For the Q3 of 2015, Finish Line got a so disappointed outcome of its financial report. The company blamed the huge miss of expectation for the introduction of its new inventory and order system. For the same time, Finish Line Inc. said it plans close up to a quarter of its stores which is around 150 over the next few years and is replacing its chief executive as it faces declining sales and supply-chain disruptions. The core problem of Finish Line is still based on the declining sales and revenue. The solution to this fatal situation now is going to rely on building its e-commerce business to boost sales and improve its inventory system.
The traditional supply chain system for retailers is complex in order to make sure the order from customers can be immediately filled. However, this old system usually get mixed with updated innovations which contributed to a mess up of managing the supply and demand. And this problem is so serious for Finish Line in the last quarter which made it lose a lot of customers. Meanwhile, retailers have found a way to reverse the decline in profit margins that typically accompanies increased online sales, or to slow the rise Amazon.com Inc. and other online-only retailers.
For most retailers, the effort to adjust to online sales starts at the warehouse. They have redesigned facilities originally equipped to send bulk shipments to a limited network of stores so that workers can quickly assemble, package and ship many small parcels to consumers in far-flung locations. Installing a new warehouse-management system like the one Finish Line started using last fall can cost hundreds of thousands of dollars, experts say.
Increasingly, chains also offer in-store pickup and free returns.
The further down this road a retailer goes, the more its supply chain begins to resemble a spider web, said Cara Wang, a civil-engineering professor at Rensselaer Polytechnic Institute. That offers more convenience for the customer, but raises technology and labor costs for the retailer.
Building the e-commerce system is so expensive and risky with competitors like Amazon
The added expense of e-commerce is a bigger burden for traditional retailers, whose stores saddle them with higher fixed costs than online-only sellers, industry experts say. A new survey of retailers by JDA Software Inc., said 68% of the respondents report rising costs for fulfilling orders. The highest costs were for e-commerce shipping and returns and shipping online orders to stores for pickup. More than half said their biggest pressures come from price, and offers of same-day and next-day delivery by Amazon.
For Finish Line, the sales are not strong enough to support the new plan of building up the online business system. In order to solve the sales problem, Finish Line not only need to strengthen its marketing activities but also make sure the problematic system can work will. Taking heavy burden the online business right now is so risky for them which investors can only see the return in a long time later.
Will the e-commerce save the company? I bet no for now.