In some ways e-commerce levels the playing field for retailers since consumers can access e-commerce websites anywhere around the world. But with physical and digital channels merging, Omnichannel readiness appears to be more dependent on where retailers are on their Omnichannel journey. And this often plays out on a regional basis according to new research conducted by PwC on behalf of JDA Software.
In a survey of 300+ CEOs from China, Germany, Mexico, the United Kingdom and the United States, PwC found trends in Omnichannel investment strategies that varied across the five countries. The similarities and differences between countries were grouped across various dimensions. In some ways the differences are regional—Asia vs. Americas vs. Europe. Other times the differences are between emerging markets (China and Mexico) and the more mature markets of the other three countries. And sometimes China and UK stood out from the other countries. I will discuss some of these comparisons below, but it is important to note that location matters when designing your Omnichannel initiatives.
Big Chinese Investments
It is no surprise that responses from Chinese CEOs stand out from those of their peers in other regions. China is just at the early stages of building a consumer culture, which has coincided with the rise in Omnichannel retail. Therefore, they are less encumbered by legacy operations and can start fresh building an Omnichannel infrastructure. For example, 25 percent of Chinese CEOs say they do not have siloed operations and are providing seamless shopping experiences, compared to only 16 percent in the rest of the world who claim this. Another 65 percent of Chinese CEOs say although they operate in silos, they are providing seamless shopping experiences, as compared to 57 percent for the rest of the world. Chinese CEOs also say they are investing more heavily in almost all Omnichannel capabilities than their peers. The downside is that Chinese CEOs are much more concerned about all threats from competitors, but especially from online, borderless entrants and from retail giants like Amazon and Walmart.
Contrast China’s situation with the more mature Omnichannel markets of Germany and UK. They have already made investments in Omnichannel capabilities so their investments now are more focused on adding stores, including dark stores for fulfillment, their supply chains and last mile delivery.
Emerging vs. Mature Markets
The biggest differences in responses from CEOs in the countries studied came from those in emerging markets (China and Mexico) versus those in the more mature markets of Germany, UK and US. The emerging market CEOs were more concerned about virtually all of the external and internal threats in the survey, generally saying they were more likely to occur and would impact them more if they do occur. Especially concerning are threats from new online entrants and service providers. They are also more likely to say their fulfillment costs are increasing (72 per cent vs. 67 per cent) and that their largest cost is shipping directly to customers from their warehouses (49 per cent vs. 38 per cent). These increased costs are likely caused by less mature infrastructures and distribution networks.
Faced with higher costs to fulfill Omnichannel orders, emerging market CEOs have little choice but to offset those costs with higher fees to consumers, as shown in Figure 1.
Figure 1 – Response to the high cost of Omnichannel fulfillment
Dealing with the higher costs of fulfillment is by no means dampening the enthusiasm of emerging markets, however. They are generally making larger investments in Omnichannel capabilities and in expanding their supply chains than their mature market peers. They are also expecting higher growth rates in online sales—10-20 per cent versus 0-10 per cent in mature markets.
Although the survey showed many differences in responses from Chinese as well as emerging market CEOs compared to their mature market peers, there was also curious agreement on certain issues from countries at opposite ends of the Omnichannel spectrum—China and the United Kingdom. While China is relatively new to retail and Omnichannel, the United Kingdom is recognized as a strong early adopter of many Omnichannel capabilities such as Click and Collect. Yet they responded similarly to certain survey questions.
China and UK CEOs were most likely to say their Omnichannel fulfillment costs are increasing, but it would appear for different reasons. In China, the costs are increasing due to the rapid growth of e-commerce coupled with limited infrastructure. In the UK, the expanded use of Click and Collect is likely pushing fulfillment costs higher. To help offset these costs, China and UK CEOs are the most likely to raise the minimum order value for free Click and Collect services. They are also the most likely to offer specific time slots for deliveries.
For small, regional retailers with operations and customer bases within one country, the insight JDA’s research provides on the differences in Omnichannel practices and investment intentions by country and region may only be of passing interest to you. But for any retailer who plans to operate physical stores and/or e-commerce sites in more than one country, or whose customers are apt to access competitors’ e-commerce sites globally, this information can be critical for designing your Omnichannel strategies. In these cases, location matters!