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

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?

Join the Discussion!

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

Notify of

Sort by:   newest | oldest | most voted
Cathy Hotka

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

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 question, the biggest opportunity is to rewrite the question. It should simply read, “Where do you see the greatest opportunities for supply chain improvements to drive commercial performance?” No channels, no qualifiers, just thinking about shopping the way those ever elusive real people think about it.

Mohamed Amer
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 are overcome, there remains the imperative of bringing the seemingly contradictory elements of creativity, innovation, and discipline as retailers go about designing and executing their future supply chains. Those from yesteryears will not get the job done tomorrow; and that is right around the corner. The infusion of digital into the business, the hyper-competitive push to innovate around shipping and integrating that into the overall business model and perceived consumer value (see the recent announcements by Amazon alone), and the fight for consumer loyalty turns dynamic and visible supply chain and the ‘last mile’ into a key success factor for… Read more »
Ralph Jacobson

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.

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

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 the promise is still wicked hard.

Mark Price

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 immediately and must use modeling to improve their prediction, in order to maintain or grow market share.

Todd Sherman
Todd Sherman
3 years 7 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 of that time.

As an exercise, take a large blank piece of paper and sketch the best organization and processes for today/tomorrow. How different is that from what exists today? Meeting these challenges requires much more fundamental changes. It’s time to stop just rearranging the furniture.

Danny Silverman

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 shelf, or you can’t fill an order online, the rest of the effort is wasted.

The biggest challenge for major brands today is the threat from those smaller, nimbler brands. The #1 item on Amazon for a search for coffee is not Folger’s or Maxwell House, it’s Kicking Horse. Olay may have the #1 result for “skin care,” but #3-6 are unknowns. Legacy systems, built and optimized to support mass retailers, will be our undoing in the era of democratized retail.

Chris Petersen, PhD.

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 original purchase was made.

If you want to assess how important supply chain is to the overall consumer experience, ask those consumers who didn’t receive their packages in time for Christmas.

For today’s CEO, supply chain is not a function, it is an integral part of the strategy online and in-store.

Vahe Katros

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

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

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 shopping models (mobile, in-store, through device, integrated into TV programming, web, etc.) Currently implemented supply chain systems simply were not built to handle the complexities of the variety of shopping and supply options necessary to be successful in the future. Retailers and manufacturers that understand how to facilitate and leverage this evolving paradigm of the new consumer will be the winners.

Lee Peterson

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 tell you where the product you want is in the first place. So it’s basically like random signage, which can be done without technology. What’s the point?

If technology could be used to improve sales associates’ knowledge, product location and reviews from others to the customer, that would be useful. But where’s that app?

Herb Sorensen

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 – the engine lurches forward. But understanding will accelerate SOME winners. 😉

gordon arnold

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 cataloging and coupon collection and distribution the leaders of this aspect of the industry are burdened with security risks on top of unintuitive marketing programs.

Before retail of any kind is ready to anticipate and prepare against the problems at hand, the industry needs leadership that is equipped to understand 21st century retail.

Kenneth Leung

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.


Take Our Instant Poll

How important, relatively speaking, is the supply chain in driving e-commerce performance today versus 10 years ago?

View Results

Loading ... Loading ...