being an afterthought and instead be built into the entire value chain, starting with product design. So, for example, b
The retail omnichannel experience
Online shopping today accounts for around 7% of global retail sales. That might sound low, but when you consider that in five years’ time the figure is predicted to reach 20%, you get some idea of the phenomenal growth rate of this channel. Clearly, shopping behavior is changing and, in the most mature markets, stores are declining unless they are discounters or convenience outlets.
To find out more about the 2015 CODE_n conference, visit code-n-ey.com.
Find out more about Performance at ey.com/performance.
Speaking at CODE_n, Andrew Cosgrove, Global Lead Analyst, Consumer Products and Retail at EY, said the shopping journey is evolving rapidly into an “omnichannel” experience — meaning consumers use many different routes to reach the point of purchase. Even if they don’t buy online, around 65% use the internet in some way during the shopping process. “It’s non-linear,” explained Cosgrove. “Consumers browse online and visit comparison sites as well as going to stores.” Changing business models So what are the implications for retailers? Clearly, they can no longer rely purely on traditional business models. But the sheer cost of setting up omnichannel services — including delivery to the
customer’s home or drop box — risks dragging down margins. Said Cosgrove: “The problem is that if you don’t do it you may protect your profits in the short term but, ultimately, you might lose your customers altogether.” In a recent EY survey of the world’s largest companies, 81% said their supply chain was not fit for purpose for omnichannel.1 Cosgrove said the solution is that omnichannel has to stop being an afterthought and instead be built into the entire value chain, starting with product design. So, for example, businesses have to design products that are cheaper and easier to ship individually.
1. Re-engineering the supply chain for the omni-channel of tomorrow, EY, 2015, www.ey.com/GL/en/Industries/Consumer-Products/ey-omni-channel, accessed June 2015.
More agile supply chains As part of this overhaul, the supply chain must also change. Traditionally, supply chains are set up to deliver large boxes and pallets, whereas online customers want single items. “Supply chains have to become much more agile and flexible,” said Cosgrove. “Now that supply chain is responsible for customer delivery, it’s very visible. It’s gone from being back of house to front of house.” In some emerging markets, manufacturers are exploring going direct to consumers and bypassing retailers altogether. These trends will only accelerate over the coming years: the dawn of the Internet of Things means that sensors will track our every purchase. “We will start to see a shift from shopping to automatic subscription and fulfillment. We are already starting to see this for items such as baby milk powder for example,” said Cosgrove. The implication of shopping being replaced by “auto-replenishing” presents yet another challenge for retailers to master, if they are to survive.
If you wish to contribute to Performance or comment on the articles published, please contact us via one of the following emails:
EY and CODE_n at CeBIT 2015 CeBIT is the world’s largest annual trade show covering issues relevant to IT in business, described as the “worldwide hotspot for innovation.” An important element of the CeBIT agenda is the CODE_n conference program and contest for 50 of the most promising digital start-ups from across the globe. This is an opportunity for pioneering young digital entrepreneurs, established businesses, investors and leading thinkers to discuss and showcase their ideas on how new technologies will transform the way we live. “Into the Internet of Things” was the theme for the 2015 CODE_n contest, which was supported by EY. While contest finalists presented ideas based on the four subthemes shown below, panel discussions and keynote speakers deep dived into the issues. Topics ranged from the cybersecure city, smart factories, the future of automotive and living the digital life.
Smart city
Planning and building urban infrastructures that improve the quality of life in our cities and foster the resourceful use of energy.
Industry 4.0
Dubbed the next industrial revolution, Internet of Things applications are transforming the manufacturing value chain, from factory to supply chain and logistics.
Future mobility
Moving things forward individually, with autonomous, intelligent and connected cars and, at a larger scale, with fully integrated urban mobility systems.
•
[email protected] •
[email protected]
Digital life
With examples such as wearables, connected and preventative health care, the consumer as co-creator and new ways of managing finances, we shine a spotlight on developments affecting consumers and patients.
EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2015 EYGM Limited. All Rights Reserved. EYG no. AU3338 BMC Agency GA 0132_00701 ED None
In line with EY’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.
This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, the views should be seen in the context of the time they were expressed.
ey.com/performance
