Your profitable retail channel mix

Roger OakdenGlobal LogisticsLeave a Comment

Retail has always changed.

Archie Norman, who led ASDA supermarkets in the UK through the 1990’s recently remarked that the UK is a world leader in on-line food shopping with home delivery, but the channel is not profitable. While consumers like the idea of on-line shopping and free delivery, the reality of retail is that the most costly part is that which the consumer normally does; namely pick, pack and deliver.

Convenience is another part of the omni-channel concept being promoted – anywhere, any-time  As part of this approach, major food retailers are opening 24 hour convenience stores to compete with the likes of 7Eleven. But small shops in high traffic areas mean higher unit costs, therefore convenience stores typically charge higher prices.

But omni-channel retailing ‘experts’state that prices should be the same in all channels so as not to confuse the consumer. In this situation, the large format shops in a business could subsidise the other channels, which is not a desirable business outcome.

Over the past 140 years, retail in ‘western’ countries has changed its approach. The growth of cities and building of railway networks provided the basis for department stores. Railways and the overland telegraph enabled mail order. The increasing sale of cars allowed shopping malls in city suburbs. Then came the discount retailers, such as Walmart and Kmart, followed by ‘big box category killers’ – in Australia, hardware is dominated by Bunnings. As each of these changes occurred, retailers that continued to provide value and innovation in their own way continued to survive and create good returns for owners and shareholders.

Think through your strategy

So it is now. As logisticians should be part of the decision process concerning omni-channel retailing, you need to question any implementation decision, just because others are doing it. On-line and convenience have their place, but should they be part of your retail mix, whether you are in food, apparel or home furnishing? Amazon is being hailed as a threat to Walmart, but Amazon is not an omni-channel retailer; there was an on-line only strategy from day one.

Is it better to create good returns doing what you know best, rather than having to carry divisions that are number three or four in what can be less profitable channels?

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

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