Unifie d Commerc e:Where to Start and the Customer Journeys

Dr iv ing the Most Prof i t Return

Today’s retail articles frequently use the terms “Unified Commerce” and “Omnichannel” to summarize the different ways consumers interact with retail brands. These broad terms,

c set of customer journeys

brand. It is, therefore, paramount for each retailer to identify the most important journeys for their relationship with the consumer and to prioritize and optimize those journeys.

At its core, Omnichannel describes the ability to support the consumer’s interaction and commerce with your brand regardless of how your customer decides to purchase from

further and includes the technology enabled retail functions (both inside and outside the

the consumer where, when and how they desire.

IHL Group researched over 300 retail

and losers in the market when it comes to IT sophistication and the optimization of systems for each of these digital journeys. It was immediately obvious that all these retailers are seeing digital orders grow at a faster than expected pace. This has led many to the faulty assumption that, since digital orders are increasing, store orders must decline. This is simply not true. Instead, retail stores are being transformed into mixed experience centers with general merchandise (GMS) retailers leading the way. But how should you transform your stores to best support these mixed experiences and which experiences are most important?

When we look at the breakdown of sales to execution channel, 73.4% of GMS retailers’ revenue now come from traditional walk-in store transactions, 10.2% from traditional ecommerce for delivery from a warehouse, 5.5% from Buy Online for Store Pickup, 6.4% from Ship from Store, and 4.5% from other methods like local delivery from stores. It is important to note that while digital is growing fast, over 89% of all retail orders still

of this review will be to analyze the digital order journeys with

excluded the traditional store cash and carry journey and the

in recent years.

STORE FULFILLMENTSTILL KEY

1

26.6%of Revenue fromDigital Orders

eCommerce withDelivery FromWarehouse

10.2%

BOPIS5.5%

Local DeliveryFrom Store OrOther Methods

4.5%

Ship From Store6.4%

Source: IHL Group

Source: IHL Group

89.8%of all orders fulfilled are with store involvement

300300OVER

BRANDSresponded to the research survey.

When compared to a traditional in-store cash and carry purchase, each of these journeys incurs a significant margin loss due to the additional costs of fulfillment. This might be due to costs of packing, shipping, or some other area but, on average, retailers lose 3 – 8 points of margin when a consumer leverages one of these digital journeys to complete a purchase.

So, which journey is most important? That really depends on the volume for each fulfillment option so each retailer should prioritize the journeys based on your expected volume. It is clear, however, that the resulting margin improvement can be dramatic for all journeys when they’re optimized.

2

The 7 digital customer journeys we researched included the following:

Buy Online Return in Store (BORIS)

Click and Collect (Same day pickup at store)

Buy Online, Local Delivery from Store

Buy Online Pickup in Store (BOPIS – shipped to store for pickup)

Ship from Store to Consumer

Buy in Store, Ship from Warehouse

Buy in Store, Pickup in Another Store

Source: IHL Group

Source: IHL Group

BORIS(Buy Online

Return in Store)

0

-2

-4

-6

-8

-10

Click &Collect

(Same DayPickup at

Store)

8.1

4.4

AVERAGE MARGIN POINT LOSSFROM TRADITIONAL STORE VISITWHEN NOT OPTIMIZED

CurbsidePickup

3.6

BOPIS(Buy Online Pickupin Store, Shipped to

Store for Pickup)

6.8

Buy in StoreShip from

Warehouse

6.3

Buy in Store,Pickup in

Another Store

3.3

Our research shows that many retailers have had to settle on offering the store fulfillment of digital orders using smoke and mirrors. While the retailer offers the consumer a fulfillment choice, systems have not been upgraded to do so efficiently. In fact, fewer than 30% of retailers have optimized any of these customer journeys and the missed opportunity for a positive margin impact is astounding. For instance, for the Buy Online Pickup in Stores journey, optimized retailers are enjoying margins that are 17.1x higher than those who have not optimized. Adobe has also reported that BOPIS revenue has grown over 43% year to year and is by far the fasted area of growth in digital orders. As such, getting this one specific journey improved is critical for most retailers. Retailers that do not spend to upgrade their systems for BOPIS will be at a distinct disadvantage in the decade as profits will be hard to come by.

3

43.2%

Buy Online Pickup in Store (BOPIS) Revenue is up

43.2% year to year.

Source: Adobe Analytics

Source: IHL Group

PERCENT OF RETAILERS WHO HAVEOPTIMIZED CUSTOMER JOURNEYS

BORIS(Buy Online

Return in Store)

40%

30%

20%

10%

0%

30%

Click &Collect

(Same DayPickup at

Store)

22%

Buy Online Local Delivery

from Store

24%

BOPIS(Buy Online

Pickup in Store, Shipped to Store

for Pickup)

27%

Ship fromStore to

Consumer

28%

Buy in StorePickup in

Another Store

16%

enough to make measurement as a % improvement impractical with some journeys showing improvements over 1000%. Instead, we found a better and more consistent way to look at the data was by average points of margin improvement.

The transactions with the biggest margin point improvement when optimized are returns of online transactions taken at the store (BORIS) at 7.5 points of improvement. BOPIS was second in net margin gain of 7.2 points when optimized. Buy In-store Ship from Warehouse was third with 6.3 points of margin gain. Curbside Pickup (3.2) and Click and Collect

Sales

BORIS BOPIS

BUY IN STORESHIP FROM

WAREHOUSE

xx,xxx xx,xxx xx,xxx

GM xx,xxx xx,xxx xx,xxx

Op Expenses xx,xxx xx,xxx xx,xxx

Net Profit Improvement +7.5 points +7.2 +6.3

BOTTOM LINE WHEN OPTIMIZED

4

It is very important to note that every one of the top 5 impact areas by margin point improvement leverage the store in some way to complete the shopping journey. It’s also vital that retailers

with technology when optimizing the journey.

Bottom line: the data is clear. Optimization of these digital journeys are worth the investment. With nearly 27% of revenue coming from digital orders and 62% of orders having a store role either in order creation

decade.

Source: IHL Group

Source: IHL Group

BORIS

13.5x

CLICK &COLLECT

2.3x

CURBSIDEPICKUP

6.7x

BOPIS

17.1x

BUY IN STORE,SHIP FROM

WAREHOUSE

6.1x

BUY IN STORE,PICKUP INANOTHER

STORE

1.6x

MUCH HIGHER MARGINS WITH OPTIMIZED vs. NOT OPTIMIZED

For more information, contact Manhattan Associates at +1 (877) 596-9208 or information@manh.com.