E-commerce will go as far as the supply chain can take it

Discussion
Jan 21, 2014

Hamish Brewer, CEO of JDA Software, began a keynote presentation at the recent NRF Big Show with the word "disruption" in reference to the retailing industry today. The rate of change is accelerating. Channelization is dead. The internet helps customers know more about product than associates. Retail company silos, once a hindrance, are now fatal. The industry hangs on the cusp of digital commerce but is unsure how to manage it.

The digital age, he noted, is surely here. Three quarters of mobile users use their device for shopping. Some 81 percent of current cell users will have smartphones by 2015. Consumers do not "go" shopping anymore, they are always shopping, and a pre-buy phenomenon has emerged.

Moreover, newly emergent digital consumers are apparently less tolerant than their predecessors. Over half react badly to lack of information about a product, and 70 percent do so relative to unexpected delivery costs. Some 46 percent are very critical of tough-to-navigate websites.

One of the key issues, according to Mr. Brewer, for reaching out to digital consumers is making sure product is visible and available anytime, anywhere.

However, Mr. Brewer referenced a CEO survey conducted by Forbes that indicated a disconnect between what retailers think and the reality of the future marketplace. Some 69 percent of CEOs sampled see growth coming from traditional paths, not necessarily e-commerce. Only 17 percent of CEOs believe that they have optimized their supply chain and just 15 percent said their supply chain could keep up with needs.

Yet, Mr. Brewer said, the supply chain has become even more mission-critical due to the 24/7 nature of the digital consumer. An e-retailer must deliver what it promises or its brand reputation is damaged and future business is threatened. To drive e-commerce, a retailer’s ability to co-ordinate horizontally across its organization is more important than depth of capability in getting product to consumers when and where they want it. All retail disciplines must work together using the same IT foundation.

One of the huge issues of online selling is the margin challenge, and a faulty, undependable supply chain makes margins vulnerable. His vision of the future is a multichannel operation that fully and seamlessly integrates stores with e-commerce, so that the customer can buy in the store or online, and then retrieve it in the store or at a distribution point, or have it delivered.

Do you think CEOs in general have a good handle on where consumers and the retail industry are headed in the future? Where do you see the greatest opportunities for supply chain improvements to drive e-commerce performance?

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17 Comments on "E-commerce will go as far as the supply chain can take it"

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Cathy Hotka
Guest
3 years 10 months ago

One of the big takeaways from discussions with retailers in the past few months is the last-mile challenge, connecting shoppers with goods. From delivery to in-store pickup to item visibility, there are plenty of challenges facing retailers as they try to hold on to their customers. IT and supply chain leaders are going to stay really busy.

Ryan Mathews
Guest
3 years 10 months ago
In a word — NO! I think that for too long the future has been defined as the end of a quarter; long-term thinking possibly extending as long as the end of a fiscal year. And as far as consumers go, I just think most retail CEOs are frankly out of touch with the reality of consumers, the core motivators that live beneath and beyond a spread sheet or a traffic pattern analysis. The only way to get to that reality is to be in the stores, and that’s the last place you find most CEOs. As for the last… Read more »
Mohamed Amer
Guest
3 years 10 months ago
Retail CEOs do have a good handle on the future of the industry and the pre-eminence of the consumer in that future. Where they may lag is in translating that knowledge into a coherent and viable company strategy that gets them over the business model change from physical to a hybrid physical-digital reality. There are surely pockets of brilliance and innovation, but to have that permeate an entire retail organization is a challenge, especially for those with strongly entrenched and institutionalized processes and siloed structures (and those that were wildly successful with the old paradigm). And when the above challenges… Read more »
Ralph Jacobson
Guest
3 years 10 months ago

One very large retailer has been working on literally every component of their supply chain starting with the raw materials suppliers for years. They are continuing to extract costs, delays and waste from each elemental piece of the network. The results to date are among the best in the retail industry and their eCommerce business is successful because of that work.

Fulfillment obstacles continue to drive down margins. There are some great ways to optimize supply chain performance these days and it doesn’t have to be painful. Take a look at some of the tools available in the marketplace.

Camille P. Schuster, PhD.
Guest
3 years 10 months ago

The retailing industry is still catching up to today’s reality. Total integration of all channels, consumer information, and the location of inventory in one place with real-time updates does not exist for most retailers. Until that happens, they are not competitive in today’s environment so will not be ready for the future. Some are catching up faster than others and will reap the benefits.

James Tenser
Guest
3 years 10 months ago
Refining the supply chain to capture greater margins and free up trapped inventory capital are still very big opportunities for retailers, but they are not the only goals that matter. Ultimately, the supply chain should be the foundation beneath the customer experience infrastructure — which materializes in terms of item availability and service levels, delivery speed, competitive value and consistency. From that perspective, supply chain innovation is no more or less important today than it was a decade ago. For multichannel or e-commerce, supply chain excellence remains necessary, but not sufficient. Getting the order is still relatively easy; delivering on… Read more »
Mark Price
Guest
3 years 10 months ago
It is difficult for anyone, let alone a very busy CEO, to get a handle on how consumers and retail are changing. Consumers have lost patience with siloed retailers and lack of information across channels. In addition, companies that speak with consumers using different voices and conflicting messages look more out of touch and old fashioned than ever. Supply chain will be critical to addressing these challenges, since consumers will respond to stock-outs and shipping delays by instantly changing their purchases to other retailers. Whether RFID or other technologies, retailers must track their inventory flow across consumer channels accurately and… Read more »
Todd Sherman
Guest
Todd Sherman
3 years 10 months ago
It’s not about ecommerce — that’s a red herring. It’s about helping customers shop the way they want, which has changed significantly over the last few years. That change will accelerate in the coming years as mobile, social, digital, etc. become even more engrained in shoppers’ habits and expectations increase. Retail is going through a disruptive period where the “old” (anything more than 5 years ago) doesn’t work nearly as effectively in today’s/tomorrow’s environment. Much of the challenge for traditional retailers is that their DNA was formed in a different epoch and they were organized to deal with the realities… Read more »
Daniel Silverman
Guest
3 years 10 months ago
This is an optics issue. As noted already, CEOs are looking for sales the next quarter. 1% growth (if you can find it) in Walmart stores dwarfs triple digit growth on walmart.com. But if you follow the shopper path, it starts online and ends in social. Optimizing supply chain for eComm is quickly becoming table stakes – the rest will be left in the dust by nimbler companies. As for Mr. Jacobson’s comment, true Walmart (assuming that’s the “very large retailer”) has been working on the upstream portions of the value chain. But if you’re not in stock at the… Read more »
Chris Petersen, PhD.
Guest
3 years 10 months ago
There is only one vote that counts … that of the consumer. They don’t vote based on channels and supply chains. They vote every day based on their experience. In the age of 24/7 shopping anytime and everywhere, the customer’s experience is now end to end … all the way to their door, and available in store. CEOs used to view supply chain as a “cost center,” or an opportunity to take cost out and reduce inventory. The reality today is that supply chain is an integral part of the total consumer experience, regardless of the channel or how the… Read more »
Vahe Katros
Guest
3 years 10 months ago

A CEO may have an intuitive, even genius level understanding of the consumer, but their ability to execute on that is the issue. Mark Zuckerberg and Meg Whitman famously sit in cubicles and open spaces.

What is the private chef preparing for lunch today?

Dave Wendland
Guest
3 years 10 months ago

Given the rate of change in retail and the convergence of technology around every aspect of the supply chain, I don’t know if any CEO can truly have a good handle on where the industry is headed. However, my prediction is for end-to-end vertical integration (compare it to the oil industry) … and some retailers are getting very close to it: they have become manufacturers, distributors, retailers, e-commerce giants, and information leaders. That, I believe, is the future of retail to drive overall performance.

Larry Negrich
Guest
3 years 10 months ago
The retail CEOs that we are talking to have as good of a grasp on where consumers are going as could be expected given the rate of change in the market. The “disruption” is on many fronts, but nowhere more so than that of consumers quickly incorporating mobile’s power to research, share, and purchase anywhere, anytime, anything. It’s much more than a change in e-commerce. These changes necessitate a change in the concept of the supply chain to something more adequately described as a supply ecosystem. The supply ecosystem is the framework to support a number of existing and new… Read more »
Lee Peterson
Guest
3 years 10 months ago
I agree with Brewer in that the general idea of DRI (Digital/Retail Integration) is being ignored by most CEOs. But I would say for good reason. Sports analogy: focusing on technology in retail today is like developing a super-advanced passing game when you can’t block and tackle! If technology was used to help retailers block and tackle, they’d be more susceptible to implementing it or “seeing” a future path for it. Example: Apple’s new beacons placed in Macy’s and other stores tells the customer about a deal when they walk into an area IF they’re on their mobile…but it can’t… Read more »
Herb Sorensen
Guest
3 years 10 months ago
The short answer is NO!!! Business habits and practices developed over the past 100 years are deeply entrenched, but the future is arriving at an accelerated pace – adaptation lags. We are moving into an era of massive creative destruction (Schumpeter). However, with literally trillions of dollars of capital deployed in support of the old world, the old world will NOT disappear overnight. Much of the new world is being driven by people with new competencies, but lacking real understanding of the old problems. Guess what. The new problems are the same old problems. New competencies – trial and error… Read more »
Gordon Arnold
Guest
3 years 10 months ago
This discussion is both informative and highly relevant for the near future growth of e-commerce retail. Whether by accident or design, the larger issue for reaching the maximum growth potential for e-commerce growth was totally unmasked for all to see. Information Technology (IT) and the power of e-commerce is largely misunderstood throughout retail leadership. Even the leadership in IT struggles with this dilemma as clearly demonstrated by the industry’s attrition and reversal rates. Brick and Mortar retail is seeing a slowdown in real growth for the exact same reason as their colleagues in e-commerce. With the low costs of IT… Read more »
Kenneth Leung
Guest
3 years 10 months ago

Traditional brick and mortar CEOs, I think, will have a tough time with omni-channel fulfillment. Even the best B&M retailer supply chain is optimized for cross docking and distribution to store level, not optimized for consumer shipping. Compare that with what Amazon is doing now and that new patent filing on pre-emptive packaging of products for shipping based on measured intent of shoppers (it sounds cool), I would say brick and mortar stores have a lot of catching up to do.

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