Global e-commerce sales will reach $3.5 trillion within the next five years. This is great news for retailers.
But there’s a catch.
Traditional retailers are struggling to adapt to the new realities of e-commerce, and these realities are being driven by pure-play online retailers. With their massive and still growing e-commerce infrastructure, these pure-plays are raising the bar on service – relentlessly. As a result, customers are more demanding than ever. They are now accustomed to getting what they want, when, where and how they want it. They are used to paying little or nothing for delivery. If a retailer fails on the service end of the sale, it risks losing the customer.
This is ratcheting up customer expectations in every industry segment – a bleed-over effect. Non-consumer industries like automotive and aerospace now face the same sets of service expectations as omni-channel retailers. This puts tremendous pressure on supply chains not just to perform, but to do so cost efficiently.
The latter is no easy feat. In the retail sector, 86 percent of retailers believe that “current supply chains are not fit for purpose to deliver a successful omni-channel offering,” according to a recent EY study. The main reason lies in the fact that omni-channel fulfillment is expensive. It can cost up to four times more than traditional bricks-and-mortar fulfillment. With most retailers operating at a five percent profit margin, the high cost of e-commerce fulfillment can easily push companies into the red.