Omnichannel, the trump card

Although online retail seems like a great success story, the hard truth is there is a long way ahead for the industry. The only way to expand and scale up is to shift gears and focus more on omnichannel. The market size of the online retail was estimated at $39 billion until 2017, according to Ibef. If we evaluate the growth trend, the industry was majorly dependent on the category-wise growth and online retail has not penetrated and reached every nook and corner of India. Of the total retail pie, which is estimated at a market size of around $750 billion, the online retail has a contribution of just 6 per cent in 2017.
The omnichannel strategy seamlessly integrates the fulfillment engine of the online and offline channels within an organisation. By integration, the offline and online supply chain can efficiently utilise the common pool of resources on customer service, order processing, warehousing, transportation and reverse logistics; thereby increasing the overall profitability of the organisation.
The intense fight between the country’s top e-commerce portals are still within this meagre 6 per cent only. Each company claims to be the winner, but no one is a real winner yet when the lion’s share is still with the offline retail.

Speed breakers of the e-commerce industry
There are various reasons which hinder the growth of the e-commerce industry. Here are top three reasons impacting the future of the e-commerce industry:

  • Working with downstream supply chain partners (retailers) as sellers make it difficult for online companies to maintain the cost advantage compared to offline retailers.
  • Logistics cost percentage to sale of e-commerce varies between whooping 12-25 per cent across various categories compared to offline retail which operates between 3-7 per cent. This huge leakage is mainly due to the inefficiency in consolidation at each node of supply chain and huge returns from the customers clubbed with insufficient reverse logistics infrastructure.
  • The e-commerce industry has efficiently touched just more than 3,500 pincode out of the 30,000 plus pincode in the country. 

Recipe for omnichannel strategy
Now, the only trump card is the omnichannel strategy wherein the online retail can piggy back on the infrastructure of the offline retail to penetrate faster. Rather than online versus offline, the smart strategy will mean online and offline. Many retailers claim to have mastered the strategy, the reality is that offline and online supply chains function as silos within the organisation. It is termed as multichannel rather than omnichannel. So, what we fail to achieve is the seamless integration of the online and offline supply chain to emerge as an omnichannel supply chain. The root of this misalignment is the lapse in planning for omnichannel and the right technology to drive the omnichannel supply chain.

  • The omnichannel’s success relies on how efficiently the supply chain network is designed to achieve the service fills of the offline and online customers.
  • Efficiently utilise the resources to the brim and seamlessly utilise resources for the online and offline fulfillment.
  • Leverage the comfort of online supply chain and widespread reach of offline supply chain to scale up. Omnichannel can bring down the overall supply chain costs of the online retailers by 5-10 per cent. This can be observed on the profit and loss faster, and it also brings out efficiency from the existing offline infrastructure by using the resources to the brim.

Myths about omnichannel
Most organisations are wary of adapting omnichannel and believe that implementation will need a change in infrastructure, systems and processes. Systems which are in use today are scalable to an omnichannel supply chain, and can ensure minimum wastage. The other myth is omnichannel is not a good idea and specialising in one channel is the best strategy. This may sound good, but the organisation will be left far behind in the race because online penetration will still take time.  The biggest myth is that the omnichannel confuses the customer but the truth is that customer gets multiple options to place orders and how the fulfillment is managed is up to the organisation to plan and execute. It can prove to be a boon for customers and organisations which can master the omni supply chain will also have competitive edge over others. Seamless integration of online and offline would be the business mantra each organisation should be working towards to be the market leader.

 

By Alvis Lazarus, CEO, Hesol Consulting

Assistant Editor