Omni-Channel - The People Issues

"Multichannel retailing is the use of a variety of channels in a customer's shopping experience, including research before a purchase. Such channels include: retail stores, online stores, mobile stores, mobile app stores, telephone sales and any other method of transacting with a customer. Transacting includes browsing, buying, returning as well as pre and post sales service." So says Wikipedia!

Since our last blogs about retailers potentially seeing systems to manage the omni-challenge as a panacea to their trading problems, I'm heartened to see at last that a few people are starting to get a sense of perspective about what this truly means.... and that's NOT a great IT system alone. I am not, of course linking our small contribution to any change of understanding amongst retailers and analysts! For previous articles take a look at "Why Retail Can Never Be Led By Technology" and "What Does Omni-Channel Mean and Can Every Retailer Deliver It?"

The whole omni-channel way of working is not about a system, it's about a retail business putting customer needs first and letting them buy what they want, how they want, and acquiring it from a store, a delivery, or via click and collect. Omni-channel retailing allows (ideally) a totally seamless journey of the product to the customer. To do this, retailers must look at how they operate internally. The traditional silos of Buying and Merchandising for bricks and mortar stores, teams for online, operations departments just for stores, separate international teams, wholesale teams, franchise teams - all these have to go! How many retailers are brave enough to do that?

This is highlighted in Retail Week by Martin Newman from Practicology: "....most customers don't think about the organisational structures of the retailers they buy from when they are crossing channels, switching devices and updating their social media feeds on their latest purchase." And why should they?

I know of a number of "Business transformation" projects about to start but guess who is running them? The IT Directors! No offence to them at all but the technical side comes further down from the start of any such project (the give away is the word "Business"). First should be the strategic direction and process, then how the organisation should be structured to successfully deliver this strategy. Are the capabilities even there? What type of people are needed and with what skills? Conventional Buyers and Merchandisers may need to "up-skill". Who really has the luxury to have both digital and bricks and mortar specialists? In reality it shouldn't be difficult to improve skills - despite those in the digital world portraying what they do as some higher level of intelligence! Those businesses who scoop up people who can work across sales channels will win against those who keep channels separate.

Ian Geddes, Head of Retail from Deloitte says "business strategy skills, creativity, and knowing how to deliver technology in a more agile way are also necessary." I couldn't agree more. The 6 major challenges identified by Deloitte to successful omni-channel retailing (from start to end) are:

• Supply Chain and Cost to Serve
• Consistent product offer
• Single view of the customer
• Operational / functional silos
• Culture, measures and incentives

It seems to me that far too many projects have started without the people skills and structures being considered and defined (as well as costed!) together with the long term strategic goals of the business being clearly defined and used to ensure projects will deliver what they need to deliver.

From my experience it's not rocket science to pull together a multi-channel, international business process (lengthy possibly if you want to keep it simple, and you should) and select the correct IT system and system provider. But, changing traditional internal structures with all the various egos and power plays that go on can be really difficult and is hugely disruptive to day to day trading.

That is when it's worth investing in consultants who can guide you through and provide best practice untainted by any other agenda. The consultants must take all the teams with them and the only person who can ensure all this works successfully is the CEO of the business. How many are brave enough to  tackle what needs to be done to make their business truly omni-channel? Far more, I feel, will stop short of this and retain their silo structures.

No IT system on it's own, however sophisticated, can achieve the true omni-channel experience for customers. This year will be very interesting!

Written by Erica Vilkauls: Director JEM Retail Consultants

Retail Winners and Losers in 2014: JEM Predictions!

The last few weeks has seen some great sound bites from leading politicians such as "Britain is on the path to prosperity" (David Cameron) and more poetically "The sun has started to rise above the hill" (George Osborne) so does this mean retailers can look forward to improving sales in 2014? Not all, I suspect.

 

According to official figures published in October the economy grew at its fastest rate for 3 years with the result that David Cameron has promised a "recovery for all" shared by every region and all groups. With 15.5% of households in the SE being in the richest 10% compared to 7.6% in the NE and NW this seems about as probable as "an end to boom and bust" but how is retail likely to fair?

The Centre for Retail Research reports that retail sales have improved in 2013 although "price competition is so vicious that there is little retail inspired inflation about". The ONS sales figures for August show that retail sales rose by 2.3% in volume terms and 3.9% by value compared to 2012. They cheerily conclude "Better therefore than we have seen in the last five years, but there are plenty of problems yet to come!"

So what is it going to take to be successful?

First and foremost great product. Being second rate really isn't good enough any more and if you haven't got something that people really desire then they are unlikely to part with their hard earned cash. Next is excellent service  in terms of channels and routes to market supported by appropriate and seamless IT platforms. Increasingly "tech savvy" consumers expect nothing less. Finally first class logistics to ensure that your product is where you want it, when you need it, it the right quantities as well as providing B2C order fulfilment and delivery.

Who is likely to thrive in 2014? I would predict the following groups will do well:

Prestigious designer brands. As these cater to people with a lot of money and social inequality has never been greater they are essentially "austerity proof". Burberry manages to tap into both its luxury and "British" image (despite manufacturing in the Far East!) Then you have the super brands like Chanel and Dior whose customers in this country are largely from overseas. Changing the visa system to make it easier for people from China to visit will inevitably help. Many of these brands also have diffusion brands so regular customers (like me) can buy into the Brand dream.

Aspirational brands. Not designer as such but clearly desirable. These brands benefit from the "Sainsbury's"effect in that wealthier customers are happy to shop there while also being an affordable luxury that provides that essential "feel good" factor. Mulberry would be one example as well as the emergence of premium ranges from those brands who wish to head upwards in terms of price and desirability, like Ted Baker and AllSaints.

Value brands. Britain has become addicted to the "value" market since 2008 and the continuing uncertainty caused by tightly controlled (or non-existent) wage rises and fuel prices means that this isn't going to end any time soon.

More speculatively brands associated with with active leisure or lifestyles such as GOoutdoors. The seemingly endless news items about the obesity "crisis" means that people will become increasingly conscious of the amount of exercise they do and having the right gear is a bit like having a gym membership. You may not use it, but it makes you feel better.

And who will suffer? Any retailer in the middle ground. Those that lack prestige but are too expensive to be regarded as value. Any brand without a clear identity or those that have lost their way such as Jaeger and LK Bennett. Finally those that rely on some of the big department stores, particularly Debenhams, as the service proposition just isn't good enough any more.

These concession based businesses are always in danger of being "de-ranged" (Fenn Wright from John Lewis) as many department stores now seek out brands that are harder to find on the high street. Any brand still in Debenhams is unlikely to find a home in any more upmarket store both in the UK and, increasingly, internationally. Those CEO's whose business relies on someone else for its future will have many more sleepless nights than those who can, to a far greater extent, shape their own destiny.

In summary worry about what you can control, not what you can't. Get the very best people into your team and ensure that you have the right creative talent for your brand, who understand what your customer desires and how to give it to them. Ensure that your customers can get what they want, when they want it however they choose to shop.

Deceptively simple, but it's these factors that will sort out the winners from the rest, not the creation of a great omni-channel strategy document.

Written by Erica Vilkauls: Director JEM Retail Consultants.

What Does Omni-Channel Mean and Can Every Retailer Deliver It?

Firstly what is omni-channel? The Webcredible report in 2012 defined it as "Doing multi-channel properly". It is delivering a seamless experience to your customers and "ability to choose any technology or communications channel they wish, at any time, anywhere."

 

Omni-channel is an open platform approach that enables the customer to see the retailer as a brand rather than a channel within a brand. From the customer's perspective they are able to make a purchase online, in store, on a mobile app, on the phone etc and have access to the same full product offering and stock availability.

Once purchased the customer then has the ability to decide time and place of delivery e.g. home, office, store. Perhaps the trickiest technical piece of the jigsaw is for the (returning) customer to be recognised immediately they start the transaction and have any previous delivery information, payment and credit information presented to them thus reducing the transaction time and continual re-entry of information.

Within the retailer's technical infrastructure all channels must work from a single database of products, prices and promotions and the all important customer history and information must be readily available to any device / point of sale. The bricks-and-mortar stores must become an extension of the Supply Chain.

The Webcredible report acknowledges that "Generally omni-channel is not being done well at the moment" and "Fully developed omni-channel experiences (such as Burberry's) are only currently feasible thanks to innovation and budget that can be justified in flagship stores for exclusive brands".

So is "omni-channel" just the latest buzzword or is it an essential development that retailers can't afford not to invest in? Consider the following scenario:

It is a Thursday afternoon. Your customer, a regular though infrequent shopper, calls into your flagship city centre store on her way home and sees a dress that she likes in your sale. In a hurry she doesn't try it on and leaves your store.

30 minutes later she is relaxing in her train seat and decides to take advantage of your mobile app. She saves the dress along with 2 matching items to view them later. Once home she accesses your website through a tablet, retrieves the saved items and asks for them to be sent to her nearest store, which happens to be a concession, with the intention of trying them on before deciding to purchase.

As it is the end of the season the concession only has stock of one of the items. Your DC has one of the others, but only your flagship store has the third. No one place has all 3 items in the sizes required. All the items were available to the customer as omni-channel displays 100% of the stock irrespective of physical location. To add to the challenges the Department Store where the concession is based will not take deliveries on a Saturday.

The first issue is that the software has to take the customer's order and use it to generate instructions to 3 different places: 1) the concession that the customer will visit 2) one other store to tell them to move an item to the concession and 3) the DC to move the item that will complete the order.

Secondly there is a big issue here with timing. The order was placed on a Thursday evening and the customer, may arrive as early as 09:00 on Saturday. While this may (I repeat "may") be possible from the DC, how many retailers would be able to complete the inter-branch transfer within the required timescale?

Next is cost. This order will generate 2 exceptional item movements and will inevitably generate additional cost. As the customer's perception is that they are buying from a store they don't expect any of this to be passed on to them and it will therefore come out of an already diminished margin.

Finally there is service. The customer has high expectations of the way she will be treated at the store, which given that it is a concession may not even be by your employees. It should also be noted that she doesn't perceive herself to have actually bought the items yet. If she doesn't turn up on the Saturday, or decides not to purchase one or more of the items then it won't be a return, it will never have been a sale.

Under these circumstances isn't it more realistic for most retailers to restrict the customer to a home delivery option at the point of ordering? After that everything becomes logistically much more straightforward and the costs easier to control. Surely it is better to do this well than attempt something more complex and fail?

Whilst the desire is to be omni-channel, the execution may not be if you want to a) make money from the sale and b) satisfy customer expectations, which has got to be what it is all about. As a customer I don't mind being restricted to home delivery, or receiving multiple parcels, all I want is what I ordered. As long as the interaction with the website lets me know what to expect, why would I really care?

Surely the key thing has got to be: don't promise what you can't, profitably and reliably, deliver.

Written by Mike Gamble: Director JEM Retail Consultants.