DHL OMNI-CHANNEL DAY 2017

Transcription

1 DHL OMNI-CHANNEL DAY 2017 Profitability in the Omni-Channel Era Sabine Müller, CEO DHL Consulting Innovation Center, Troisdorf, 4 May 2017

2 Retail industry is changing

3 Customer behavior is changing 93% of shoppers buy both online and offline An omni-channel shopper spends on average 3.5x vs. single-channel shopper 59% of online shopping time spent on mobile devices 66% of shoppers research online before visiting store C&C 35% of online orders expected to be collected in store 56% of shopping carts abandoned due to unexpected costs, e.g. shipping Source: DHL Consulting, Barclays, Accenture, Kibo Commerce, Emarketer, Business Insider, Statista 3

4 Omni-channel is already a common expectation 84% of customers expect stronger integration across channels 70% of the customers want retailers to predict their demand 71% of customers value online visibility on in-store inventory 24% of customers already expect same-day option 54% of customers value Buy Online Pick-up in Store (BOPIS) and Buy Online Return to Store (BORTS) Source: DHL Consulting, Barclays, Accenture, Kibo Commerce, Emarketer, Business Insider, Statista 4

5 Technology advancements change retail Omni-channel Manufacturing Warehousing Shopping Experience Last Mile Delivery 3-D printing AR & VR Internet of things Robots Collection points Near-shoring & automation Fulfillment by robots Body scanner Drones Fulfillment at stores Autonomous driving Face Recognition Crowdsourcing Trunk delivery Source: DHL Consulting 5

6 One channel is no longer enough: e-commerce and B&M are merging TRILLION EUROS TOP 80 E-COMM COUNTRIES e-comm 8% 9% 10% B&M 92% 91% 90% % 89% % 88% % 87% % 86% % 85% Share of e-commerce rising steadily, but B&M is not being replaced Pure e-commerce players investing into B&M footprint B&M retailers are investing into omnichannel capabilities, leveraging stores IndoChino stores Amazon stores Visibility on in-store inventory BORTS / BOPIS 1) Birchbox SoHo Miao Street (Alibaba) In-store kiosks for online/ out-of-stock products Geo-messaging/ real-time promotions Source: DHL Consulting, Euromonitor, Forrester research, Asia Distribution and Retail, Accenture 6

7 Large retailers are driving change by setting high service standards as well as introducing innovative models Shop with me machine learning for suggestions based on browsing patterns Treasure Truck browse daily deals nearby and arrange a pick-up time Virtual subway grocery stores shop on the go to save time! Synchronized online and in-store omni-channel consultation Try on and customize own products in store Source: DHL Consulting, Nike, Amazon, Tesco, Toms, Clinique; 7

8 Most retailers are investing into omni-channel fulfillment capabilities Currently implemented Plan to implement Σ Buy online/ pick up in-store 31% 52% 83% Buy via mobile app/ deliver to home 36% 41% 77% Buy via in-store kiosk/ deliver to home 27% 40% 67% Reserve online/ purchase and pick up in-store 38% 37% 75% Buy via mobile app/ pick up in-store 33% 40% 73% 65% of leading retailers allocated more than 30% of commerce budget to digital and mobile commerce expansion in the last year Source: emarketer

9 Profitability becomes a challenge 19% of retailers say they can fulfill omnichannel demand profitably 36% retailers consider their omnichannel initiatives diluting margin High delivery and return cost Next-day/ same-day expectations Fragmented delivery modes Increased fulfillment complexity Piling up inventory Increase in SKUs Inventory required closer to demand High IT investment Full visibility across channels at all inventory locations (store, warehouses, etc.) Integration need to enable services like as track and trace Source: DHL Consulting, PWC, E&Y, Supply Chain Digest 9

10 High delivery and return costs drive unprofitability USD bn 20 Shipping revenue Outbound shipping costs % Amazon continues to make significant net losses from shipping B&M return rate 9% 79% of customers expect free returns E-commerce return rate Zalando return rate 30% 50% 58% expect hassle-free, no questions asked return policy Source: DHL Consulting, Amazon, Invesp, Zalando 10

11 Executives believe that supply chain is key to improving omni-channel profitability Survey results of Retail Supply Chain Executives 86% Current Supply Chains are not fit for purpose to deliver a successful omni-channel offering 81% Supply Chain transformation rather than incremental change is required to succeed in an omni-channel Source: DHL Consulting, E&Y

12 BUT HOW TO DESIGN THE BEST-FIT OMNI-CHANNEL SUPPLY CHAIN?

13 To develop a profitable omni-channel supply chain strategy, companies need to return to thinking from the top Strategic positioning What does our company stand for and what are our USPs? Same/ complementary positioning x-channels Channel objectives Differentiated positioning by channel What is the role of each channel in the delivery of our USPs? Front-end design Back-end design How does SC complement and ensure delivery of our propositions? Organization Processes KPI IT Risk Management Which factors enable an effective end-to-end supply chain? Source: DHL Consulting 13

14 Front end/ customer-facing design choices will imply the right back-end design; iteration may be needed after modeling supply chain costs Channel Assortment Delivery Options Return Options Front end design Common across channels Differentiated Home delivery Free Differentiated Instant Store collection Same Day Pick-up points Paid Membership Next Day 2-4 Days To Store Free Differentiated To parcel network Home Pick-up Paid Membership Inventory management Fulfillment & storage Last Mile Delivery Reverse Logistics Back end design Fully integrated Cross allocation Completely separated At supplier E-com fulfillment ctr. Hybrid DC Dark Store Dedicated fleet Special provider Local parcel provider Express provider In store In specialized facility At supplier Store Crowd sourcing Source: DHL Consulting 14

15 Faster service offerings require a more extensive infrastructure footprint Optimum facility count for required service levels in USA (to cover 90% of population) Current trend: next day and same day delivery Target service level 2-3 days Next day Same day Radius covered by 1 facility ~650 miles ~150 miles ~90 miles # of facilities needed ~ Source: DHL Consulting 15

16 Each location in the supply chain can become an e-commerce fulfillment point to enable service offering and/or generate x-channel synergies Centralized Fulfillment Localized Fulfillment E-commerce fulfillment optimization Dedicated E-fulfillment E-commerce fulfillment center Dark Store Integrated Fulfillment Supplier Hybrid DC Store Customer Crosschannel optimization Inventory pooling Vs. Service 16

17 Omni-channel stores will look different Click-and-collect pickup and service area Optimization of backroom to enable efficient picking Education of store personnel to advise on and sell online items Interactive devices to place orders or even configure products (e.g. kiosks, smart fitting rooms) Advanced labor planning to handle store sales and e- commerce fulfillment 17

18 Cross-channel visibility is a crucial enabler for generating supply chain synergies across channels Cross-Channel Visibility No 19% Ability to transfer inventory across channels Optimized Transfer 16% 81% Unable to Transfer 28% 56% Manual Transfer Yes While most retailers have achieved cross-channel visibility, only 16% can seamlessly transfer inventory across channels Source: Gartner 2015; DHL Consulting 18

19 Inventory pooling can reduce safety stock levels or improve service with the same inventory levels Reduce safety stock w/o impact on service Store sales Online sales Separate model Integrated model Online Pooled Store -27% OR Improve service w/o impact on inventory Separate model Integrated model 98.0% 99.5% +1.5% 19

20 We are in the omni-channel era Omni-channel is the new industry standard It is a journey to become true omnichannel champion 20

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