Retailers losing up to 70 percent of order value to fulfillment costs

Picture: Cover of the study; copyright: Radial

12.06.2017

Radial in partnership with EKN Research released a study that revealed complexities associated with shipping and fulfillment are eroding profitability for retail companies. In the new study titled, "Strategies for Agile, Profitable and Secure Omnichannel Execution," retailers report that the average cost for the company to fulfill an order is staggering at 70 percent of the average order value. 

Overcoming fulfillment challenges is more important than ever. Today, more than 55 percent of customers are using multiple channels such as online and mobile to shop, yet over 40 percent of retailers describe fulfillment costs as a major challenge impacting their business. Further, 67 percent of CEOs say that costs to fulfill orders have increased over the past several years, with 37 percent citing that inventory order and supply chain operations are not properly aligned and are therefore driving up costs.

In an effort to marry customer expectations with back-end efficiency, retailers have adopted a number of tactics including non-traditional shipping solutions, like "buy online, pick up in store" and "buy online, ship from store." Unfortunately, despite a small reduction of costs, complexities and hidden fees associated with process inefficiencies persist, including:  
  • 31 percent of retailers are challenged with split orders, where multiple products in one order must be shipped from different locations
  • 56 percent of retailers say their order management systems need to be able to process at higher volumes and velocity, and to source from a variety of channels
  • 40 percent of retailers have trouble automating order capture and processing, integrating inventory and standardizing order management from different order types across channels

"The post-click ecosystem is difficult for even the most successful omnichannel retailers to navigate," said Stefan Weitz, Executive Vice President, Technology Services at Radial. "Customers expect limitless selection, next-day delivery, frictionless payments and easy returns. While all this adds up to a seamless experience for the shopper, retailers are faced with mounting costs. The fact is, retailers can't solve for this alone and they shouldn't have to. With Radial, retailers can reclaim lost profitability while getting back to what they are best at."

With more than 35 percent of retailers still in the planning stages of deploying intelligent order technology, the industry is not moving quickly enough to meet demand in today's fast-paced retail landscape. By shifting responsibility from the retailer to a fulfillment partner, retailers will be better positioned with a long-term solution for the increasingly complex shipping landscape.

Source: Radial