Omnichannel fulfillment can be a margin killer

Order Management

Many retailers are investing heavily in the omnichannel experience. However, for most sellers, it is still a learning process. That means these omnichannel initiatives may not be as profitable as merchants initially had hoped.

The real cost of omnichannel fulfillment

One recent report conducted by PricewaterhouseCoopers found that a big thorn in the side of many sellers is omnichannel fulfillment. Omnichannel shopping experiences require retailers to fulfill orders on their toes. Retailers need to be able to pick and process orders from the location that makes the most sense. However, this has proved to be a significant challenge, with merchants struggling to manage orders, fulfill purchases promptly, choose the right fulfillment location and take other crucial steps.

“Only 16 percent of the retailers polled by PwC said they can fulfill omnichannel demand in a profitable fashion.”

In fact, only 16 percent of the retailers polled by PwC said they can fulfill omnichannel demand in a profitable fashion. Fulfilling orders is costly, and to make matters even more complex, many merchants find the costs of picking and processing purchases are only growing as they try to incorporate more channels and deal with other factors, such as the addition of dimensional weight shipping charges.

“Every time retailers receive an online order, they have a number of options to fulfill that demand. They can pull the product from a local store, send it from a centralized warehouse or ship it directly from the supplier,” said Kevin Iaquinto, chief marketing officer at JDA. “Most retailers lack the insight to make these decisions in a profitable manner – and are not sufficiently focused on this critical capability gap.”

Using the right solution to bolster fulfillment

Retailers understand the value that omnichannel retailing initiatives bring to the table. Being able to serve customers in a seamless fashion across all sales avenues can bolster the shopping experience significantly, and at the same time, being able to use multiple avenues to fulfill orders can also be a real boon. This strategy enables sellers to use their inventory more effectively, avoid running out of stock and having to cut prices to move slow-selling goods.

However, it is critical that retailers deploy the tools necessary to help them improve visibility throughout the supply chain, which will help them pick the appropriate fulfillment location each and every time. This can help eliminate some of the extra costs associated with order fulfillment that retailers may encounter as they look to foster an omnichannel retail environment.