Retailers Bear Exceptionally High Cost to Meet Today’s Omnichannel Retail Expectations

Skyrocketing retail order management and fulfillment costs average 18 cents of every dollar, eroding profits

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AtlantaMarch 31, 2016—Retailers spend a staggering 18 cents of every dollar to satisfy today’s customer expectations of buy anywhere, pick up anywhere. This is just one of the key insights stemming from a new omnichannel order management study conducted by EKN Research in partnership with Aptos Inc., formerly Epicor Retail, a provider of retail technology solutions. The study reveals the true costs associated with the order management lifecycle as retailers struggle to meet customer expectations in the current omnichannel retail era.

“This study is a huge wake-up call to retailers,” said Noel Goggin, CEO and culture leader of Aptos. “As traditional store-based purchases continue to decrease and omnichannel transactions continue to increase, runaway order management and fulfilment costs have the potential to devastate the bottom line of retailers in virtually every category.”

As an example, if the reported fulfillment costs of 18 percent per order were applied to the estimated $3.07 billion in online sales from Cyber Monday 2015, then U.S. retailers would have spent $540,000,000 on that one single day to get their products into customers’ hands.

According to the study, eight in 10 retailers surveyed reported an increase in order management and fulfillment costs compared to last year, with an average year-on-year increase of 5.07 percent. Devising sustainable fulfillment strategies in the wake of consumers’ expectations for free shipping was cited as the biggest order management-related business challenge by nearly half of all retailers surveyed.

The research also serves as a call to action for retailers to make a commitment to process optimization to provide the requisite foundation for new and emerging fulfillment services and options. According to EKN, by proactively adding efficient, scalable and repeatable processes throughout the order management lifecycle, retailers can gain competitive advantage through lower costs, higher margins, higher earnings and more consistent service experiences.

Retailers say the process of managing order management systems and fulfillment processes is becoming more multi-faceted and complex. The need to improve order cycle time; the lack of visibility across order functions and processes; and a lack of alignment between inventory, order and supply chain operations were all cited as the greatest order management process-related struggles.

EKN found that many retailers struggle with a lack of defined/streamlined workflows for each order type, which leads to inconsistencies in order processing and management across the entire order value chain. “A lack of end-to-end order management visibility severely inhibits effective decision-making, productivity and enterprise effectiveness,” said EKN Vice President of Research and Principal Analyst Sahir Anand. “Many of the retailers surveyed recognize this must quickly become a priority investment, with almost half of respondents (48 percent) identifying improvements to end-to-end order management visibility as a key area of focus in 2016.”

As part of their focus on order management, EKN and Aptos made the EKN QuickScan interactive tool available to retailers to help them assess the maturity of their order management systems.

“Today’s omnichannel retail realities are putting tremendous stress and strain on disparate order capture and fulfillment systems, as well as retailer margins,” said Goggin. “Real-time inventory visibility from across the enterprise, combined with powerful order brokering and sourcing logic, ensures that every order is sourced from the most profitable location. This also enables powerful competitive advantage through lower prices, improved margins and consumer service.”