March 25, 2013

The #Omnichannel Challenge - Forecasting Sales

Here's the challenge that nobody wants to talk about.

We know that mobile is growing, exponentially.  Some businesses (not retailers) generate 30% or more of volume via mobile.  Most businesses, especially those catering to a customer over the age of 45, generate a very small ratio of sales via mobile.

When newer channels "explode", we make an invalid assumption ... we assume that the new channel will result in an increase in total sales.

It is more likely, however, that the new channel will cannibalize existing channels.  Credit cards and 1-800 numbers eliminated the need for customers to mail checks.  E-commerce ended the call center.  And rest assured, mobile will end something.

The only question, then, is this ... "what channel will be cannibalized at the expense of mobile?"
  • E-commerce.
  • Retail.
Look at our example, above.  This is a reasonable forecast for a large retailer.  Omnichannel experts tell us that customers will use the retail channel as an "experience channel".  They tell us that retail will not be where sales are generated, in the future.

Ok, let's accept the premise (flawed though it may be).  In our example above, if retail sales begin to drop (see 2015 and then 2016), then we must get a dramatic increase in e-commerce + mobile sales to offset the retail drop --- or the retailer goes out of business due to retail debt obligations.

If the omnichannel experts are right, then mobile is going to explode, e-commerce growth is going to slow (causing e-commerce folks to add mobile to their totals to keep e-commerce relevant when, really, it is being replaced by mobile), and retail is going to shrink.

This will require mobile to really, really explode, in order to keep the total net sales line growing.  You have to project some really big mobile numbers to make this happen.  It will be fun to watch, no doubt.