Getting fulfillment right is much more mission-critical in a digital enabled, omnichannel setting compared to a traditional brick and mortar retail (see figure below)
Fulfillment represents significantly higher costs in multi-channel—up to 15-20 per cent of online-order revenue in the US market, about five times the proportion compared to traditional B&M channels. Fulfillment also carries more brand impact than traditional settings, as digitally connected customers rely increasingly on receiving and updating orders quickly and accurately.
Despite its strategic importance, too many retailers still lack an effective multichannel fulfillment strategy.
Our work with clients suggests a clear separation between multichannel fulfillment leaders and the also-rans. We define multichannel leaders as retailers with multichannel sales growth significantly above the industry average CAGR of 15 per cent over the past three years. Leaders also display faster service levels, a fulfillment-cost advantage over 25 per cent and a greater ability to handle category/demand flexibility. These operational and efficiency advantages translate to increased strategic and category flexibility to address changing market conditions, driving enhanced performance.
The leaders we have observed follow three core fulfillment-related practices:
- Define customer strategy and fulfillment solution simultaneously (and iteratively)
- Harness flexible, “no-regrets” fulfillment-solution activation
- Use metrics and incentives aligned with multichannel fulfillment