How to Talk With Your CFO About the ROI of Omni-Channel

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Allied to Win Tour 2014

The Shift Towards Omni-Channel is Happening Now

50%By 2017, 50% of all U.S. retail

sales will be omni-channel.

Source: Forrester Research, Inc.

Omni-Channel Programs Provide a Net Sales Benefit to Retailers

Almost a quarter of all online purchases are returned

Offering in-store returns gives retailers an opportunity to save or lift online sales

Offering in-store pickup and returns gives retailers an opportunity to cross-sell additional items

Source: Kurt Salmon US Inc.

But There Are Disconnects Between Retailer Values and Realities

Source: RSR Research, December 2013

But There Are Disconnects Between Retailer Values and Realities

Disconnects:49% of retailers are enabling ship-from-store.Vs. 37% report that they are in the process of getting online visibility to in-store inventory.

50% of retailers think ship-from-store is valuable.Vs. 74% who believe in-store pickup is valuable.

49% are rolling out ship-from-store programs Vs.36% are rolling out in-store pickup.

Source: RSR Research, December 2013

Retail Winners Are Focusing on ROIPriorities for Retail Winners:

#1 Prioritize fulfillment based on the most profitable location.

#2 Rethink how sales and costs of sales are allocated in cross-channel fulfillment.

Source: RSR Research

2X Retail winners are twice as likely to prioritize attribution as retail laggards.

Retail Winners: Retailers that achieved higher than average YoY sales growth. Retail Laggards: Retailers that achieved lower than average YoY sales growth.

Retailers Want the CFO’s Involvement in Driving Omni-Channel Initiatives

Who is currently driving omni-channel adoption? ➤ VP Supply Chain➤ Store Operations ➤ CIO ➤ VP Marketing

Who should be driving omni-channel adoption? ➤ VP Supply Chain➤ Store Operations➤ CIO ➤ CFO

Retailers have: Don Draper

Retailers want: Warren Buffet

Source: Retail Systems Research

How to Convince Your CFO to Embrace Omni-Channel Fulfillment

Leverage intelligent order

routing logic

Optimize your return policies and

procedures

Prioritize financial sales attribution

“And we’ll also double our shipping costs, resulting in a net loss!”

“With distributed order management software, we’ll be able to roll out a ship-from-store program, which will double our inventory turn.”

VP Omni-Channel

Leverage Order Routing Logic to Convince Your CFO of Omni-Channel ROI

“Fantastic!”

“With distributed order management software, we’ll be able to implement logic that factors in the location of the inventory that’s selling the slowest and route orders to that location for fulfillment. The money we save from reduced mark-downs will offset any additional shipping costs resulting in higher-margin sales across the board.”

VP Omni-Channel

Is your eCommerce return period longer than your in-store period to account for shipping? Or are all of your return policies consistent?

Changes to Return Policies May Impact Revenue Recognition

* Consider the fact that CFOs look at historical return data to estimate sales returns. If this cannot be reasonably estimated, the sale might not be recognized until after the return period ends.

The Rise of Omni-Channel Poses Challenges Related to Attribution $$

Attribution is challenging in an omni-channel environment: ➤ How do retailers credit an omni-channel sale? ➤ How do retailers decide which channels to invest in?➤ How do retailers track web-influenced sales?

Order management software helps retailers: ➤ Identify the source of a sale➤ Credit the store that originated the search instead of the store

that supplied the inventory

But there are other factors to consider: ➤ Volume goals of each store➤ Incentive programs and compensation

ROI Case Study

Retailer with $50 million online sales.

Ship-from-Store:➤ Assumes 10% of online orders shipped from store (based on average

retailer data); previously shipped from warehouse➤ First year return: $300,000 savings in inventory carrying costs➤ Client achieved a 30% boost in top line sales by using store-based

inventories to avoid stock-outs

In-Store Pickup:➤ Assumes 3% conversion lift (from having ISPU), plus 25% of pickups

resulting in incremental purchases ($100 ticket with $30 incremental in-store sale)

➤ First year return: ~$2.4 million in new sales

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