Report: Online Taking a Bite out of Retailer Profits, Omnichannel Could be the Answer
May 9, 2016
While online sales continue to grow, overall operating earnings for retailers have taken a hit from the high cost of e-commerce fulfillment, according to a new report. Retailers’ earnings as a percentage of sales have declined by up to 25 percent, according to a report by HRC Advisory, as retailers invest in the supply chain upgrades, digital marketing and variable logistics costs that come with consumer expectations of shopping more online. Managing a high level of online returns has also hurt retailers’ profitability, the report said. But, a sharper focus on omnichannel commerce could provide retailers a way to counteract the losses they have experienced.
“There are a number of ways retailers can strategically mitigate and ultimately offset the negative impact of e-commerce on their operating earnings and return to their historically higher brick-and-mortar performance,” said Antony Karabus, CEO of HRC. “To start, retailers need to re-examine the cost structures of their physical stores and infrastructure, and become more efficient omnichannel operators to staunch the losses from extremely high online fulfillment costs. Those who can engage customers and meet their heightened expectations, while offering complete visibility of inventory availability, can be lucrative in reducing markdowns and improving inventory productivity.”