Do you think the retail industry is finally realizing the benefits of merged-retail platforms?
I spoke with Evan about this article on Sunday (or should I say, commiserated with him). What it is going to take, we agreed, are incentives and disincentives, that is to say, basing rewards of both executives and sales staff on their successful adoption and implementation of merged-retail platforms and strategies.
There is nothing wrong with an emphasis on bricks over clicks; retail is still mostly people buying stuff in physical stores. My whole thrust with my retail clients and audiences (and my readers at IntegratedRetailing.com) is to show how merged channel strategies increase traffic, sales, visits, spending and loyalty IN STORES.
A great web site does not compete with your store; it complements and extends consumers’ in-store experience. It’s a resource of information, comparison shopping, and consumer reviews and rankings. Remember: even after years of 25% annual revenue growth, e-commerce sales comprise only about 3% of total retail sales, and pure-play online merchants convert an average of only 2-3% of their site visitors into buyers.
Yet 87% of consumers shop online before buying in stores, and 67% state a preference to make purchases in physical stores.
Therefore, the future is clear: it belongs to integrated, merged-channel retailers, those that use their web sites to reach shoppers, educate them, serve them, earn their loyalty, and drive traffic to their stores.
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Is going multi-channel worth the bother?
Retailers are increasingly leveraging their presence across channels — catalog, web, stores, call centers and kiosks — to increase their share of the customer’s wallet and expand across consumer segments. Recent studies of consumer shopping behavior indicate that multi-channel shoppers show a significantly higher value and frequency of purchase than single channel shoppers. Over 65% of online shoppers also use catalogs, and 60% of retailers find multi-channel customers more profitable than single channel buyers.
Retailers face several challenges as they attempt to integrate their web, call center and catalog operations with the full-line store business, according to an Infosys Technologies report. These challenges include unaligned organizational structures; disaggregated merchandising and inventory management; uncoordinated customer operations; and disparate, multiple database and enterprise management technology systems.
To meet these challenges, multi-channel retailers have developed strategies that begin with a customer centric perspective, and that build an organization structure to support change. Implementation of these strategies involves a complex organizational change process, and an IT strategy that supports common merchandize hierarchy, centralized order management capability and centralized customer and inventory databases.
According to Infosys, an integrated multi-channel retailing strategy entails significant change in organizational structures, business processes, staffing, technology, supplier relationships, and customer relationship management. Multi-channel retailers should aim to deliver a seamless customer experience and harness synergies for cross-channel collaboration, concludes the report. Retailers that do this successfully will garner increased customer satisfaction and loyalty, and grab a larger share of wallet and increased profits.
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Building out a store vs. building out the web
When embarking on an expansion strategy, retailers must now weigh whether their investment dollars are better spent online or in-store. With more people shopping and buying online, e-tailing is growing faster than in-store sales, but is still a single-digit percentage of total sales. There also may be an upper limit to online sales for a variety of reasons, including shipping costs. On the other hand, it’s getting more expensive to build, staff and run stores.
What’s the answer? As Mary Wagner writes in a recent issue of Internet Retailer, retailers can continue to grow sales and stay profitable via a well-considered multi-channel strategy. The retail winners will be the ones that have visibility online and product in the store — in other words, those which integrate online and in-store operations through effective multi-channel merchandising and logistics strategies.
Forward-looking retailers are getting added utility out of consumers’ increasing propensity to shop and buy on the web both by upgrading their web sites and by offering in-store features and functionality similar to what consumers are becoming accustomed to online. Examples:
Such initiatives represent the future model achieved: multi-channel integrated retailing, combined with customized service, to maximize sales, profits, growth and stock price.
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Who is embracing a multi-channel approach?
With robust growth in its catalog and e-commerce businesses outstripping internal capacities, writes Tom Ryan in Apparel, Pendleton Woolen Mills in 2004 saw a need to further integrate its consumer direct channels. The firm has a sizeable wholesale business selling to independent retailers, outdoor specialty stores and select department stores. However, its consumer-direct business has grown to include more than 50 retail stores as well as a direct-mail catalog and e-commerce.
The catalog was launched in 2000, following the web site’s debut in 1996, but the two divisions were operating under separate operating systems, which created much inefficiency. These inconsistencies included not only inefficiencies in inventory allocation, but also price discrepancies between items in the catalog and on the web site. Moreover, there was no automation to share data between the catalog system and retail stores.
In 2005 Pendleton overhauled its catalog system and relaunched its web site. The system upgrades gave Pendleton a single database for housing item information across its web and catalog divisions, as well as a real-time view of inventory across all its consumer-direct channels, including its own retail stores. This led to immediate efficiencies in workflow at the firm’s call center and better customer follow-up.
The quality of inventory data also has been greatly improved under the new IT infrastructure. Better insight into its sales data is helping Pendleton project inventory stocks in the future and project future season initial purchases.
The final step of the system’s upgrade was integrating the web/catalog systems with its brick-and-mortar retail network. With the new automated process, a virtual warehouse receives data daily on the aggregated inventory of Pendleton’s stores. As a result, the company is seeing improved order fill rates and fewer mistakes in customer service while offering customers a more dynamic online shopping experience.
The next step in integrating Pendleton’s multiple channels is getting better information on its customers across channels, including its wholesale accounts. Ultimately, Pendleton plans to look for more of an enterprise solution to better integrate the consumer-direct side of its business with its wholesale business in terms of measuring inventory and sharing data. Further enhancements in measuring sell-through and assessing consumer information will help Pendleton grow in all of its channels.
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What is the role of the retail CIO?
The retail industry is a volatile one. As shoppers become more demanding and less forgiving, retailers must ensure that their core solutions support both business operations and a superior customer experience. This turn of events has also put new pressures on the chief information officer (CIO) to become a more innovative business leader, and more focused on business strategies. More specifically, CIOs are now expected to help their chains to formulate the enterprise’s many strategic goals, and use technology to support business operations.
This was the key message delivered during last year’s CIO Summit, reports Chain Store Age.
Historically, the role of a CIO was clear-cut. Typically, the executive was responsible for the information technology and computer systems that support enterprise goals. However, these standards are just not enough in today’s competitive landscape.
A mere 21% of the retailers attending the
While an enterprise’s IT vision and execution is clearly the CIO’s responsibility, the only way to ensure that technology solutions will continue to support business operations both now and in the future is to gain company-wide support. There needs to be a clear business vision starting from the company’s board of directors and CEO.
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How goes the multi-channel revolution?
E-commerce is mainstream; consumers are king; and the single-channel retailer is no more. Hence, multi-channel integration has become the new retail imperative. Retailers can no longer make technology investments solely focused on improving business in a single channel. To stay competitive, retailers must now invest in creating synergy across all channels. What most retailers have been missing is the technology necessary for integrating multi-channel business processes. That technology is now here: service-oriented architecture (SOA) is the next generation of e-commerce. So writes Sandy Carter in Customer Interaction Solutions.
Today retailers are challenged to become more customer-centric while continuing to manage increasing labor and value-chain costs. Legacy information infrastructure does not have the ability to provide the information retailers need to respond to these challenges. To address these issues, businesses must begin to manage information as a strategic asset, freeing it from its repository, process and application silos and actively delivering it in-line and in-context across the extended enterprise. This is the essence of an SOA.
With online sales continuing to grow at double-digit rates, and with the Internet influencing a high percentage of sales in other channels, companies big and small now recognize e-commerce as a strategic priority. Savvy retailers realize that e-commerce is more than an online shopping cart; it’s an integral part of their overall business strategy. It’s no longer just about doing new business in a single channel; it’s about doing business better — in all channels.
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How did Brain Trust panelists respond?
Here are some of the more interesting comments:
- The top challenge to true multi-channel integration is less an IT challenge, and more a cultural one. (Greg Belkin, SeaTab Software)
- Retailers that don’t get on the learning curve of multi-channel integration are going to have their world rocked soon — by the mobile phone. Consumer mobility is only going to accelerate their cross-channel behavior because it so easily serves as a bridge between online in the home and the physical world of the store. Retailers who are down the path of multi-channel integration will be much better positioned to deal with this “fourth” channel. (Nikki Baird, Retail Systems Alert Group)
- Many retail boards are demanding well-articulated multi-channel game plans of their senior management team. There are many significant initiatives under way, with retailers of all sizes, to better integrate their channels. Some are more apparent than others as they represent the front end (e.g., customer experience), while others are back-end focused so their benefit may not be as visible (e.g., customer and inventory data integration). We will see an acceleration of integrated strategies in the coming years as the board-level push manifests into real activity; with real, profitable results. The barrier most pressing for most retailers to address in order for this to happen? Addressing organization design and people skills will drive many other downstream decisions in order to execute the game plan well. (Jim Okamura, J.C. Williams Group)
- The challenge is enabling the alternative channels for the independent and small chain retailer. As more solutions are built on the “network model,” using the network to provide subscriber services to anyone, the service costs can be spread across many independent users. This is the promise of the next generation of web applications. (Bill Bittner, BWH Consulting)
- When multi-channel/e-commerce/cross-channel business represented 3% of a retailer’s revenue, it wasn’t worth the cost of integrating systems, inventory and procedures together. That’s changed. The need for a seamless consumer experience is clear and goes without saying. The customer is unforgiving and everyone knows it. The recognition of the need to do it efficiently is new. (Paula Rosenblum, Retail Systems Alert Group)
- Fair or not, all retailers today are held to customer expectations based on the most satisfactory multi-channel experiences they encounter anywhere, in any channel. Absence of an informational Web presence is inexcusable for any retailer. Lack of a seamless product research and purchase option shuts out a group of lucrative shoppers who are spending anyway. As a matter of business philosophy, retailers must do their utmost to present a single, consistent face to shoppers, across all channels of interaction. This requires an integrated back office and some hard management-level decisions about the trade-offs of price zones and other legacy store-based practices. (James Tenser, VSN Strategies)
- Multi-channel selling involves a major organizational change: (1) redoing the back end computer systems so a unified portrait of a customer to anyone talking with that customer regardless of channel; (2) changing job responsibilities to broaden positions to include consumer responsibility as the technology changes; (3) requiring employees to learn how to use the new technology to create a better consumer experience. Multi-channel selling involves a huge training component: all employees who come in contact with consumers need to be able to respond to consumer questions regardless of channel that consumers have used or want to use to purchase products. (Camille P. Schuster, Global Collaborations)
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Is multichannel integration getting short shrift?
Nearly 80% of retail winners (those that outperform peers in comparable store sales growth) operate in multiple channels versus only 50% of retailers who perform worse than average, according to recent study by Retail Systems Alert Group (RSAG). Yet a survey as part of the study found 23% of store-based retailing respondents reported still operating in only the store channel.
And while a recent LakeWest Group survey showed that nearly three-quarters of the top 100 retailers in the
It is amazing that so many retailers still do not realize the necessity of making the most of multiple channels, wrote Dr. Roger in a recent RetailWire Brain Trust Query. Multi-channel shoppers are, on average, younger, more affluent, better educated and they shop and spend more than single channel shoppers.
Driven by the continued immersion of the Internet into our daily lives, Americans have dramatically changed the way they research purchases, shop, and buy. And research continues to show online activity drives offline sales:
- 91% of shoppers research items online before heading to a store, and one in three do so frequently (Deloitte).
- 22% of all offline sales are influenced by the web (Forrester).
Yet of the retailers with websites, 40% still don’t have any integration between store and online operations (LakeWest Group). It is not enough to offer customers multiple channels; they expect to be able to move seamlessly between and among them.
As detailed in the pages of Integrated Retailing, multi-channel integration is the strategy being pursued by most major retailers including J.C. Penney, Macy’s, Nordstrom, Circuit City, Best Buy, Target, Home Depot, Wal-Mart and many more across virtually all retail channels.
Retailers face several challenges in attempting to integrate website, call center and catalog operations with full-line store businesses. According to a report by Infosys, these challenges include unaligned organizational structures; disaggregated merchandising and inventory management; uncoordinated customer operations; and disparate, multiple database and enterprise management technology systems. Obviously, an integrated multi-channel retailing strategy must entail significant change in organizational structures, business processes, staffing, technology, supplier relationships, and customer relationship management. Support from upper management, up to and including the CEO, is required!
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