CEO Viewpoint 2017: The Transformation of Retail - JDA Software
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CEO Viewpoint 2017: The Transformation of Retail
Respondent profile
351 responses across a range of markets, retailer tiers and business types
Geographical markets Retailer tiers
17%
15%
(60) United Kingdom
32% Top 250 retailers
14%
28%
United States (50) Japan
(100)
Top 251 - 1000 retailers
15%
(51) Germany
Outside top 1000 retailers
10%
(33) Mexico 16%
China
(55) 53%
Top 250 retailers = revenue $5 billion +
Top 251- 1000 retailers= revenue between $250 million- $5 billion
Outside the top 1000 retailers= revenue less than $250million
Breakdown of business type
Hard Goods 27
Soft Lines 27
Grocery 24
eCommerce 12
CPG 9
Other (Retail & Consumer) 1
Base: 351 %
Copyright © 2017 JDA Software Group, Inc. ConfidentialConfidence in overall revenue & profit growth
Online is the biggest area of confidence both in terms of revenue and profit
Revenue Profit
%
Mexico: 74% US: 54%
Japan: 26%
47 Very confident 44 43
52 48 51 51
54
Somewhat confident
Not very confident
31 36
34 37
31 39 Not at all confident 34 41
16 11 16
10 12 8
4 6 5 5 4
2 1 3 3 1
Stores Online Total business Total business Stores Online Total business Total business
2017 2016 2017 2016
Denotes sig. difference Denotes US for info only
Q27. How confident are you about your organization’s prospects for revenue growth during the next 12 months?
Q32. How confident are you about your organization’s prospects for profit growth during the next 12 months in the following channels:
Base: 351 Please note: ‘Don’t know’ and ‘Prefer not to say’ responses are not included.
Copyright © 2017 JDA Software Group, Inc. ConfidentialOmni Channel competencies
Compared to 2014, there has been a marked deterioration in retailers ability to handle
omni channel execution
2017 2014
We have refined our omni-channel offering to a point where we are now able to make a
profit while fulfilling our omni-channel demand 10% 16%
We provide a seamless shopping experience and offer complete omni-channel fulfillment. However,
the offering is too complex/expensive and we are looking to scale back our delivery options 12% 19%
We have the ability to offer our customers a seamless shopping experience but we struggle to meet
customer’s omni-channel fulfillment demands 38% 31%
We have distinct channels operating as silos to meet customer demand 37% 30%
US: 26%
Don’t know: 4%
Base: 351
Q10. Which of the following best describes your organization in relation to omni-channel fulfilment?
Copyright © 2017 JDA Software Group, Inc. ConfidentialInvestment Priorities
Copyright © 2017 JDA Software Group, Inc. ConfidentialDigital transformation strategy
Digital Transformation becomes the highest investment priority
100 69% increase 100 51% increase 100 48% increase
Mexico: 86%
80 80 80 China: 73%
US: 60%
60 60 60
45% remain
42% remain the same
40 40 the same 40
28% remain the
20 same 20 20
3% decrease 5% decrease
1% decrease
% % %
Digital transformation Omni-channel fulfillment Core supply chain capabilities
Digital Transformation strategy is well defined and is being implemented 49%
Digital Transformation strategy is being developed but implementation has not yet started 38%
But more than half of retailers have
not started implementation of a We are struggling to define a digital transformation strategy 9%
digital transformation strategy
No plans to develop a digital transformation strategy 5%
Denotes sig. difference Denotes US for info only
Copyright © 2017 JDA Software Group, Inc. ConfidentialDigital transformation strategy
Digital capabilities outside of the store feature in the top 3, ahead of all in-store capabilities,
with mobile applications in 1st
Outside of store
Mobile enabled applications 55 30 16
Big Data availability and analytics 53 33 14
Use of social media data 53 32 15
Collaboration across supply chain partners 44 37 19
Integration of IOT devices and data 36 40 24
In-store
Smart Mobile device for staff in stores 46 33 21
Personalized mobile ‘push offers’ in store
40 36 25
(Beacons)
In-store clienteling 39 37 24
In-store augmented reality 31 30 39
Robotics and automation 28 31 40
In-store virtual changing rooms 26 31 43
Have implemented Plan to implement in next 12 months No plans to implement in next 12 months
Base: 351
Q18. Please indicate the level of implementation for each of the following digital capabilities:
Copyright © 2017 JDA Software Group, Inc. ConfidentialLeveraging customer data
Retailers say they are currently best at using their customer data for planning and
developing offers
Using customer segmentation insight…
...in the planning and development of your customer
38 37 17 5 2
offers
…to gain insight into customer preferences and
34 38 20 5 3
shopping behaviors via data science techniques
...in the personalization of the customer experience
33 40 17 6 3
in your digital channels
...in the personalization of the customer experience
33 41 16 6 3
in your physical channels (stores)
Having a single view of the customer across all
32 38 20 8 1
channels and touchpoints
Capturing unstructured data about your customer
27 42 19 9 3
(social, reviews)
Significantly Moderately Minimally Not at all Don't know
Base: 351
Q21. Thinking about customer data, please indicate the level to which your organization performs the following.
Copyright © 2017 JDA Software Group, Inc. ConfidentialCustomer Order Fulfilment Investment
Collecting orders in-store is the top collection offering but more challenging options are
being scaled back
Click & collect in-store 51
47
Buy online, ship to store 48
Buy online, return to store 44 Soft lines: 64%
Next day delivery 43
44
Same day delivery 33
43
Use third party retailers as collection points for online orders 28
25
Specific delivery time slots 27
48
Same day click & collect 23
26
Click & collect as a drive through in your car park 21
26
%
Don’t know: 1% 2017 2016
Base: 351
Q11. Do you offer, or plan to offer any of the following customer collection or delivery options in the next 12 months?
Copyright © 2017 JDA Software Group, Inc. ConfidentialStore Expansion Investment
The majority of retailers don’t plan to reduce store investment, regardless of online growth
Mexico: 34%
Accelerate 20% Cannibalising store sales 24
US: 18%
Online are net additional
42
No change 58% US: 60%
sales (no cannibalisation)
China: 45%
Complimentary (some Halo
28
Reduce effect across the channels)
22% US: 22%
%
Not sure: 1% Denotes sig. difference Denotes US for info only Don’t know: 7% Denotes sig. difference Denotes US for info only
Base: 351 Base: 351
Q9. Do you plan to reduce your store investment due to online growth? Q25. How are online sales impacting store sales?
Copyright © 2017 JDA Software Group, Inc. ConfidentialProfitability
Copyright © 2017 JDA Software Group, Inc. ConfidentialGrowth of online operating costs
Three quarters of retailers believe that their online operating costs have increased as a percentage
to sales in the last 12 months
US: 50%
52% US: 18%
Distinct
channels: 35%
23%
19%
4%
Cost reduction No change Some increase (0-9%) Significant increase
(10% or more)
Denotes sig. difference Denotes US for info only
Don’t know: 3%
Base: 351
Q28. How have your organization’s online operating costs changed as a percentage to sales in the last 12 months?
Copyright © 2017 JDA Software Group, Inc. ConfidentialSupply chain issues impacting profitability
Rising inventory levels, rising out of stock levels and rising supply chain costs constituted
62% of the responses
Ranked number 1
Ranked #1 for Softlines, Hard Goods, China & UK
Rising out of stock levels 25
Ranked #1 for Grocery & US
Rising inventory levels 20
$10B+ (23%) vs $5-$10B (9%)
Rising supply chain costs 17
$10B+ (14%) vs $5-$10B (24%) Most frequently
Failing customer service in order fulfillment (e.g. delivering ranked in the top 3
15
incorrect orders, delivering orders outside of the agreed…
Store inventory accuracy 12
Mexico – 26%
Capacity to support online growth 10
Other 1
Base: 351
Q15. Please rank the following issues within your supply chain in order of concern where #1 is the most important to your organization:
Copyright © 2017 JDA Software Group, Inc. ConfidentialImpact of omni-channel on cost of labor…
Labor costs are increasing, particularly in enabling omni-channel capabilities for the
in-store customer experience
Don’t know
Mexico: 40%
for your in-store customer experience 4 25 48 19 4%
Mexico: 31%
China: 27%
US: 7%
for your customer order fulfillment 3 32 46 14 4%
%
Cost reduction No increase Some increase Significant increase
Denotes sig. difference Denotes US for info only
Base: 351
Q13. To what extent is the cost of labor affected by enabling omni-channel capabilities…
Copyright © 2017 JDA Software Group, Inc. ConfidentialChanges in order fulfilment
While increased customer charges for online orders is currently the most implemented change,
the next 12 months will see a rise in the minimum order value for free standard home delivery
Increase customer charges for online orders 35 22 43
Raise the minimum order value for free standard home delivery 29 33 38
Mexico: 54% US: 56%
Decrease customer charges for online orders 27 31 42
Raise the minimum order value for free buy online pick up in
27 28 45
store
China: 56%
Apply limits on returns (e.g. max items in a time period) 25 27 48
Hard goods: 33% US: 66%
Charge for customer returns 22 28 50
%
Have implemented Plan to implement within next 12 months No plans to implement within next 12 months
Base: 351
Q12. Have you implemented or do you plan to implement any of the following changes in relation to fulfilling orders across channels?
Copyright © 2017 JDA Software Group, Inc. ConfidentialThe cost of customer returns is eroding profits
Almost three quarters of retailers believe that the cost of customer returns is eroding
profits to at least some extent
Don’t know
US: 36%
Profitable omni-channel
% operation: 41%
To what extent is the cost
15 59 23 3%
of customer returns eroding profit
To a great extent To some extent Not at all
Base: 351
Q29. Please indicate to what extent the cost of customer returns is eroding profit:
Copyright © 2017 JDA Software Group, Inc. ConfidentialKey performance indicators
62% of retailers stated their online business is making a profit – up 7% on last year
62% Making a profit Profitability
Mexico: 40% Those who have a higher percentage of
US: 68%
online revenues are more confident about
their prospects for total business profit
growth over the next 12 months.
26 Breaking even
(10) Making a loss
Don’t know: 3% Denotes sig. difference Denotes US for info only
Base: 351
Q26. Is your total online business:
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