Why retailers must overhaul organizational structures

Across global and regional markets, retailers have never poured more capital into technology. Executive boards routinely approve multi-million dollar budgets for artificial intelligence engines, automated fulfillment nodes, retail media networks, and unified commerce platforms.

Yet despite these unprecedented investments, C-suite leaders share a common frustration: digital execution remains sluggish, customer journeys feel disjointed, and cross-channel opportunities frequently stall.

As seasoned retail executive and strategist Scott Benedict points out, the limiting factor in modern retail is rarely strategy or technology—it is organizational design.

While consumer shopping habits have evolved into a fluid, multi-touchpoint experience, most retail enterprises remain structured around channel-based models developed decades ago. When internal teams are organized, incentivized, and measured in isolated silos, even the most sophisticated digital infrastructure cannot deliver a seamless experience.

The Friction Paradox: How Channel Silos Sabotage the Customer

To understand why modern retail investments fail to yield expected returns, executive teams must examine the disconnect between internal organizational charts and actual shopper behavior.

A modern shopping journey rarely follows a linear path. A consumer might discover a product via a social media feed, research specifications using a generative AI assistant, verify local store inventory on a mobile web app, place an order for immediate curbside pickup, and eventually process a return at a physical customer service desk.

To the consumer, this represents a single interaction with a single retail brand. Internally, however, this single transaction crosses five independent corporate fiefdoms: social discovery managed by marketing, web sessions managed by e-commerce, inventory sourcing managed by merchandising, curbside pickup managed by store operations, and returns handled by customer support.

When these functions operate independently under isolated targets, structural friction immediately degrades the customer experience:

• Marketing vs. Inventory Alignment: A digital marketing team launches a high-budget campaign that successfully drives a massive spike in web traffic. However, because merchandising and store operations were not integrated into the planning cycle, store locations lack the physical inventory to fulfill local pickup orders—turning marketing success into customer frustration.

• Store Sales vs. Digital Fulfillment: A physical store manager is evaluated strictly on register sales recorded within their four walls. When an online customer places a Buy Online, Pick Up in Store (BOPIS) order, store staff view packing that order as unpaid labor that distracts from their primary goal of making in-person sales.

• Retail Media vs. Shelf Availability: A retail media team monetizes web traffic by selling premium display positions to a brand partner. However, if backend supply chain systems are disconnected, the promoted item goes out of stock, frustrating the consumer and wasting advertiser spend.

Defining the Real Omnichannel Workflow

A true omnichannel workflow is not simply a technical capability—it is a synchronized operational framework where every department works toward a shared outcome.

In an integrated operating model, cross-functional teams replace isolated channel managers. Instead of evaluating success by channel ownership, leading organizations structure workflows around four core journey stages:

1. Discovery and Demand Generation: Integrating brand marketing, digital content, and merchandising analytics to ensure promoted products match real-time regional stock levels.
2. Digital Merchandising and Conversion: Aligning e-commerce user experience design, dynamic pricing engines, and core merchandising to optimize conversion regardless of whether the order is completed online or in-store.
3. Fulfillment and Service: Coordinating supply chain, dark-store fulfillment, and physical store staff to turn physical locations into efficient, multi-category last-mile distribution nodes.
4. Lifecycle and Loyalty: Unifying customer data platforms across digital sessions and physical point-of-sale registers to measure total account value rather than channel-specific transactions.

The Hazard of Isolated Goals vs. The Power of Combined Metrics

The fundamental obstacle to achieving cross-functional alignment lies in legacy Key Performance Indicators (KPIs). When corporate reward structures incentivize departmental isolation, teams naturally defend their individual metrics at the expense of the overarching business.

Evaluating teams on isolated e-commerce revenue targets versus store sales targets creates channel friction and margin erosion. Conversely, aligning leadership around unified omnichannel growth and overall customer lifetime value generates high operational efficiency and long-term brand loyalty.

The Cost of Isolated Goals

When a digital team is judged purely on e-commerce revenue and a store team is judged solely on physical store sales, they become internal competitors. E-commerce teams hoard inventory for online shipping, while store managers resist processing online returns or fulfilling ship-from-store orders. The result is bloated safety stock, higher markdowns, duplicated logistics costs, and eroded net margins.

The Efficiency Yield of Combined Goals

When enterprise retailers align incentives around unified performance metrics, operational efficiency rises dramatically:

• Inventory Velocity Increases: Real-time visibility across combined store and warehouse stock reduces overall working capital requirements while cutting out-of-stock events.

• Fulfillment Costs Drop: Routing online orders to the nearest physical store with excess inventory dramatically shortens last-mile delivery distances and reduces freight expenses.

• Customer Lifetime Value (CLV) Expands: Data shows that true omnichannel shoppers—those who interact across both physical stores and digital touchpoints—spend up to two to three times more annually than single-channel buyers.

Enterprise retailers like Walmart, Target, Best Buy, Sephora, and Nike have demonstrated that aligning store personnel incentives with digital fulfillment performance directly improves both store productivity and online conversion.

The Build-Versus-Partner Operating Model

Restructuring the organization also requires corporate leadership to re-evaluate which capabilities must be built and controlled internally versus those managed through specialized external partners.

Leading operators adopt a hybrid architecture:

• Core Internal Capabilities: Merchandising strategy, proprietary customer analytics, pricing architecture, data governance, and core brand experience leadership must remain strictly in-house. These functions define competitive differentiation and strategic control.

• Specialized External Partnerships: Rapidly evolving technical tools—such as AI-driven personalization algorithms, retail media optimization engines, advanced experimentation platforms, and specialized customer data platforms—are frequently integrated through external technology partners to accelerate time-to-market.

• Operational Execution Outsourcing: Resource-heavy, non-differentiating operational tasks like content production, basic digital media management, and system integrations are increasingly managed through specialized service providers, freeing internal leadership to focus entirely on cross-functional strategy and customer experience execution.

Source: Scott Benedict Industry Analysis: Why Retailers Need to Rethink Their Organizational Structures (Published September 2026). Walmart, Target, and Best Buy Corporate Disclosures: Omnichannel Store Integration, Store-Fulfilled Delivery Metrics, and Executive Statements on Unified Operations. Sephora & Nike Omnichannel Case Studies: Cross-Channel Merchandising, Digital Discovery Alignment, and Customer Experience Benchmarks.