to a carrier with a higher discount, may actually cost the shipper more money in the long run.
  • Secondly, each carrier establishes their own fuel surcharge percentages to again meet their individual financial needs. In fact, some carriers add the fuel surcharge to the gross rate, (before the discount is deducted) and some add the fuel surcharge to the net rate, (after the discount has been deducted) these calculations can result in a huge difference. And, carriers also begin to assess the Fuel Surcharge at different Diesel Fuel Price per Gallon points.
  • In addition, each carrier establishes their own Accessorial Fees for the ancillary services they provide. Again, the differences in these fees from carrier to carrier can be significant.

So how can a shipper be sure they are getting “The Best Deal” for their company? The only true way is to benchmark their rates against the competing carriers in their respective service areas. Shippers can attempt to do this by creating Requests for Proposals from competing carriers to see how each carrier’s rates stack up against the competition. But this too may leave the shipper wondering, do they really have the “Best in Class” rates for their specific business.

To properly perform this analysis, shippers really need to work with transportation and logistics consultants and freight invoice auditors who have extensive knowledge of carriers’ pricing structures. Firms that maintain huge data bases of carrier rates and fees that can provide the shipper with a comprehensive benchmarking analysis to ensure they obtain the lowest possible rates for the services they require to run their business. An actual case in point is a manufacturing client of ours that had a pricing agreement that provided a 78% discount for all of their LTL shipments. After we assisted our client in re-negotiating their LTL contract, the manufacturer’s LTL freight costs were reduced by a whopping 50% utilizing the same LTL carrier the manufacturer had been using for several years. The client could not obtain “Best in Class” rates on their own; they needed our expertise to get them there. 

One final point; a shipper should NEVER sacrifice service for lower rates. If the carrier(s) cannot provide the service the shipper requires, they should not be part of any benchmarking analysis. This is another critical area the transportation and logistics consultant can assist the shipper with. An extremely valuable service they may not be able to obtain on their own.   

Please take a moment to check out ICC’s Blog @ http://www.logisticsstrategies.com to check out previous articles.

Reprinted from ICC Logistics Services, Inc.with permission.
Photo credit: Thomas Hawk

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What 3PLs Need to Know about Alibaba

October 16, 2014

By Tompkins International StaffThe Alibaba Effect: What Today’s 3PLs Need to Know

You’ve been hearing a lot about Alibaba lately. The Chinese e-commerce giant has burst on to the global scene and it is poised to make a huge impact on today’s marketplace. What does this all mean for third-party logistics providers (3PLs)? What opportunities and challenges will retailers and consumer product manufacturers face with the changing omnichannel scene?

Our new white paper, The Alibaba Effect: What Today’s 3PLs Need to Know, details key points that 3PLs must consider when planning their e-commerce strategy. It also explores what makes Alibaba different from other e-commerce giants.

Alibaba gives merchants the opportunity to reach thousands of new customers. As online and mobile e-commerce continues to skyrocket, more retailers will need 3PL services, and they will need new options for fast and efficient fulfillment and delivery. This creates a tremendous opportunity for 3PLs who have their sights on the future.

It’s clear that Alibaba has changed today’s e-commerce marketplace. Today’s 3PLs need to adapt in order to protect existing business and take advantage of new business opportunities. Download the new white paper for more exclusive insights into how 3PLs can endure and grow during this e-commerce evolution.

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For 3PLs, New Market Trends=New Opportunities

October 10, 2014

3PL-New Market Trends

By Tompkins International Staff

Big opportunities lie ahead for today’s third-party logistics providers (3PLs).

These new opportunities (and challenges, too) are a result of evolving market trends such as omnichannel and personalization. In turn, these market trends drive today’s supply chain trends (think: cloud computing or speed of delivery).

All of these trends are affecting how 3PLs and shippers work and function. There is a sharper focus for 3PLs and shippers to be able to deliver via omnichannel, inventory flexibility and agility, faster delivery time, and customer-centric services.

The current rising trends mean new opportunities, and it’s time for 3PLs to make some critical changes. According to new research by Tompkins Supply Chain Consortium, 64% of 3PLs surveyed say reinvention is occurring in the industry.

In addition, today’s top three challenges for 3PLs are: 1) competitive rate pressure, 2) profitability, and 3) the need for information sharing between 3PLs and customers.

Find out more about changes in the 3PL industry by downloading Tompkins Supply Chain Consortium’s latest report, “Reinventing the 3PL Model: Trends, Challenges, and Opportunities.”

What do you see as the biggest challenge(s) for 3PLs? What new capabilities and services do you think should be considered for the future?

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Photo credit – www.graphicstock.com

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Holiday 2014: How to Avoid Last Year’s Disaster

October 2, 2014

By Jim Tompkins
CEO, Tompkins International

Holiday 2014 - How to Avoid Last Year’s DisasterIt’s no secret that Holiday 2013 was a disaster for final delivery. The debacle was the result of the perfectly brewed storm, combining forces from inadequate delivery capacity, lack of discipline at several points in the supply chain, over-promised delivery times by retailers, and poor weather conditions across the U.S.

Are we fully prepared to tackle Holiday 2014 in a better way? Well, to put it simply, I’m not certain. Consider where we stand as of today:

  • Delivery capacity: E-commerce has continued to grow in the double digits this year. The Alibaba Effect (watch the video here) is resulting in even more e-commerce growth, and additional capacity added by national parcel carriers does not even cover last year’s shortcomings. The final delivery capacity problem for Holiday 2014 does not result in a solution to the Holiday 2013 problem. Unless the rest of this “perfect storm” subsides, the problem will repeat this year.
  • Lack of discipline: There is hope that nationwide parcel carriers have better discipline in 2014 than 2013, but this is not yet clear. Parcel carriers need to say no sometimes, rather than accepting parcels that cannot be delivered to fulfill the customer promise.
  • Over-promised delivery times by retailers: We are hopeful that retailers have better control over this issue for Holiday 2014 than last year, but it remains unclear. 
  • Bad weather: Unfortunately this is out of everyone’s control, so we cannot make any kind of educated prediction at this time.

It is unclear whether we have adequately addressed the Holiday 2013 disaster, so what can retailers do at this point to avoid a Holiday 2014 disaster? 

The path forward is different for pure play online retailers than it is for omnichannel retailers. But the solutions both have to do with not over-promising. More specifically, pure play online retailers must adopt an order entry cut-off date for Christmas delivery that is realistic. The date that works depends upon how well the retailer has “gotten local” to the customer’s location. Of course, all order entry cut-off date scenarios are dependent upon distance.

If the retailer has only one fulfillment center in the U.S., the cut-off date for delivery on Christmas Eve must be Friday, December 19. If the retailer has two or three fulfillment centers, the cut-off date can be Saturday, December 20. If the retailer has four or more fulfillment centers, the cut-off date can be Sunday, December 21.

Omnichannel retailers fall into two categories, both of which depend on how “local” they have gotten with their fulfillment. The first category is retailers who do a good job with store fulfillment. For products that are picked from the store, the cut-off for click-and-collect is December 24 at noon. For products that are picked from stores and shipped to customer, the cut-off is December 22 or 23 at noon, depending upon the local carrier. Products not picked from the store but picked up by click-and-collect, the cut-off is one day quicker than for the pure play retailers. Product not picked from store but sent to the customer has a cut-off that is the same as for pure play retailers.

The second category is retailers who do not do a good job with store fulfillment. They follow the same as pure play online retailers.

If you are a retailer, it’s critical to recognize the importance of getting local. For omnichannel retailers, it’s all about store fulfillment. This will be true in dictating cut-offs going forward into Holiday 2015 and beyond. But for retailers who have not done well with getting local, the only tactical solution that can be impactful for Holiday 2014 is to select certain products for store fulfillment and place sufficient inventory of these products into the stores to approximate getting local. I’m crossing my fingers for good weather this Holiday 2014 for the people who have not adequately planned for being local and store fulfillment.

What is your Holiday 2014 plan? Tell me in the comments or tweet me @jimtompkins.

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A B2B Question from the Floor (that Almost Knocked Me to the Floor)

October 1, 2014

B2B space is undergoing massive transformation as a result of major changes in customers, distributors, and technology

By Jim Tompkins
CEO, Tompkins International

I was speaking at a large conference about the major impacts of globalization, technology, and supply chain on commerce. At the beginning of my presentation I defined commerce to include retail, consumer products, wholesale, and distribution.

At the end of my presentation, someone asked: “I really understand what you are saying for B2C, but is there anything happening in B2B? Is anything you said relevant for B2B?” 

My first reaction was, Good question, I really need to help B2B people grasp the magnitude of what is coming their way.

But then the words “is anything happening” and “anything relevant” burst into my mind. To be honest, I was speechless for the first time in many years. I answered the question by explaining how B2B is in as much of a transition as B2C, and everything in my presentation was relevant to both B2B and B2C.

Obviously I was totally floored by this question. Over the next few days, I contemplated my response. Now that I’ve (figuratively) gotten up from the floor, I’d like to share what I think is the best answer to that question.

The B2B space is undergoing massive transformation as a result of major changes in customers, distributors, and technology. In fact, every aspect of B2B is changing and B2B players who are doing the same things today as they did 5 years ago will become obsolete.

The first area in B2B where major changes are occurring is with the B2B customer. Today’s B2B customer demands low prices, great experience, very broad selections, and convenience that were considered unachievable only a few years ago:

  • Low prices: B2B customers have traditionally not been as sensitive to price as B2C customers. But with the power of the internet and the large number of manufacturing companies selling online, today’s B2B customer is shopping online for prices. A recent survey showed that 61% of B2B customers believe product price is extremely important and 31% think it is very important. A total of 92% of B2B customers feel that price is at least very important. If 92% of all B2B customers find their industrial distributor total delivered price is significantly higher than the manufacturer’s price, they will buy directly from the manufacturer (which was not even an option 5 years ago).  In addition, most of today’s B2B customers have more than one preferred B2B provider and more than one-third of all B2B customers shop online outside of their existing supply base to ensure competitive pricing. Contrary to traditional B2B thinking, low total delivered price is a critical factor in B2B buying decisions
  • Great experience:It’s clear that today’s B2B customers have very high expectations of their suppliers. This includes everything from real-time product availability and enhanced search to improved product descriptions and streamlined checkout/invoicing.  The B2B buying experience includes mobile ordering, ability to see estimated delivery dates, order status, order history, repeat ordering, personalization, workflow management systems and transparent shipping, and return and restocking fees.
  • Broad selection: Today’s B2B customers demand a selection of products that is both broader in variety and deeper in offerings. One of the major drivers of B2B mergers and acquisitions is the buying of distributors who offer different products and then integrating these distributorships to offer a broader selection to customers. Another way to achieve a broader selection is by acting as a marketplace. (To understand more about marketplaces, watch the video The Alibaba Effect.) Marketplaces place product offerings on your site for sale even though you do not have any inventory of these items. Orders for these “stockless inventory” items are simply passed to your marketplace partner who drop-ships the products to your marketplace customers. These stockless inventory items can allow you to literally offer an “endless aisle” of product offerings without increasing inventory.
  • Convenience: Customers generally equate “convenience” with the ability to order online and the speed at which they can obtain their order. Recent research shows that 67% of all B2B customers believe the ability to order from a website is either extremely or very important. B2B customers are like B2C customers in that 25-30% is willing to pick up their order. For both pickup and delivery of orders, the speed of delivery is facilitated by having by the “Get Local” concept of having branches near the customer’s location. In fact, 92% of all B2B customers say having a physical location where they can easily purchase or pick up product is extremely or very important. In addition, 85% of all B2B customers say that having an accurate estimate of the delivery window is extremely or very important.

In addition to B2B customers, industrial distributors have also undergone massive transformations. Just a few years ago, industrial distributors were predominately family-owned businesses built on decades of service and personal relationships. The industrial distribution industry has been highly fragmented, with the sales representatives considered the most important employees who help guide the B2B customer to the products they need. However, due to a combination of the customer wanting to deal with fewer industrial distributors and mergers and acquisitions among industrial distributors, traditional family-owned distributors are becoming a rarity.

Research shows that 68% of all B2B customers prefer doing search on distributor websites and only 58% of all B2B customers feel having that a sales representative is extremely or very important. In the 2013 white paper “Industrial Distribution at a Crossroads,” we presented the reality that for industrial distributors to continue to be successful, they need to adopt the right strategy, the right technology, and the right supply chain. Failure to do so leads to turmoil and eventually bankruptcy.

Let’s not forgot about the changes in technology too. B2B customers have forced industrial distributors to adapt technology and the industrial distributors themselves have understood and embraced this need for technology. B2B customers rely on technology, from the initial research on what they want to buy all the way to the delivery of their desired products. There is no aspect of creating a happy B2B customer that is not driven by or supported by technology.

A recent UPS report on B2B purchasing Insights concluded that e-commerce needs to be embraced (but not exclusively). Suppliers who are not yet online risk being excluded from consideration by buyers at all spending levels. While traditional selling methods should not yet be abandoned, it is difficult (if not impossible) to compete if you are not present on a platform where the majority of buyers are spending their budgets.

So let’s ask the question again: Is anything happening in B2B? You bet. In fact, as more people grasp the transformational implications of e-marketplace Alibaba, we are left considering the real question: Is there anything in B2B that is not changing?

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Photo Credit: www.graphicstock.com

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Alibaba IPO: Just Give Me the Facts

September 9, 2014

Alibaba IPO: Just Give Me the FactsBy Jim Tompkins
CEO, Tompkins International

I’ve been reading a lot of articles lately that toss around Alibaba IPO numbers. There are so many variables and this is really a big deal. (I have never tried to sell $20+ billion of stock—but it can’t be easy.) Given the many variables, I’d like to present the ranges I believe are reasonable for the Alibaba IPO, as well as the emotions and significance of these numbers (which is maybe even more important than the numbers).

Of course, I am not an employee of Alibaba, I don’t own stock in Alibaba, and I have never done consulting work for Alibaba. But I am a CEO of a supply chain consulting and implementation firm that does a lot of retail and consumer products consulting. I am student of Alibaba and I have conducted extensive research on the company, its founder Jack Ma, and its past, present, and future. Watch my video The Alibaba Effect to learn more about the Alibaba phenomenon.

Let’s look at the IPO share price and cash raised first. I believe the Alibaba IPO share price will be between $60-$70 and that the IPO cash raised will be between $20-$25 billion. To be the largest IPO ever in the world, Alibaba needs to raise more than the $22.1 billion that was raised by the Agriculture Bank of China, Ltd. in 2010. To be the largest in the U.S., Alibaba needs to raise more than $19.96 billion raised by Visa in 2008 (Facebook was only $16 billion in 2012). The Alibaba team will be conducting 100 meetings globally over the next ten days, and the result of these meetings will affect where Alibaba will land in these ranges.

I believe the valuation range for Alibaba’s IPO will be between $155-$170 billion. A fun side note: Amazon’s current valuation is $160 billion, and Alibaba may think it would be cool to be valued at more than Amazon. My view of today’s actual current valuation is $190-$220 billion. So why would Alibaba position its IPO at a valuation lower than the actual valuation? Good question. The reason is because Alibaba has unique IPO objectives. Alibaba is not going public to raise cash. Alibaba’s objectives are to:

  1. Increase its brand recognition as a result of the IPO. In turn, this will grow the participation of global companies on TMall, increase U.S. awareness of Alibaba, and position Alibaba as the leading global retail platform.
  2. Boost its momentum. Alibaba is very aware of poor publicity that befell the Facebook IPO due to the poor performance of its stock shortly after their IPO. This will not happen to Alibaba. Its goal is to see its stock price increase after the IPO by offering shares at their IPO at a conservative price, thus almost assuring significant gains going forward. This gives Alibaba the much desired momentum going into the 4th quarter.

Are you wondering if going with a conservative valuation makes Alibaba shares a good deal? Yes—I believe buying Alibaba stock is a very good deal. (But hey, that’s just me.)

More Resources

Article:  What’s Happening with Alibaba: Profits Soar as IPO Nears
Press Release:  The Alibaba Effect: What It Means for All U.S. Businesses and How They Need to Respond


Photo Credit: Photographer Andrew Harrer Bloomberg

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Top Highlights from the 2014 Supply Chain Leadership Forum

September 5, 2014

By Tompkins International Staff

Last week we hosted our 10th annual Supply Chain Leadership Forum! We had nearly 130 attendees join us in Nashville at the Hilton Downtown on August 25-27 for several days of networking, thought leadership, and knowledge sharing.

In case you missed it, here are some of our favorite photos from this year’s event:

Kick-Off Reception on Monday Evening

Attendees settled into the forum and networked with peers, and some sampled our signature event drink, The Tompkins Tea. A special thanks to JDA Software Group for sponsoring this reception.

Kick-Off Reception on Monday Evening

Kick-Off Reception on Monday Evening


Jim Tompkins’ Opening Keynote on ‘Responding to The Alibaba Effect’

Tompkins International CEO Jim Tompkins engaged the audience with his breakthrough keynote speech, ‘Responding to The Alibaba Effect’ (based on his blockbuster video The Alibaba Effect).

Jim Tompkins’ Opening Keynote on ‘Responding to The Alibaba Effect’

Jim Tompkins’ Opening Keynote on ‘Responding to The Alibaba Effect’


Dinner and Live Music at The Listening Room Café

After a packed day of breakout sessions, Jim Tompkins’ keynote, and a general session led by China expert Michael Zakkour, the group headed over to local music spot The Listening Room Café. We kicked off the evening with a cocktail hour.

Dinner and Live Music at The Listening Room Café

Dinner and Live Music at The Listening Room Café

Our attendees enjoyed a Southern-style dinner and live music by local band Amber’s Drive.

Southern-style dinner and live music by local band Amber’s Drive

Southern-style dinner and live music by local band Amber’s Drive

Southern-style dinner and live music by local band Amber’s Drive

Live music by local band Amber’s Drive


Women in Supply Chain – Breakfast

On Wednesday morning, some of the women of the forum gathered for a “Women in Supply Chain” breakfast to network with other women at the event and to discuss hot topics in the industry.

Women in Supply Chain – Breakfast

Women in Supply Chain – Breakfast


Closing Lunch and Learn Session

After two final breakout sessions on Wednesday, the group joined together one last time for a “Lunch and Learn” session led by Bruce Tompkins and Chris Ferrell. The Lunch and Learn recapped each session from the event and provided takeaways for attendees to take back to their companies.

Closing Lunch and Learn Session

Closing Lunch and Learn Session

Join us for next year’s forum in San Antonio, Texas from August 31 – September 2. Stay tuned for more details! Visit www.supplychainconsortium.com/Seminars/2015/overview.asp for more information.

 

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Insights into the FedEx Ground Ruling in California and Oregon

September 3, 2014

FedEx Ground Ruling By Lisa Kennedy
Project Manager, Tompkins International

It was inevitable. We knew a detailed look into how FedEx manages its drivers would happen, and it was only a matter of time before the courts would deem them employees. Uniforms, vehicle requirements, company logos, contractual requirements—who else could the contractors work for?

Logistics service providers who use independent contractors have been trying to distance themselves from FedEx to avoid the same fate. But I am an optimist. Those service providers that diligently allow independent contractors to be independent will remain intact; the future of home delivery will depend on it. In order for packages to be delivered to remote areas as cost effectively as possible, independent contractors who can consolidate packages from several different delivery service providers will need to do this.

Key differentiators for custom logistics service providers include:

  • Service providers need to offer custom logistics services with delivery as a component that is outsourced to an independent contractor to perform that part of the service. Independent contractors are free to work with multiple competing service providers.
  • Delivery vehicles are owned by the independent contractor and if they have a company logo the driver is reimbursed for advertising.
  • Independent contractors are allowed to subcontract their services to other drivers to assure deliveries are completed as required by the service provider.
  • Uniforms are never required by service providers. Safety and security attire may be required by the customer.

FedEx will need to take a hard look at how it manages its independent contractors. According to Wolf Research, “In the past, we were concerned that these class action suits could force FDX Ground to start using company employees with much higher costs. But even with this negative ruling, we no longer see risk that FDX Ground will be forced to move to an employee model.”

What other services can your company offer to customers to reaffirm your strategy as a custom logistics service provider and not just as a delivery company?

More Resources

Article: The Final Mile Delivery – Strategies, Benefits, and Challenges for Multichannel Fulfillment

Report: Trends in the Transportation Industry

Photo Credit: Justin Sullivan Getty Images

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What’s Happening with Alibaba: Profits Soar as IPO Nears

September 2, 2014

Alibaba initial public offering (IPO)By Jim Tompkins
CEO, Tompkins International

The Alibaba initial public offering (IPO) is just weeks away and things already look promising for the Chinese e-commerce giant. In a recent New York Times article, “Mobile Sales Lift Alibaba Profit Nearly Threefold, Ahead of I.P.O,” profit numbers for the last quarter have tripled to $2 billion, with sales jumping 45% to $2.5 billion.

The New York Times now says what I have been saying for the last 10 months—that the Alibaba IPO has the potential to be one of the biggest ever and that the offering could raise up to $20 billion. Alibaba’s financial success is a result of its increase in mobile capabilities, and thus, mobile sales. The article says that “nearly a third of Alibaba’s gross merchandise volume, or the value of goods sold on Alibaba’s marketplaces, comes from mobile transactions, compared with just 12 percent a year ago.”

This rings true to what I discuss in my video, The Alibaba Effect. Alibaba and its founder Jack Ma are changing the way supply chains are viewed and clearly Jack Ma will do whatever it takes to succeed.

As Alibaba’s numbers continue to climb, make sure you have watched The Alibaba Effect video and create your game plan. From the “get local” movement to e-commerce planning, you need a firm understanding of how to optimize your supply chain and e-commerce strategy in order to be successful as Alibaba’s IPO looms.

More Resources

Article: Alibaba Group Seeks Market Share

Video: The Alibaba Effect

Article: Alibaba: The New Face of American e-Retail?

Photo Credit: http://logonoid.com

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Confusion Reigns as the Question Persists: What Exactly Is Omnichannel?

August 27, 2014

Confusion Reigns as the Question Persists: What Exactly Is Omnichannel?

By Jim Tompkins
CEO, Tompkins International

I recently read a July 2014 report titled “On Solid Ground: Brick-and-Mortar Is the Foundation of Omnichannel Retailing.” While there are a few points in the report that show some understanding of omnichannel, I also disagree with many of the points it presents and believe it only adds to today’s confusion surrounding omnichannel.

Consider the following quotes from the report, as well as my thoughts:

  • “Digital retailing is capturing headlines and inspiring spirited debate as retailers plan how best to invest for future success. But beyond the headlines, physical stores remain the foundation of retailing, evidenced by the fact that 90 percent of all retail sales are transacted in stores.” This is simply untrue. Omnichannel means all channels work together to provide a great customer experience. Most customers use multiple channels to shop, so to credit the channel where the actual transaction takes place indicates a total lack of understanding of omnichannel.  In fact, where a sale is transacted has nothing to do with the importance of omnichannel. Think about it this way: If a customer finds an item that they like online and then goes to the store to buy it, is this an online sale? No. Is it an in-store sale? No. It is an omnichannel sale. Accounting systems that track where a sale takes place have nothing to do with the concept of omnichannel. Therefore, it is critical to identify the capabilities of your many segmented supply chains and enable them to achieve omnichannel sales potential at a minimal cost.
  •  “Physical Stores are clearly customers’ preferred shopping channel and a place where the most significant consumer and retailer value continues, and will continue, to be created.” This is also completely untrue. Place this in the context of the August 8, 2014 Wall Street Journal article “Shoppers Flee Physical Stores.” The opening sentence reads: “US retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online.”  Omnichannel is not about a competition between channels.  In fact, retailers need to realize that customers do not even think about channels. Channels are the retailers’ issue. Customers want to buy from you and use your various channels to support that purchase. Shopping is not about having a preferred channel—it is about finding the price, selection, experience, and convenience that fills your needs. Shopping must be omnichannel! Look at requirements of today’s final delivery to customers and you can see the major transformation that is occurring with same-day, next-day, second-day, and local delivery service providers. Innovation in final delivery is clearly being driven by the shopper fleeing the physical store and preferring alternative shopping channels.  This may lead to a need for retailers to be creative in driving traffic to the stores, but clearly how retailers make innovations in their delivery capabilities is the key to future growth.
  • “The store plays a crucial role in online purchases, as two-thirds of customer purchases online use a physical store before or after the transaction.” The whole point is that all channels work together for omnichannel success.  All channels are critical, and a strong channel management strategy is the answer to the success of retail.  Stores that support online are what omnichannel is all about. In a similar way, online helps stores: more than 60% of all retail purchases are influenced by online. But, this does not mean stores or online are the keys to success. This means that omnichannel holds the true key to success.
  •  The future of retail is solidly anchored in the brick-and-mortar channel.” Again, this is nonsense. If a portion of your channel management strategy is to have stores, then these stores will play a key role in your omnichannel strategy. But the future of retail is not in one channel or another, but in omnichannel.  Retailers that do not recognize this will not only operate with a channel strategy that is inflexible and unable to adapt to the rapid changes in customer preferences, but the supply chain will be a huge driver for escalating costs and act as a bottle neck to achieving best-in-class customer satisfaction.

When I first read the article, I was confused. But then a second, more careful read brought an answer: A short excerpt about the study reads: “This independent survey of consumers and retail executives was funded by, and completed in cooperation with, leading U.S. shopping mall real estate developers.” There you have it—so much for trying to make sense out of nonsense.

Photo Credit: Tim Reckmann

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