Omnichannel Retailers Risk Survival Without Replacing Obsolete Planning Systems

omnichannel retailing

Despite consumers’ increasing preference for multichannel shopping options, retailers are still using decades-old merchandise planning systems that fail to address new challenges associated with omnichannel retailing, according to a recent survey by Boston Retail Partners.

Fewer than half (47%) of the retailers polled in BRP’s 2015 Merchandise Planning Survey said they plan to upgrade or replace their omnichannel planning systems in the next two years. An additional 15% said they would do so in the next three to five years, and 24% said they have no plans to upgrade or replace these outdated systems.

“Stores are under siege from other channels and unfortunately dealing with outdated and ineffective systems to address the complex planning process that is required in an omnichannel environment,” Ken Morris, principal at BRP, said in a press release. “All of this negatively impacts the customer experience and ultimately sales.”  

The laggards should be a cause of concern for the industry. Having the proper technologies in place to support the rising omnichannel is key to survival for retailers. Without proper technologies, retailers will miss opportunities to forecast demand, better manage pricing and inventory levels and improve other facets of their businesses, the report said.

Inventory and Analytics Challenges

Outdated inventory management practices have held back omnichannel retailers over the past year. BRP said nearly half of respondents maintain separate inventories for each channel, whether it’s a brick-and-mortar or online store. This is an improvement from last year, however, when 69% of respondents told BRP they maintained separate inventories for each channel.

The negative implication of siloed inventories is loss of sales opportunities. An omnichannel approach requires retailers to increase flexibility across inventory management. With the rise of buy online, pickup in-store options, for example, retailers must be able to adjust if a product intended for a physical store shelf is needed to fulfill an online order.

As Thomas Kase, vice president of research at Spend Matters, pointed out, “a common inventory might require additional capabilities in local stores (i.e. to be able to package and dropship scarce items that are requested from other stores or other channels) but this is a challenge to overcome, not to ignore or avoid.”

The report also revealed that, although 75% of retailers are applying advanced analytics to merchandise planning, only 20% are using analytics for omnichannel planning. Forty-five percent of retailers use analytics for store planning and 40% use it for assortment planning, the report showed. This could change soon, however — 58% of retailers surveyed said improving analytics is their top priority for the year ahead.

'Too Little, Too Late'

If companies continue to drag their feet updating their technology strategies for the needs of omnichannel retailing, the fate of the industry could be bleak, according to Spend Matters analyst Andrew Karpie.   

“One really has to wonder, based on this data and the slow rate of change, ‘What will be the fate of the retailers that fail to update their systems?’” Andrew said. “Even those that claim to be planning to invest in demand forecasting systems and supply chain upgrades in the next five years appear to be doing too little, too late. If they are able to complete such upgrades on schedule, which isn’t likely given the IT/SI industry track record, there is probably more that needs to be done.”

Andrew also believes the game has changed from merely providing products to providing services enabled by technology. Consumer experience and satisfaction increasingly includes the services wrapped around the products, not just the products themselves — something especially true of millennials. Spend Matters predicts that many retailers will not succeed in modifying their value propositions and executing in lower-margin channels. Even the powerhouse Wal-Mart, despite substantial e-commerce investments, is struggling to become an omnichannel success.

Discuss this:

Your email address will not be published. Required fields are marked *