Multichannel Now - Retail Week

Multichannel Now 2013

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produced in association with:

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Foreword

I

t’s a little over a year since the last issue of Retail Week’s Multichannel Now report. And this latest edition has once more tracked a significant change in the priorities and outlook of multichannel chiefs across the sector.

On the high street, the tale of low-to-no growth and stubbornly static consumer sentiment may seem frustratingly familiar. But in the boardrooms of retailers and etailers up and down the country, the strategies and approaches to multichannel retailing have evolved and matured at speed.

In part this has been driven by a greater familiarity of the possibilities on offer, but there is no doubt too that as fast as the industry runs, consumer expectations are moving as fast if not faster. The challenge that presents is one of the key themes of this report.

Over the past 12 months, a consensus has been building as to what best practice in this new environment looks like, aided by the success of some high-profile brands.

Just as important, some learnings have been taken on board as to how customers are engaging with retailers across multiple touchpoints – and here the extraordinary growth of the tablet has created a new sense of urgency to understand these journeys.

Key to this has undoubtedly been an acceptance that the customer must be at the centre of these developing strategies, with technology the enabler rather than the protagonist of change. And if 2012 was coloured by a hope the emerging channels could spark growth in the sector, there is now an acceptance that a strong multichannel – some would say omnichannel – model is a prerequisite for long-term survival.

As always we have sought out and held in-depth interviews with 20 ecommerce and multichannel leaders from across a number of sectors and not just focused on those businesses that have built a name for excellence in this discipline. The result is a candid assessment of how UK retail has progressed in the last year, the challenges present at each new corner and the, at times, conflicting views of how retailers will leverage new opportunities.

This year, however, we have partnered with retail consultancy Conlumino, which has polled a sample of close to 2,000 digital consumers to understand their behaviours.

For the first time it has allowed us to marry up the customer trends that are shaping the reactions and strategies that come through in our retailer research, giving us the most complete view of multichannel development yet.

Chris Brook-Carter Editor-in-Chief Retail Week

Consumer research methodology In January 2013, Conlumino carried out an online survey of 1,670 consumers that have internet access. The survey asked consumers a comprehensive range of questions on how they use the internet in relation to retail and was carried out among a representative sample of consumers in terms of demographics and geography.

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Multichannel Now 2013 2

in partnership with:

Sponsor foreword

W

ith smartphone ownership at an all-time high, internet devices are tipped to outnumber people across the globe in 2013*. The mobile boom has influenced the way we shop, with consumers expecting instant access to information while on the go. In fact, the most common uses of smartphones in store are those that enhance the shopping experience, such as reading product reviews, accessing deals, offers, coupons, comparing prices and browsing the store’s own website. By offering fast internet access through wi-fi, retailers have a great opportunity to improve the customer experience and, ultimately, boost loyalty and sales. Recent research shows that 79.5% of mobile consumers in the US are influenced by the availability of in-store wi-fi when deciding where to shop*.

Beyond allowing customers to get online, wi-fi paves the way for new technologies such as mobile payments to cut queue times, or the use of QR codes and augmented reality to encourage customers to log on and discover more about the product range – from reviews to ordering items with a single click.

The modern shopper also expects some level of personalisation through ecommerce.

Through analysing wi-fi data, retailers can gain a better understanding of what their customers are doing while in store and create in-depth profiles to send targeted and relevant offers and product suggestions via location-based advertising.

The Cloud is the UK’s biggest public wi-fi provider on the high street, with more than 8 million registered users connecting at more than 16,000 live locations such as Marks & Spencer, PizzaExpress, Greggs, plus transport hubs such as Network Rail stations.

Alison Dodd Commercial Director The Cloud

* Report from IT services company Cisco * JiWire Mobile Audience Insights Report, Q4 2012

www.thecloud.co.uk

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Multichannel Now 2013 3

Management summary 1. Multichannel strategy Page 6 • • •

• •

Methods of delivering multichannel retail evolving at a challenging rate A consensus growing of what a successful multichannel retailer now looks like Multichannel’s three pillars defined as a seamless customer experience and a single view of inventory and of customers Individual retailers in differing positions on the journey to a successful multichannel offer Even highly regarded multichannel retailers find keeping up with consumer expectations challenging

2. Channel evolution Page 11 •

• • • •

Retailers focusing more on improving and linking existing channels rather than pursuing new ones Mobile use increasing throughout the customer journey, from browsing to payment Tablets becoming more influential, with higher conversion rates than smartphones Mobile payment adoption at early stage but widespread uptake inevitable Digital technology revitalising traditional retail channels

3. Big data and the single customer view Page 17 •

• • • •

Focus now on understanding individual consumers behaviour in the multichannel world Most retailers yet to achieve a single view of the customer across all channels Retailers working to bridge gap between consumer expectations and current retail practices Loyality schemes still key to capturing data on consumers, especially cross-channel Balance to be struck between personalising service and accounting for consumer privacy concerns

4. Evolution of the store Page 20 •

• • • •

Store remains linchpin of UK retail but new roles such as ‘showrooming’ emerging Bricks-and-mortar shops still vital for customer engagement as importance of social experience grows Digital technology key to leveraging in-store service Click-and-collect enabling stores of all sizes to offer convenience and greater choice Multichannel changing the size of store portfolios in most retail categories

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Multichannel Now 2013 4

5. Fulfilment and the single view of inventory Page 24 • •

• • • •

A single view of inventory emerging as a key competitive advantage Multiple warehouses and brands, and legacy IT systems identified as obstacles to single view Delivery a key front in the battle for consumer loyalty Consumer expectations growing around delivery options Click-and-collect popularity surges Returns services becoming integrated into multichannel strategies

6. The international marketplace Page 30 • • • •

Developing multichannel offer a launchpad to global expansion Ecommerce giving retailers ability to test the waters and enter overseas markets Retailers looking to take ‘multichannel approach’ to international growth Tailoring multichannel offer to local retail markets and their consumers vital

7. Internal hierarchy Page 33 • •

• • • •

Shift to omnichannel strategy forcing retailers to revise internal structures Developing consensus that management of online and store activity should be combined Retailers across the sector at different stages in integrating these channels Leadership buy-in to omnichannel key to success Strong grasp of multichannel skills key for future business leaders Store staff increasingly incentivised to push multichannel to customers

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Multichannel Now 2013 5

1. Multichannel strategy

I

n the 14 months since the publication of Retail Week’s last Multichannel Now report, the industry landscape has undergone great and, at times, painful change.

Not only has it borne the physical overhaul driven by the failure of a number of high-profile retail names, including Game, Comet, Blockbuster and HMV, but the structural dynamics have continued to change too.

As some of the retail leaders interviewed for this report point out, the basics of good retailing remain the same but the methods, means and mediums by which those services are delivered continue to evolve at a challenging rate.

“As much as things are being changed by technology, some basic laws of retail stay the same so getting the basics right is still key,” says the omnichannel development manager of a department store group. “We still need to invest in our selling partners and in our shops as well as the online channels. We really need to know our customers and use innovation to get a clearer picture of them. All that must be supported by a flexible, agile operating model and a strong supply chain and IT infrastructure.”

The structural changes affecting how those basics are now served have been driven by two main forces, which are irrevocably interlinked: the evolution of new technologies and the vastly accelerated speed with which consumers are adopting these innovations.

Mobile technology The adoption of mobile technology is a case in point. Google now predicts that smartphone adoption is growing so rapidly that more than half of all web searches will be carried out via mobiles within three years, compared with about a quarter now. Meanwhile, according to figures from the IMRG Capgemini e-Retail Sales Index, sales via mobile devices last year increased 304% on 2011.

A chief executive of a general merchandise retailer says: “M-commerce and mobile sales are growing at a rate of knots. The percentage of total sales coming from m-commerce is about 10%, which would make it about a third of our ecommerce sales. In two years’ time it will be over 20%.”

These changes, against the backdrop of punishing economic conditions, have created the most difficult trading environment in living memory. But the last 14 months have been characterised, nonetheless, by a number of success stories as some of the country’s leading retailers get to grips with this new environment.

304%

The percentage increase in sales via mobile devices last year compared with 2011, according to IMRG Capgemini

“M-commerce and

mobile sales are growing at a rate of knots. The percentage of total sales coming from m-commerce is about 10%. In two years’ time it will be over 20%”

Chief executive of a general merchandise retailer

The changing multichannel age The research illustrated this with a growing consensus of what ‘good’ looks like in the multichannel age. The 2011 report was characterised by the sense that the industry was at the start of a journey, as it readied itself to respond to the challenges the age of multichannel retailing presented. But there remained many unanswered questions about the shape of that response. As one grocery director said at the time: “There is a real impetus in the business to map out what multichannel means from the perspective of the customer.”

A rival supermarket director commented: “You have to be economically viable, but we don’t know what we don’t know. Everybody I know is on a learning curve in multichannel, especially in non-food.”

Most notably in 2011, there was an acceptance that the industry had allowed customer desires and expectations to run too far ahead of what the industry was delivering and questions were being asked about how to close that gap.

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Multichannel Now 2013 6

1) number of channels used during clothing shopping in 2002

number of channels used during clothing shopping in 2012

9.3% 3.4%

17.9%

7.2%

3.9%

41.8%

68.4%

9.8%

38.3%

1

2

3

4

“Some people

use the word multichannel, some use omnichannel, but we are channelagnostic, and we will let our customers tell us how they want to transact”

Ecommerce director of a leading etailer

5

Source: Conlumino consumer research Base: online poll of 1,670 consumers with internet access

But a striking takeaway from the 20 interviews conducted for the 2013 edition is the agreement of what a successful multichannel retailer now looks like, driven in part by the examples such as John Lewis and Next in the UK, and Nordstrom and Apple overseas.

“Successful multichannel and omnichannel retailers have had to take multichannel seriously and re-engineer their businesses. They have to integrate all of the departments into the main core of the business so that there is no differential between stores and online,” says the chief executive of a high street fashion group.

The marketing director of a health and beauty retailer agrees: “The successful multichannel retailer is one where the organisation completely embraces the digital and bricks offering – an organisation that when you engage with it feels as though the whole organisation is supporting it from a retail perspective.”

The importance of delivering a committed multichannel strategy is underlined by Conlumino research that found 58.2% of consumers now use two or more channels when shopping for clothes compared with 31.6% 10 years ago (see graph 1).

The ecommerce director of a leading etailer explains: “Our multichannel strategy is to be wherever our customers want us to be, when they want to transact; whether they want to transact on the phone, internet, tablet, mobile or desktop device. Some people use the word multichannel, some use omnichannel, but we are channel-agnostic, and we will let our customers tell us how they want to transact or research products.”

Omnichannel versus multichannel The question of semantics is interesting. A number of retailers – though not a majority – interviewed registered a dislike of the word omnichannel.

“We all hate the word omnichannel and we continue to use multichannel,” says the group ecommerce director of a fashion group. “We do talk about cross-channel propositions when we are talking about the actual journeys that customers make as

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Multichannel Now 2013 7

they travel across channel. I think all these words will disappear and we will return to ‘retailing’ once we all have total integration.”

Across the interviews, when it comes to the omnichannel, multichannel or just good retailing vision, three pillars surfaced time and again – a seamless customer experience; a single view of inventory, and a single view of each retailer’s customers.

“Our multichannel strategy has evolved into our omnichannel strategy. Our omnichannel strategy is to provide a consistent experience across all of our customer touchpoints. We recognise that our customers’ behaviour is changing and we need to adapt from operating the business in a multichannel way with separate channels, to delivering our brand consistently across all channels at all stages of the purchase, from browsing, to research to buying… Customers are now tending to bounce from one touchpoint to another in a quantum way. Before they shopped in a linear way just using one channel,” says the omnichannel manager of a department store business.

A director of a high street retail group adds: “The most important thing we feel we should be offering, but can’t quite yet, is omnichannel. I use the word sparingly, but in this context it is appropriate. An omnichannel view of stock is the dream we can’t yet get to. It is a particular challenge because of the number of brands and the number of warehouses we have. An omnichannel view of stock is one element and the other omnichannel element is an integrated set of data on our customers.”

A seamless experience But while there is consensus on the constituent elements of success, what is apparent is the staggered position of individual retail businesses on the journey towards that goal.

Some retailers have made great strides in the past 14 months, driven by a clear vision of not only where they are heading but how to get there.

“Retailers are moving away from multichannel towards omnichannel, which offers a more seamless brand experience across each channel. And that is what we have been doing since we last spoke [in 2011],” says the ecommerce director of a grocer. “As with most retailers our strategy is constantly evolving. It is just retailing, but to the extent that you have more touchpoints and channels through which customers can access you, you need to keep working at keeping them joined up and coherent. So if a customer contacts you on the phone or online, or walks into a store then, increasingly, you can recognise them across those different shopping channels. Customers do expect that and will complain if you can’t. We are making every effort to do that but I don’t think we have won the battle yet.”

Meanwhile, the ecommerce director of a general merchandise retailer says: “In the last 18 months we have been pushing ourselves into multichannel, which involves having the same price online as in store, same experience online as in store, same range online as in store, online available in store, people in store paying for products online and sales and marketing spend and attribution online and in store. It’s a common journey that most people who started out on the ecommerce journey at the same time as we did will have travelled.”

He continues: “People are now measured on how fast they have made that journey.

The standout people for me recognise the way customers use their website and their shops and fix the fundamentals around that. I think we have done everything that we need to do to make ourselves multichannel. Now what we have to do is make ourselves very good at it.”

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“Retailers are

moving away from multichannel towards omnichannel, which offers a more seamless brand experience across each channel” Ecommerce director of a grocer

“In the last 18 months

we have been pushing ourselves into multichannel. It’s a common journey that most people who started out on the ecommerce journey at the same time as we did will have travelled” Ecommerce director of a general merchandise retailer

Multichannel Now 2013 8

Learning from other retailers This kind of thinking is well developed and epitomises the strategies of many of the successful retailers over the past year. Others, however, for one reason or another, remain behind the curve.

A director at a leading grocer says: “We started late on our multichannel journey, but that gave us the opportunity to learn from others. We are now pretty ambitious and we have a very active multichannel expansion agenda.”

To fragment the picture further, each retailer faces different challenges when it comes to the individual pieces that make up the omnichannel puzzle. The issues of delivering on a single customer view and a single view of inventory, as well as key concerns around the role of stores and the company infrastructure, are dealt with in later chapters.

“Multichannel is

our top priority.

We urgently need to make progress because the consumer is way ahead of us in brands where the customers are young” Group ecommerce director of a clothing company

The challenges ahead Even now, the scale of the challenge that still exists for many businesses with legacy bricks-and-mortar infrastructures is significant and summed up by the group ecommerce director of a clothing company: “Multichannel is our top priority. We are struggling a bit with technology. We often find ourselves pushing through solutions that are frankly sub-optimal. But we urgently need to make progress because the consumer is way ahead of us in brands where the customers are young.”

He continues: “We have to try to meet customer expectations. Our old legacy systems are a huge problem. We need to change and improve them but we can’t wait for that wholesale refresh.”

The fact that this journey is being driven by the expectations of some of the most digitally-savvy retail customers in the world is not in question. “The most important part of our strategy is to put the customer at the centre of everything we do. That is clear. We start decisions with the customer and finish with decisions about the customer. That is because we know the value of a multichannel customer is so much higher than a single channel customer,” says the director of ecommerce at a department store.

But while there is more confidence the sector is closer to understanding and delivering on those customer expectations, their relentless evolution is still causing headaches. “I think we have tried to do that [keep up with consumer expectations and advancing technology] but we will need to pick up our pace to maintain that,” says the ecommerce director of a specialist retailer. “In terms of web technology we are in the game. As far as mobile and tablet is concerned we have not been keeping up, but we are now developing a solution. Once we have landed that we will be up to date.”

The chief executive of a general merchandiser sums up the challenge of the last year when he says: “With regards to consumer expectations we realised we had to make a huge effort to keep ahead of the curve. We had thought we were keeping up with consumer expectations but it wasn’t good enough. In technology too we needed to get ahead of the curve and that is extremely difficult to do. It is moving very quickly but you need to strive to keep ahead because it is all too easy to get left behind.”

That issue of technology was echoed by a director at one of the country’s biggest grocers. “Consumer behaviour is changing so rapidly that you need to be able to respond to that very quickly and it’s something that traditional IT functions find challenging. So, for example, I suppose everyone you are talking to is bringing up the tablet phenomenon

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“Consumer behaviour is changing so rapidly that you need to be able to respond to that very quickly. The tablet phenomenon changed consumer behaviour in the space of a year” Director of a big grocer

“We are barely

keeping up with consumer expectations. Our overall retail platforms can only be changed every few years and between those changes we struggle to keep up”

Chief executive of a specialist retailer

Multichannel Now 2013 9

which, in a very short space of time, has changed consumer behaviour. I mean, this is in the space of a year.”

For smaller, specialist retailers, without the budgets of the large multiples the task can seem even more daunting. “We are barely keeping up with consumer expectations because they have been moving so fast,” says one chief executive in the category. “With regards to keeping up with advancing technology we are trying but the problem with that is our overall retail platforms, which is our web platform, can only be changed every few years and between those changes we struggle to keep up.”

Given that challenge of updating legacy systems and business models, it would not be surprising to expect more confidence emanating from pure-play ecommerce businesses.

Yet even here the picture is mixed. “I think we have caught up with technology now after the big step change in the last 18 months in our business,” says the ecommerce director of an etailer. Although he admitted that his demographic was less “tech-savvy” than those in some sectors, he adds: “I would describe the brands in our business as fast followers rather than early adopters.”

“Traditional

retailers have difficulty in translating their multichannel businesses into online simplicity” Chief executive of a pure-play retailer

Simplifying the journey Anyone who believes that the scale of this challenge as we progress through 2013 is limited to those with bricks-and-mortar models should take note of the thoughts of a chief executive of a pure-play retailer: “Anyone who says yes to that [keeping up with consumer expectations of technology] is fooling themselves. We try. We are an ecommerce business after all and we were founded in the ecommerce space and I would say we are more progressive than many traditional retailers. But we are a small band of people and inevitably going to miss some tricks that on reflection we should not have missed.”

He continues: “I suppose I most admire those who make the journey simple and they are very often the most successful etailers. It is a more and more complicated world.

Traditional retailers are by their very nature complicated and they have difficulty in translating their multichannel businesses into online simplicity.”

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Multichannel Now 2013 10

2. Channel evolution

I

n 2013, channel developments are more akin to evolution than revolution, with the surveyed retailers focusing attention to a greater degree on improving and linking existing channels rather than pursuing new ones. Allied to consumer research conducted for Retail Week by Conlumino, this chapter examines the different channels and their developments.

Mobile momentum 2) channels used by consumers with internet access for browsing while shopping in general 80

Browsing just for fun.

Visiting physical shops

70

Browsing just for fun.

Visiting online shops via desktop PC or laptop

PERCENT

60

Buying products. Visiting online shops via a mobile

50 40

Browsing just for fun.

Visiting online shops via a tablet

30 20

Browsing just for fun.

Using a catalogue

10

Browsing just for fun.

Phoning the store or customer service line

0

FREQUENCY

Source: Conlumino consumer research Base: online poll of 1,670 consumers with internet access

Mobile devices are increasingly used throughout the customer journey, from browsing to payment, in conjunction with other channels. For example, according to Conlumino research, although shops and traditional PC/laptops remain the preferred choice for browsing, 13.4% of consumers with internet access use a mobile to browse and 12% use a tablet device (see graph 2).

Retailers are pressing ahead in optimising the mobile brand touchpoint, as well as integrating the technology into cross-channel services. “It [mobile] is definitely a bridge to other channels and a driver of web traffic and a sales channel in itself,” says the chief executive of a multichannel retailer.

The chief executive of a maternity specialist comments: “All our sites are mobile optimised and mobiles represent about 40% of traffic to our site.”

The ecommerce director of an electricals retailer adds: “The percentage of traffic to our site from mobile was 9% in June 2011. It was 18% in June 2012, 30% in October 2012 and 40% on Boxing Day 2012... all our sites are mobile optimised and responsive to any size of screen that they are researched from. We were one of the first retailers in the world to put that into practice.”

In response to the growing relevance of mobile, a number of functionalities for the channel are becoming standard, including the ability to reserve items, check store

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13.4% Percentage of consumers with internet access that use a mobile to browse, according to Conlumino research for this report

12%

Percentage of consumers with internet access that use a tablet device to browse

“The percentage of traffic to our site from mobile was 9% in June 2011. It was 18% in June 2012, 30% in October 2012 and 40% on Boxing Day 2012” Ecommerce director of an electricals retailer

Multichannel Now 2013 11

locations and access basic product catalogues, through either mobile-optimised sites or smartphone/tablet applications. This level of functionality is the starting point for retailers’ mobile offer and is common across retail categories. In general, grocers, fashion retailers and etailers have been quicker to introduce mobile functionality, while department stores and wider homewares players have been slower off the mark.

“Our multichannel strategy has been ‘let’s wait and see what happens to other retailers in our sector’. So up to now we have proceeded with extreme caution, just observing how others fared. We have learned from successful online retailers and learned from those who have moved too fast and failed,” comments the chief executive of a department store.

In further developments, omnichannel leaders, including Tesco in grocery and John Lewis in homewares, are providing free in-store wi-fi, leveraging mobile as a shopping companion; this allows customers to order items that are unavailable in store for delivery or later collection, and in some instances scan items as they build shopping baskets. Mobile can also enable customers to navigate their way around stores, with Tesco mobile apps providing maps for selected stores to help consumers locate products.

The omnichannel development manager of a department store comments: “We have also introduced wi-fi into all of our shops and in that way we are enabling customers to access in the shop all of the apps, all of the online shop.”

Conlumino consumer research showed that among smartphone shoppers nearly a quarter (23.8%) spent more than 50% of their online expenditure through their devices during 2012.

Tablet growth Albeit from a position of relative infancy, tablets are demonstrating faster growth than smartphones, with tablet shoppers directing more than a quarter of their online spend via tablets over the past year, according to the consumer research.

Retailers recognise that tablets have added benefits over smartphones at the browsing stage, with larger screens offering greater scope for engagement. The chief executive of a fashion retailer explains: “Last time I checked [our online traffic], 70% was via PC, 20% was via tablet and 10% was through mobile. If you are looking at fashion and can choose between looking at it on a mobile or a tablet, it’s obvious you will go for the tablet.”

Accordingly, more than 10% of consumers with internet access use tablets for browsing (see graph 2), generating ideas and checking product specifications and prices when thinking about shopping, according to Conlumino consumer figures. For many, especially lifestyle retailers, tablets are the driving force for their multichannel strategy.

The head of an online fashion boutique claims: “It [tablets] is affecting our strategy a lot. Tablet users are usually high-ranking people who shop with us seven or eight times in a season. Most sales transacted on tablets are over £1,000.”

For retailers with relatively high-priced discretionary products, tablets offer a more engaging touchpoint that more closely parallels a ‘tangible’ product interaction, and is therefore more persuasive in encouraging transactions.

The ecommerce director of an electricals retailer says: “Tablets are becoming more

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“We have also

introduced wi-fi into all of our shops and in that way we are enabling customers to access in the shop all of the apps, all of the online shop” Omnichannel development manager of a department store

23.8%

Percentage of smartphone shoppers that spent more than 50% of their online expenditure through their devices during 2012

“If you are looking

at fashion and can choose between looking at it on a mobile or a tablet, it’s obvious you will go for the tablet” Chief executive of a fashion retailer

Multichannel Now 2013 12

important. Tablet follows the same pattern as [mobile] traffic but mobile has a much lower conversion rate. Mobile sales will increase in the next two years but tablet sales will increase at a much greater rate.”

In contrast, in grocery, a comparatively non-discretionary category, the tablet usage is more complex – the device is one part of the customer journey, but is less central as an interface than in higher value product categories.

The ecommerce director of a grocer comments: “Giving the percentage of sales [that come] from m-commerce is quite hard because it depends on where you start your journey. What I can tell you is that more than 20% of our Christmas sales had a tablet involved in the sale. It was much lower for mobile phones. Tablets are [mostly] used for originating or completing a mission.”

Mobile purchasing and payment 3) channels used by consumers with internet access for buying while shopping in general 100

Buying products.

Visiting physical shops Buying products.

Visiting online shops via desktop PC or laptop

PERCENT

80 80

60 60

Buying products. Visiting online shops via a mobile

40

Buying products. Visiting online shops via a tablet Buying products.

Using a catalogue

20

0 FREQUENCY

Buying products.Phoning the store or customer service line

Source: Conlumino consumer research Base: online poll of 1,670 consumers with internet access

“Mobile sales will

increase in the next two years but tablet sales will increase at a much greater rate”

Ecommerce director of an electricals retailer

“more than 20% of

our Christmas sales had a tablet involved in the sale. It was much lower for mobile phones.

Tablets are [mostly] used for originating or completing a mission” Ecommerce director of a grocer

10%

Less than 10% of consumers with internet access have used smartphones or tablets for transactions over the last year

In terms of consumers making payments on mobile, the device’s penetration is at an early stage on the curve. Uptake of mobile payment is growing but at a slower rate than pre-buying activity, with less than 10% of consumers with internet access using smartphones or tablets for purchases over the last year (see graph 3). However, its application is growing, as consumer familiarity is increasing and retailers’ mobile payment options improve.

The chief executive of a high street retailer says: “Mobile will be increasingly important in years to come, especially as a method of payment. Young people will increasingly run their lives through their mobile and that further technology will make that easier.”

The chief executive of a maternity retailer comments: “Soon we will have contactless sales on mobiles and tablets. I am looking for standards. I am talking to

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Multichannel Now 2013 13

PayPal and we are also talking and working with Google Wallet. I have decided that I will accept all types of electronic wallets and I will not wait for a standard to develop because I can’t wait any longer.”

While still a way from critical mass, 2012 has seen the concept of mobile payment go in two directions. Firstly, there are e-wallet solutions by the likes of Barclays, Google and O2. These solutions store consumers’ credit and debit details on mobile devices, so consumers can pay by tapping their phone on a terminal at the checkout. During the summer last year, O2 claimed that more than 100 leading retailers, including Debenhams and Sainsbury’s, had agreed to accept its service. With these type of solutions, retailers pay search engines such as Google for sending targeted advertisements to shoppers, based on spending patterns.

Secondly, there are on-screen-based applications, pioneered by PayPal. With these applications, customers are issued with a unique barcode and transaction number, which is scanned at point-of-sale by a cashier. PayPal has enrolled the likes of Aurora and Karen Millen onto the application. As a payment services provider, PayPal charges retailers an interchange fee.

Retailers’ uptake of both these applications is likely to depend on how quickly the technology improves and becomes easier and more cost effective to implement.

As these technologies develop, there are some simplified solutions gaining a degree of consumer traction. An example is Barclays PayTag, a sticker attached to a mobile device, which is linked to consumer payment cards. This technology is closer to contactless credit and debit cards which are now widely available.

Social commerce The previous Multichannel Now report detailed retailer recognition of the value of Facebook as a transactional platform. However, in line with a greater focus on value, adoption of F-commerce has not been widespread throughout retail.

“We have Facebook sites but we are using Facebook cautiously because we are not sure that it is right for our business. We are constantly having to make selective decisions about which technologies and which applications we should be operating with,” comments the marketing director of a health and beauty specialist.

However, by allowing access to a mass market of consumers sharing personal information, there remain strong grounds for enabling transactions through social media sites. Indeed, in 2012 almost 75% of consumers with internet access in the UK are members of core social media sites including Facebook, Twitter and Google+, according to Conlumino consumer research. The study also found that membership was almost 65% for those aged 65-plus, revealing the extent to which social media has become a broadly used channel.

Conlumino research also found that only 45% of internet consumers have interacted with a retailer via social media in 2012, which includes ‘likes’ and ‘follows’. However, the fact that 63% of those who are members of social sites do interact with retailers via this medium, is a cause for optimism.

In 2013, social media sites are still being used mostly as a brand communication platform and a driver of traffic to main retail websites. At present they remain a complementary, rather than a core, channel in the omnichannel customer journey.

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“Soon we will have contactless sales on mobiles and tablets. I will accept all types of electronic wallets not wait for a standard to develop because I can’t wait any longer” Chief executive of a maternity retailer

75%

Percentage of consumers with internet access in the UK in 2012 that are members of core social media sites including Facebook, Twitter and Google+, according to Conlumino consumer research

45%

Percentage of consumers with internet access that have interacted with a retailer via social media in 2012, which includes ‘likes’ and ‘follows’, according to Conlumino consumer research

Multichannel Now 2013 14

Changing role of traditional channels On the surface, in a mobile-led world, traditional channels including TV and catalogues appear to be outdated means of communicating with consumers.

However, ironically, the emergence of digital channels is presenting new possibilities for these older mediums.

Despite often being cited as a victim of the digital era, as seen in Argos’ shift in focus towards a broader multichannel strategy, catalogues are still widely used as part of the omnichannel experience. Over the past year, 25% of consumers with internet access used catalogues for browsing (see graph 2), and more than 23% used the channel for gathering ideas, according to Conlumino research.

The channel is especially effective at giving consumers a full product overview and enticing online visits, which offer a more interactive interface.

The catalogue resonance can be seen in the homewares catalogues of Asda, Tesco Direct and, most recently, Debenhams, as well as in the ongoing success of Next Direct.

Fashion retailers too, including Boden and H&M, circulate regular printed publications, while higher-end retailers, including House of Fraser and Liberty, send out seasonal specials. In the crowded space of online, these publications can drive greater levels of attentiveness and engagement compared with retailer websites. In practice, catalogues are just another contact point in the customer journey.

The chairman of a fashion retailer says: “We keep an eye on all the channels to make sure they are running efficiently. If we were having this conversation in five years’ time, we will no longer be using the term multichannel and from a customer’s standpoint they will not distinguish between the paper catalogue and the website.”

The same chairman highlighted how two good examples of multichannel retailers come from a background in catalogues, adding: “Argos gets criticised for a lot of things but they are [becoming] really very good at understanding multichannel. And Next have been very good too. What is interesting about those two companies is that they have a legacy of being great catalogue retailers. And they have successfully leveraged that [through multichannel].”

Other retailers are reinvigorating the traditional print catalogues by producing digital versions, incorporating regularly updated product lines and interactive content, as seen on the websites of Bathstore, Ikea and Marks & Spencer. Meanwhile, etail leaders Asos and Net-a-Porter utilise online catalogues and magazines respectively, to contextualise product lines with editorial content, with the aim of strengthening brand identity around lifestyle equities.

The omnichannel development manager of a department store says: “The other important thing about the tablet is the effect it is having on catalogues. We are moving away from the catalogue [as we know it]. This year’s Christmas guides have gone digital onto tablets.”

Outside catalogues, TV has received renewed interest. Concurrently, TV shopping pioneer QVC continues to resonate with UK consumers through its flagship TV channel and specialist beauty channel. Coupled with a vast online product library and live streaming through iPhone and iPad, QVC is playing on a growing trend of companion shopping. Called ‘dual screening’ by one retail senior executive, the activity is watching TV while browsing online on a separate device.

With a number of grocery and homewares retailers launching YouTube channels and internet protocol television (IPTV) – television services delivered via the internet www.retail-week.com

25%

Percentage of consumers with internet access that have used catalogues for browsing in the past year

“What is interesting

about next and argos is that they have a legacy of being great catalogue retailers.

And they have successfully leveraged that [through multichannel]”

Chairman of a fashion retailer

Multichannel Now 2013 15

– TV as a sales channel is becoming more widely available, and it offers significant scope for future growth and integration within the digital customer journey.

“Strategically, we have always wanted to be on each device as it becomes mainstream. We are also interested in IPTV and our German colleagues are supplying services in the IPTV space,” comments the chief executive of a home shopping retailer.

We are moving away from the catalogue [as we know it]. This year’s Christmas guides have gone digital onto tablets Omnichannel development manager of a department store

www.retail-week.com

Multichannel Now 2013 16

3. Big data and the single customer view

I

f the focus for retailers at the time of the last report was on enabling consumers to shop across different touchpoints, this year attention has shifted to understanding how individual consumers behave in the multichannel environment. Or as the multichannel director of one high street retailer puts it: “The most important thing last year was mobile and this year it is having a single view of our customer.”

Retailers agree that the ability to mine data to deliver meaningful insights based on hard facts rather than theories and opinions is crucial in an environment where customers are demanding recognition across different channels when they shop with a brand.

“It is the same customers shopping our brand through multiple channels and they have the expectation that we are totally joined up whether they are talking to a store colleague or contacting us through the website,” says the chief executive of one specialist retailer.

The single customer view In the digital age, customer data is ubiquitous – it is stored on loyalty cards, buried in historical transactions and accessible via customer analytics software. It allows retailers to see how consumers are behaving on websites and mobile sites and find out what they’re saying about brands off-site, on social media and online forums.

However, the majority of retailers admit that, despite the plethora of information at their disposal, they have not quite achieved a single view of the customer across all channels. “I wouldn’t say we have it but we are close,” says the director of ecommerce for a department store, a position that is representative of the majority of the retailers surveyed.

The single view of the customer is currently “far from perfect”, according to the ecommerce director of a grocery retailer. “I suppose Nirvana looks like a real-time view of your customers whenever they want to interact with you. But there are data issues there. It is not practical to recall, in any medium, your customers’ entire transactional history because the data loads are too big,” he says.

Another ecommerce director, this time of a high street retailer, says it is trying to communicate more with customers and tailor its offer online, and to some extent in the stores, on the basis of a disjointed and incomplete picture of who those customers are.

“That just massively limits its effectiveness,” he adds.

Data exploitation At its most effective, data exploitation allows retailers to give consumers exactly what they want, when they want it, be this in the form of product offers, recommendations or fulfilment options. More fundamentally, at an individual level, it allows retailers to use the single view to personalise marketing messages. “[A single view] is really terribly important. You need to know who your customers are. You need to know what they like and when they want it and how they want to pay for it so that you can respond to that from a CRM perspective,” comments the chief executive of a fashion retailer.

The omnichannel development manager of a department store adds: “It assists customer engagement and personalisation and operational efficiency based on clean data. A single view lets us know what customers are doing, and in retail knowing your customers means you don’t have to second guess what they want.”

www.retail-week.com

“The most important

thing last year was mobile and this year it is having a single view of our customer” Multichannel director of a high street retailer

58.3%

Percentage of consumers with internet access concerned about sharing their personal data with retailers

“I wouldn’t say we

have it [a single customer view] but we are close” Director of ecommerce at a department store

“Nirvana looks like

a real-time view of your customers whenever they want to interact with you.

But there are data issues there”

Ecommerce director of a grocery retailer

Multichannel Now 2013 17

An anecdote from the multichannel director of a high street fashion retailer underlines the benefits of taking a cross-channel customer view. “We have got customers on our database that bought from us in July, August and September and haven’t bought from us in October, November and December and we need to know why. More often than not a customer has gone to a store that looks dated and they have had bad service.

But what we can do now is track back and have a look at those lost customers through the full sales cycle across our channels and try to get them back.”

He continues: “If a customer complains about there being no mirrors in a store we can send her a list of other stores in the area and some sales vouchers that could also be spent online. So a single view is very important in terms of how we build a relationship with customers and how we sell to them and move forward.”

“A single view lets us know what customers are doing, and knowing [that] means you don’t have to second guess what they want”

Bridging the technological gap

“We are investing in

Consumers have an expectation that they can hop seamlessly between their mobile phone and their PC or from their mobile phone to their tablet. The fact remains, however, that retailers are struggling to bridge the gap between what consumers expect and what technology can deliver.

“It is terribly complicated. You have to find hooks that can re-link a customer up so that you can identify customers from one channel to another and then link them together. But you have to do that in real time and have up-to-date information. That is the biggest challenge,” says the ecommerce director of a department store.

For large retailers, the outlay on the necessary technological infrastructure is widely seen as worthwhile and will usually mean investing in developing a home grown CRM system or buying a packaged CRM system off the shelf. “We are investing heavily in the right platform so that we have the right technology to collect that information, which allows us to have a single view of the customer at all levels and at every point. This is where CRM comes into it. We aim to allow customers to shop across the channels with as little frustration as possible,” says the chief executive of a department store.

However, for small or medium-sized retailers that are often bound to outdated legacy systems, the cost of implementing the technology is often seen as too great to justify.

“Getting a single view can be and usually is very expensive and smaller retailers may find that cost prohibitive,” says the ecommerce director of a high street fashion retailer.

Organisations that operate multiple fascias are also encountering problems in achieving a single customer view. A director of a high street retail group notes: “We don’t have a 100% view of our customers yet. It is particularly difficult for us because we have so many brands and we need to make sure that all of them are joined up. I would hope by the end of this year we have it.”

Omnichannel development manager of a department store

the right platform [to] collect that information, which allows us to have a single customer view at all levels and at every point” Chief executive of a department store fashion retailer

“a single view is very important in terms of how we build a relationship with customers and how we sell to them and move forward” Multichannel director of a high street fashion retailer

The value of loyalty One way in which bricks-and-mortar retailers have traditionally captured information on consumers is through loyalty schemes. The information from which continues to be leveraged to achieve a cross-channel view of a customer’s shopping habits and preferences, which can in turn be used to tailor offers in store, online and through mobile channels.

“We do have a pretty good view of customers through our loyalty card,” says the director of a grocery retailer.

www.retail-week.com

Multichannel Now 2013 18

The marketing director of a high street retailer adds: “We have sorted out the supply chain and made sure the loyalty card can be used in any domain. Because we have a very successful loyalty card, we understand how customers are interacting and we are able to give personalisation in all our channels.”

Social media can also hold a wealth of consumer data. “About a year ago we did some work with a consultant to build a platform that allows us to have a single view of the customer whether it is through transacting or through social channels – so Facebook, Twitter and the rest,” says the customer and multichannel managing director of a fashion retailer. “I think this will be the life-blood of a profitable business going forward because you can leverage your contact strategy according to how the customer behaves, and track and measure it on the database.”

4) consumer attitudes towards sharing their personal data with retailers

11.9%

29.8%

Director of a high street retail group

“We have a

CONCERNED

58.3%

“a single view is difficult because we have so many brands and need to make sure all of them are joined up. I hope by the end of this year we have it”

NEUTRAL

NOT CONCERNED

successful loyalty card, [so] we understand how customers are interacting and are able to give personalisation in all our channels”

Marketing director of a high street retailer

“You have to [collect

Source: Conlumino consumer research Base: online poll of 1,670 consumers with internet access

Data concerns For all its potential benefits, data exploitation also has its risks, including consumer sensitivity around the use of personal information. Retailers must skilfully juggle the consumer desire for recognition across different channels with their dislike for overly intrusive behaviour. Conlumino research reiterated this and found that about 58% of consumers have concerns around sharing personal data with retailers [see graph 4].

“With our customers you have to [collect and use data] in a very unobtrusive way because they have made it clear they are wary of invasion of privacy,” the ecommerce director of a grocer states.

Regardless of how it is acquired and used, one thing all retailers agree on is the huge impact that customer data will have on the future retail landscape. “I think if we roll forward 10 years it will be the big differentiator in terms of successful multichannel retailing,” predicts the chief financial officer of a grocery retailer.

www.retail-week.com

and use data] in a very unobtrusive way because [customers] are wary of invasion of privacy” Ecommerce director of a grocer

Multichannel Now 2013 19

4. Evolution of the store

T

he role of the store in the multichannel world is changing. The proliferation of consumer touchpoints means the modern store no longer serves purely as a place to buy goods but as a showroom that brings the brand to life and shapes the brand experience.

With almost 90% of all UK retail sales made in store, according to the Office of National Statistics’ figures for January 2013, the bricks-and-mortar format remains the linchpin of UK retail, but the high street shop’s function is undoubtedly shifting on account of the growth of online and mobile channels.

One ecommerce director tells us his retail group is thinking about how it can make its stores “higher-end showrooms with a concierge-type experience”. He continues: “The customer will be greeted by a staff member with a tablet. If you come in to collect your click-and-collect order you will be able to have a cup of coffee in our hospitality area while staff load your order into your car. And you will probably want to have a browse around to see what is fresh and new, unencumbered by your click-and-collect order.”

If this seems like a far-fetched retail utopia then it’s worth remembering that many of these ideas have already been realised. The previous edition of the Multichannel Now report noted the roll-out of in-store kiosks by the likes of Debenhams, John Lewis and Marks & Spencer, which are upgrades on the kiosks used by Argos and Boots during the early noughties. However, these newer versions are broadband linked, offering realtime access to a retailer’s full inventory, allowing consumers to browse and order products for delivery or collection from store at a later date.

5) channels used for payment by UK consumers with internet access among age groups in 2012

“There will be kiosks

in the store, clickand-collect and wi-fienabled technology so people can place orders on their mobiles” Customer and multichannel managing director of a fashion retailer

service] experience is Apple [Store]-like. The objective is that the stores develop customers’ loyalty so they will also shop online”

80 PERCENT

Percentage of all UK retail sales made in store in January 2013, according to the Office of National Statistics

“our [customer

100

60 40 20 0

89.9%

Financial director of a grocery and general merchandise group 18--24

25-34

35-44

45-54

55-64

65+

AGE Visiting physical shops to buy products

Visiting online shops via a tablet (such as an iPad) to buy products

Visiting online shops via a desktop PC or laptop to buy products

Using a catalogue to buy products

Visiting online shops via a mobile to buy products

Phoning the store or customer service line to buy products

Source: Conlumino consumer research Base: online poll of 1,670 consumers with internet access

www.retail-week.com

Multichannel Now 2013 20

“Stores are like a

6) channels used for payment by UK consumers with internet access among socio-economic groups in 2012

contact centre so they bring a human touch and a problem resolving resource to a customer’s remote relationship with the brand”

100

PERCENT

80 60 40

Chairman of a fashion retailer

20 0

Combine: {A, B}

C1

C2

Combine: {D, E}

Rather not say

Don’t know

SOCIAL GRADE Visiting physical shops to buy products

Visiting online shops via a tablet (such as an iPad) to buy products

Visiting online shops via a desktop PC or laptop to buy products

Using a catalogue to buy products

Visiting online shops via a mobile to buy products

Phoning the store or customer service line to buy products

Source: Conlumino consumer research Base: online poll of 1,670 consumers with internet access

There is new momentum behind these technologies with the aim of integrating in-store and online experiences. In 2012, early adopter Argos rolled out a new version of the initiative, ‘Argos Quick Pay’, incorporating express checkout points linked to its Check & Reserve service. Elsewhere, etailer Kiddicare opened its first batch of physical superstores, equipped with kiosks with touchscreen technology, and Dixons is selectively installing kiosks across its combined Currys/PC World fascia.

Stores as showrooms

The stores of the future will remain brand-defining and engaging experiences but they will link more seamlessly with digital channels, employing ever greater levels of technology to add to the sense of theatre. “We want a [fashion] authority in each store,” says the customer and multichannel managing director of a fashion retailer. “There will be kiosks. There will be click-and-collect points. There will be wi-fi-enabled technology so that people can place orders on their mobiles in the store. The fitting rooms will be stylish and places where we want to engage with our customers.”

The leveraging of mobile technologies via free in-store wi-fi is a service a number of retailers have already rolled out. As well as allowing consumers to browse the internet, the technology is also being used to enable customers to interact with instore promotional activity, browse full product catalogues, order out of stock items for delivery or collection, and, in some instances, scan shopping baskets.

www.retail-week.com

“[The store of the future] will be less about a place to transact, less about going through racks of clothes. Those who haven’t grasped that will die out quickly” Customer and multichannel managing director of a fashion retailer

“We put iPads in

stores to see how staff interact with customers when they are looking for stock or advice”

Marketing director of a health and beauty specialist

Multichannel Now 2013 21

Complementary technology These examples demonstrate how technology can complement the store rather than cannibalise its sales. Indeed, retailers are enthusiastic about the future role for the store as part of a customer journey that combines both online and offline channels.

“I think customers like the idea of seeing everything [in store] and then thinking about it before they order it online,” says the omnichannel development manager of a department store.

Customer engagement is going to be an important part of a store’s future success, according to the financial director of a grocery and general merchandise group. “That is still best done in a store. Our customers need good advice and practical demonstrations.

Our [customer service] experience is Apple [Store]-like. The objective is that the stores develop customers’ loyalty so that the customers will also shop online.”

In this new role, the store is an important sales facilitator, enabling consumers to see full product lines in person, which in turn drives purchases. The fact that more than 60% of consumers with internet access across age groups and social classes make purchases in store (see graphs 5 and 6), highlights the importance of the physical channel.

The store can also add value in terms of personalised product advice, something that is not easily replicated online. “Stores are almost like a contact centre so they bring a human touch and a problem resolving resource to a customer’s remote relationship with the brand,” says the chairman of a fashion retailer.

Empowering staff As retailers begin to satisfy consumer demand for optimised mobile access in the shop, they are also equipping front-line employees with the same technology to improve the in-store experience. Retailers, including technology leader Apple, department stores Debenhams and John Lewis, and fashion retailers Aurora, Burberry and New Look, have begun arming retail assistants with wi-fi linked iPads, in a bid to streamline the buying process.

“We have put iPads in stores to help colleagues and to see how they interact with customers when they are looking for stock or advice,” says the marketing director of a health and beauty specialist. “It is actually easier to demonstrate some of the products on an iPad in store. So in that way we are trying to stay ahead of customer expectations but still we find ourselves having to catch up as well.”

Click-and-collect Another key development in the evolution of the store has been the growing ubiquity of click-and-collect services, which are in strong double-digit sales growth for the many retailers. The director of a big grocer believes that click-and-collect is the single biggest factor in the changing role of its stores. “We have had it for three years and it has been growing explosively ever since,” he says.

Not only do click-and-collect services enable smaller stores to offer a broader range of products, they also allow consumers to shop online on their own terms. “It is easier for customers to collect in their own time rather than have to stay at home waiting for a delivery,” says the marketing director of a health and beauty retailer.

Other retailers, however, see greater potential for their business in a buy-and-collect

www.retail-week.com

“We have had click-

and-collect for three years and it has been growing explosively ever since”

Director of a big grocer

“customers like

the idea of seeing everything [in store] and then thinking about it before they order it online”

Omnichannel development manager of a department store

60%

Percentage of consumers with internet access across age groups and social classes that make purchases in store

“Retailers with

hundreds of stores just don’t need that amount of floor space anymore. Many will downsize but keep a presence in the high street”

Ecommerce director of a fashion retailer

Multichannel Now 2013 22

service, where consumers purchase online and pick up in store. “With click-and-collect the items have to be in stock at that store but buy-and-collect means you can order a broader range of items to be delivered to any store,” says the ecommerce director of a high street fashion retailer.

Estate management What the shift to multichannel retailing has undoubtedly done is brought the need for large store portfolios into sharp focus. “Retailers with hundreds of stores just don’t need the amount of floor space anymore,” says the ecommerce director of a fashion retailer.

“I imagine a lot of them will downsize but still keep a presence in the high street.”

Multichannel thinking is dominated by questions around what constitutes an optimal store estate. Over the last year, Arcadia, Argos, Halfords, Kingfisher, Mothercare and New Look are just some of the retailers to have reviewed the viability of properties as leases come to an end. “Whatever you thought the optimum number of stores was four years ago, it’s now a lower number,” notes the chairman of a fashion retailer.

The multichannel director of another fashion retailer adds: “If like Dorothy Perkins and New Look I had 600 stores, I would be worried because in the next 12 to 18 months they are going to have to start closing stores at a rate of 20 a month for years. A lot of those stores take little money and rack up high rents.”

One fashion retailer with a large store estate says it has already taken the decision to reduce its UK portfolio in order to trade more profitably, adding: “I would have to say the reason we are closing stores is because of multichannel.”

Not all retailers, however, believe the shift to online is the main cause of estate reduction. “There are a number of other major factors,” says the chief executive of a general merchandiser. “The main reasons are the cost of rent and business rates.”

One point on which retailers are in general agreement is that grocery retailers have oversaturated store space. “If you look at the big grocers I would argue that there is no need for 100,000 sq ft stores anymore because of online and click-and-collect,” says the chief executive of a maternity specialist.

The ecommerce director of a fashion group, however, sounds a note of warning about a strategy of closing stores based on their lack of profitability. “If a store disappears in a high street you will see a dent in online sales in that area. At the moment there is potentially no financial link and people are looking at store profitability without seeing those benefits.”

An ecommerce director of a high street fashion group concurs: “Having a shop window nudges people towards your brand and your products. Our research shows what is often underestimated is the power that a shop window has to drive online sales.”

www.retail-week.com

“If I had 600 stores,

I would be worried because [I’d] have to start closing stores at a rate of 20 a month for years”

Multichannel director of a fashion retailer

“I would have to

say the reason we are closing stores is because of multichannel”

Customer and multichannel managing director of fashion retailer

“If a store

disappears in a high street you will see a dent in online sales in that area”

Ecommerce director of a fashion group

“We have very few

stores – I don’t believe I have to think about scaling back”

Chief executive of a department store

Multichannel Now 2013 23

5. Fulfilment and the single view of inventory

W

here stock is concerned Aurora Fashions believes that if a product is available anywhere it should be available everywhere. However, the reality is that a single view of inventory is enormously tough to achieve. Aurora is widely viewed by its industry peers as a forerunner in the quest to have one single view of stock across all channels, yet the ecommerce director of one department store believes even it hasn’t “nailed it” yet.

The ability to have a centralised, single view of inventory is emerging as a key source of competitive advantage for retailers as not only can stock holding costs be optimised, but consumers can make purchases safe in the knowledge that product availability is the same across all channels. “[A single inventory view] is essential to our business because, after price, stock availability is the most important thing that customers want to know,” says the chief executive of a sporting goods retailer.

Although this particular retailer claims to already have a single view of stock, the consensus among most retailers is that they’re moving in the right direction without quite having managed to fit together all the pieces of the jigsaw. “Various retailers like Halfords and Snow + Rock have been able to surface their store information online but it is still not a single inventory view. Nordstrom are the only people I know who have done it,” says the same ecommerce chief.

Those retailers that do claim to have “nailed it” tend to be smaller retailers that operate out of a single warehouse. “We do actually have a single view of our inventory,” says the chairman of a high street fashion retailer. “We only have one warehouse which services all of our channels. I do think it is important for retailers and it is a very difficult thing for some retailers to do.”

In particular, retailers that have multiple warehouses and brands and those that are bound to legacy IT systems are finding a single view of inventory difficult to achieve. “It’s a big technical piece and a huge operations piece too because the guys in store have to know what the thresholds are for real stock,” says the ecommerce director of a department store. “Stock goes missing in store, things are misplaced when someone tries something on or brings something back so you have an item in store somewhere but finding it is like looking for a needle in a haystack. So, the logistical challenges are huge and it’s even harder in a business like ours, which has own-label products, concessions and multiple brands.”

One of the toughest challenges facing retailers is a lack of real-time information about where products are located, which makes it difficult to provide transparent stock visibility for the customer, according to the omnichannel development manager of a department store. The financial director of a grocery and general merchandise group adds: “If you have a perfect inventory view you know you can sell a single item that is left in a store to a customer. If you have a limited inventory view then you have to hold enough stock to be covered.”

“[A single inventory view] is essential because, after price, stock availability is the most important thing that customers want to know” Chief executive of a sporting goods retailer

“We do have a single

view of our inventory [as] we only have one warehouse servicing all of our channels”

Chairman of a high street fashion retailer

“The logistical

challenges [of a single inventory view] are huge and it’s even harder in a business with ownlabel products, concessions and multiple brands”

Ecommerce director of a department store

Is a single view necessary?

Of course, single-item tracking is more relevant to some retailers than others, as the ecommerce director of a grocery retailer explains. “Do I want to have to keep track of every can of baked beans in our stores? No I don’t. Does a customer want to know that there are at least 10 tins available when she shops online? Yes she does. So I do think good availability for grocery is more by the case than by the item.”

www.retail-week.com

Multichannel Now 2013 24

But for fashion and general merchandise retailers, who need to sweat every inch of store space, single-item tracking can make a huge difference to the bottom line. “It will be critical to a profitable business,” says the customer and multichannel managing director of a high street fashion retailer. “If someone comes into the store who is a size 16, I can have a 16 sent to that store or the customer’s home the next day. So maternity and large sizes will be online only, which is a much more profitable use of inventory.”

Delivering the goods Along with availability, delivery is becoming a key front in the battle for consumer loyalty. Grocers, in particular, have been at the head of the curve in offering consumers convenient fulfilment options. Tesco, Asda and Sainsbury’s have leveraged scale advantages and large store estates to provide ‘pick from store’ delivery services.

Moreover, Ocado’s ‘hub & spoke’ model, that picks and delivers from central distribution centres, has raised the bar even further, most notably through offering two-hour delivery slots. “The bar for fulfilment has been set very high in the UK by food,” says the chief executive of an online fashion retailer. “They have unique operations that make that possible. We have had to follow suit. Customers say ‘Ocado can give me a two-hour delivery slot, why can’t you?’ So we will have one-hour deliver slots by summer next year.”

Multichannel Now 2012 explored the early stages of same-day delivery, which is paving the way for faster fulfilment services. At the time, the report highlighted the trial of Shutl’s 90-minute delivery service for Argos and Aurora within the M25, which, as the most densely populated area in the UK, is currently the most financially viable area to serve. Since then an increasing number of retailers have trialled the concept, including Next, Asos and Amazon, along with department stores Debenhams and House of Fraser, fashion etailers My-Wardrobe and Net-a-Porter, and furniture retailer Ikea.

7) FULFILMENT OPTIONS uSED BY UK consumers with internet access in 2012 100 100

Free delivery Same-day delivery

PERCENT

80 80

Click-and-collect – buying online and picking up from designated store

60 60

Third-party collection points – buying online and picking up from a designated collection point

40 40

Reserve online – reserving items online and paying for goods in store

20

0 0

Free returns FREQUENCY

Returns to a collection point

“I think [a single inventory view] and good availability for grocery is more by the case than by the item”

Ecommerce director of a grocery retailer

“The bar for

fulfilment has been set very high in the UK by food. Customers say ‘Ocado can give me a two-hour delivery slot, why can’t you?’”

Chief executive of an online fashion retailer

10%

Percentage of UK consumers with internet access that chose same-day delivery as a fulfilment option in 2012

“Customers don’t

want an eight-hour [delivery] window.

They want to know it will come between nine and 10 tomorrow morning”

Chief executive of an online fashion retailer

Source: Conlumino consumer research Base: online poll of 1,670 consumers with internet access

www.retail-week.com

Multichannel Now 2013 25

As rivals follow suit, same-day delivery will become increasingly ubiquitous in retail.

Indeed, more than 10% of UK consumers with internet access chose same-day delivery as a fulfilment option in 2012 (see graph 7). However, in the immediate term, this service is likely to be limited to within the M25. Furthermore, implementing the required ‘pick from store’ strategy, which is a departure from traditional, centralised models, is likely to prove a hurdle to expanding the service nationwide.

Order tracking In addition to demanding further delivery options, consumers with internet access are asking for increased certainty on when a delivery will arrive as well as visibility on the order’s progress. Retailers are responding with delivery status updates delivered by text and order tracking information. “Customers don’t want ‘this afternoon’. That can mean an eight hour window. They want to know it will come between nine and 10 tomorrow morning,” says the chief executive of an online fashion retailer.

Customers also want to keep track of their order throughout its journey, adds the ecommerce director of an online fashion retailer. “We are looking at things like NFC and QR codes,” he notes. “We will be using GEO-targeting [the method of determining the location of a website visitor and delivering tailored content based on location] soon and then we will be able to tell customers where their box is at any one time.”

49.5%

Percentage of consumers with internet access that used click-and-collect services over the past year

58.7%

Percentage of consumers with internet access that used reserve-and-collect services over the past year

The emergence of click-and-collect Despite the increased speed of delivery and the narrowing of ordering windows, home delivery remains an undesirable option for many consumers, particularly those that work out-of-home during the week. This has led to a significant uptake in services such as click-and-collect, which puts the power back in the consumer’s hands. Approximately 50% of consumers with internet access used click-and-collect services over the past year, while just less than 60% used reserve-and-collect.

Unsurprisingly, given the potential benefits both for retailers and consumers, sales through click-and-collect services are growing rapidly. With growth of more than 20% not uncommon among the businesses surveyed, retailers are keen to encourage further uptake. “We are promoting it [click-and-collect] as hard as we can because it is in our interest rather than having to deliver,” says the ecommerce director of a general merchandise retailer.

The chief executive of a maternity specialist points out that the cost of the last mile of delivery can be “horrendous”, whereas the cost of delivery from retailers’ internal networks to one of their own stores, when their trucks are going there anyway, is free.

“Retailers [also] on average see a 10% upswing when a customer comes in to collect their click-and-collect,” he adds.

While the previous edition of the report was filled with concerns about the infrastructural complexity of click-and-collect services, retailers are now putting aside these hurdles to focus on satisfying consumer demand. As early adopters, the grocers are particularly well advanced in their provision of click-and-collect.

“We are promoting

it [click-and-collect] as hard as we can because it is in our interest rather than having to deliver”

Ecommerce director of a general merchandise retailer

“There is significant

growth [in click-andcollect], so much so we have increased collection points and brought in more staff”

Omnichannel development manager of a department store

Limitations For all its potential benefits, click-and-collect isn’t without its challenges. Encouraging large numbers of customers to pay online for goods and then collect in store risks undermining one of the key attractions of click-and-collect, namely its convenience.

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Multichannel Now 2013 26

Ironically, queues at the most successful click-and-collect retailers during peak periods can be substantial, at which point collecting an item can be slower and less convenient than spontaneously walking into the shop and buying it. “There is a basic flaw in that at peak hours it takes substantially longer to queue to collect than walking into the store and buying it,” says the chief executive of a multichannel retailer.

The omnichannel development manager of a department store adds: “There is significant growth, so much so that queues are building up in busy periods, and we are having to undertake what we call capacity reviews. We have increased the collection points and brought in more staff for busy periods.”

Click-and-collect also has less scope for growth in slower moving, more discretionary categories. “Click-and-collect is not that important for us,” explains the chief executive of a fashion retailer. “What we find is our customers sometimes like to check if we have a particular size and style before they come in to the shop but rarely use click-and-collect.

We don’t run a business that frequently runs out of stock.”

For other retailers that are already behind competitive standards in terms of their delivery fulfilment, click-and-collect is less of a priority. “At the moment we cannot provide click-and-collect, but it will happen. Click-and-collect has been driven by customer demand,” says the chief executive of a department store.

Third-party collection points Click-and-collect is clearly not an option for pure-play etailers that don’t have physical stores. However, the emergence of services that utilise third-party collection points have created opportunities for online-only players. It is also proving a fruitful solution for bricks-and-mortar retailers, providing another convenient fulfilment option for consumers.

In the UK, this service has been widely available for less than five years, yet in 2012 more than 15% of consumers bought online and collected from a dedicated independent collection point, according to Conlumino data.

One of the leading third-party collection point services, Collect+, has enabled customers to buy and then subsequently collect and return goods back to retailers including Asos, Boden and Clarks as well as Amazon and eBay members, through a network of 3,500 local shops and a partnership with delivery company Yodel. Customers organise returns online, by submitting order details and printing labels.

As a free service, which allows customers to collect and return items at their convenience, this initiative is set to gain a wider market footing in 2013, according to Conlumino.

It allows consumers to collect and return items at more convenient locations and provides an added incentive to go ahead with online purchases. Most pertinently, third-party collection points open up the mass market for etailers, especially newer, independent players. The ecommerce director of an online fashion retailer says: “It [third-party collection point services] started with people using it for returns but what we have seen in the last 12 months is a massive switch to people collecting orders. The big advantage is that most of the collection points are within the final mile of home.”

“Customers like to

check if we have a particular size and style before they come to the shop but rarely use clickand-collect”

Chief executive of a fashion retailer

“At the moment we

cannot provide clickand-collect, but it will happen. because Click-and-collect has been driven by customer demand” Chief executive of a department store

15%

Percentage of consumers with internet access that bought online and collected from a dedicated independent collection point, such as Collect+

Drawbacks to third-party collection points Despite the attraction of the Collect+ model, introducing another agent into the supply chain does have its drawbacks, particularly with regard to the resultant squeeze in margins. “I think if you don’t have your own stores then the economics can’t work,” says the chief executive of one multichannel retailer. “Anyone with a mail order

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Multichannel Now 2013 27

business could have done this in the past, but when we looked at it, we abandoned it because it meant an extra person in the supply chain and sharing the margin with that extra person.”

Another key development in independent collection has been Amazon introducing its ‘Lockers’ to the UK market. In 2012, Amazon installed locker collection points in 20 London stores of stationery retailer Staples, and Conlumino predicts that third-party collection points is the next wave in fulfilment especially for online-only retailers that don’t have their own stores.

8) channels used by consumers with internet access when making returns

70

Visiting physical shops Visiting online shops via a desktop PC or laptop

PERCENT

60 50 40 30 20 10 0

Visiting online shops via a mobile Visiting online shops via a tablet (such as an iPad) Using a catalogue Phoning the store or customer service line

Source: Conlumino consumer research Base: online poll of 1,670 consumers with internet access

One issue that adds further complexity to the single view of stock challenge is the thorny subject of returns. During the latest Christmas trading period, there was growing evidence of consumers returning unwanted presents, often bought online, back to stores. “[Stores] are a collection centre and they are a returns centre. A lot of the things that we sell online we get back and a store is a convenient centre to return clothes,” says the chairman of a fashion retailer.

Conlumino research, carried out during the course of 2012, found that almost 70% of consumers with internet access used physical stores to make returns (see graph 8) and, significantly, the UK has one of the highest online return rates in Europe, reaching as high as 30% to 40% among some retailers. Retailers are responding by ensuring returns services are integrated into multichannel strategies, allowing consumers to return items bought across any channel at their convenience.

“Just after Christmas [there was a large increase in the] return of unwanted Christmas presents,” says the multichannel director of a fashion retailer. “It resulted in a very negative attitude in the store portfolio and had to be addressed or it would start to poison the brand.”

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started with people using it for returns but we have seen a massive switch to people collecting orders”

Ecommerce director of an online fashion retailer

Return requirements: the new mile

80

“Click-and-collect

“[Stores] are a

collection centre and a returns centre. A store is a convenient centre to return clothes [bought online]” Chairman of a fashion retailer

69%

Percentage of consumers with internet access that used physical stores to make returns

Multichannel Now 2013 28

Fast fashion retailer Topshop’s dedicated returns department is an example of an innovative approach to returns. In many of its stores it has a unique returns area staffed by a specialist team, the location of which purposely makes customers walk through store merchandising areas, thus encouraging purchases that would not otherwise have been made.

The chief executive of a department store notes that some etailers are starting to set up stores in high streets for collection and returns. “But it will be very expensive for them,” he adds. “The sophisticated customer is becoming ever more demanding.”

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Multichannel Now 2013 29

6. The international marketplace

M

ultichannel has been key to UK retailers’ success in international expansion in the last couple of years, giving retailers unprecedented access to foreign markets.

Despite the consensus among the retailers interviewed on the growth opportunities overseas, retail leaders’ responses indicate a spread both in terms of the strategies employed and the pace at which retailers are looking to expand overseas. Some businesses, many in fashion retail, have already made major inroads into foreign markets via multichannel or solely ecommerce, while others are still concentrating on domestic multichannel operations.

Global ecommerce Businesses have been driven on not only by the need to seek growth outside the often stagnant or mature domestic market, but also by the genuine opportunities abroad.

The chief executive of a leading online fashion retailer says: “If you look at the UK side of our business you may say it is close to maturity. But the international side of the business is far more positive. It is only a couple of years old and is a long way from maturity. I would say that this is the case for a lot of UK etail companies. Even though we are [currently] 70% UK focused and 30% international [focused], in two years’ time those figures will be reversed.”

Multichannel has opened up opportunities for an easier route to international growth, and retailers with compelling ecommerce offers have often been better placed to leverage those opportunities overseas. The advantage that ecommerce gives retailers to test the waters and enter overseas markets is highlighted by the chief executive of a fashion retailer, which sells to 60 countries and has a handful of local language sites across the globe. He says: “[Etail] gives us the opportunity to try out new markets where we don’t have a physical presence to see if customers like our product or not. So ecommerce gives us flexibility internationally.”

The chief executive of a sporting goods retailer adds: “We have an international business which is entirely ecommerce. Customers from overseas have been buying from us for seven years and that business is growing.”

Ecommerce will often be the first step into new markets for retailers new to global expansion. For example, the chief executive of a high street retailer says from September onwards it will be preparing a 2014 international launch that will be online only. Similarly, the ecommerce director of a lingerie retailer adds: “International offers a clear opportunity and ecommerce will be a lead in that. Ecommerce is our only international outlet.”

Indeed, it is fashion retailers, in particular, that have frequently exploited ecommerce international growth, with businesses such as Burberry, Ted Baker and Asos, having proved successful overseas. The interviewees echoed the prevailing belief that many fashion retailers already have very active global expansion strategies via etail operations.

The multichannel managing director of a high street fashion retailer boasted that its business ships to 120 countries from its web operations, while the ecommerce director of a fashion retail group adds: “International expansion is a high priority and ecommerce is driving that. We are selling into 110 countries and we ship to those. And we also have a number of dedicated websites, which are selling directly into Germany, France and the US.”

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“Even though we

are [currently] 70% UK focused and 30% international, in two years’ time those figures will be reversed” Chief executive of an online fashion retailer

10.6% The share of cross-border sales in Europe that are forecast to be online in 2013, according to IMRG

“[Etail] gives us the

opportunity to try new markets where we don’t have a physical presence to see if customers like our product or not” Chief executive of a fashion retailer

“International offers

a clear opportunity and ecommerce will be a lead in that.

Ecommerce is our only international outlet”

Ecommerce director of a lingerie retailer

Multichannel Now 2013 30

A full multichannel offer in new markets Even though ecommerce has allowed retailers with an advanced etail offer to expand overseas markets without the substantial investment of rolling out bricks-and-mortar stores, an etail offer in the desired market can be the first move of a greater multichannel strategy.

The chairman of a fashion retailer explains that the business already generates international sales via ecommerce “without trying really”, but adds: “We will be opening our first international store in 12 months. There will be a combined currency and language-specific website together with a store opening programme.”

The desire to roll out a multichannel offer in an international market was echoed by the multichannel managing director at a high street fashion retailer: “When we enter China it will be with a full multichannel brand experience and it will fundamentally change the way we enter new markets.”

The multichannel director of a fashion retailer is taking a similar approach and says for new markets it is “going in with a multichannel approach”. Highlighting the importance of the bricks-and-mortar store in this strategy, he explains: “We have opened our Hong Kong store in one of the biggest malls in Hong Kong and, as a result, there is a lot of footfall. [Then] it’s about how to service those customers in that store, but also to encourage them to go online with us. When you have that beautiful, physical store it is the best type of marketing. We want them to touch and feel the quality of our brand and then go home and start a new relationship with us online.”

Localising multichannel When exporting a multichannel offer to an overseas market, retailers stressed the importance of adapting that offer for local consumers. Emphasising this point in the retail news recently, John Lewis revealed plans to launch local language websites in France and Germany, to exploit the European traffic its flagship English website receives.

The chief executive of an online fashion retailer, which also tailors its offer to overseas markets, says: “We sell in more than 40 territories around the world. We translate our websites into eight languages and nine currencies. We are a multi-lingual, multinational company.”

However, the surveyed retailers indicated that changing the currency and language of ecommerce is not the only consideration to factor when adapting a multichannel offer to a foreign market. The chief executive of a fashion retailer adds: “We etail in other countries the way that the local market does. We try not to be a foreigner in those markets.”

The ecommerce director of a general merchandise retailer stressed the importance of understanding what sales channels are popular with consumers in the market and how advanced multichannel is in the region. He explains: “You have to learn from the markets.

Where are international sales going and where has ecommerce been adopted and grown?

That is how you inform the best strategy for the markets that are still emerging. You optimise costs by doing that. Remember that it is ‘customer first’, so what is right in one country may not be right in others.”

However, one leading retailer believes that the advanced state of multichannel in its domestic UK business is an appropriate model for its global expansion strategy. The ecommerce director says: “The UK is a good market and it is leading on ecommerce. So

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“When we enter China

it will be with a full multichannel brand experience and it will change the way we enter new markets”

Chairman of a fashion retailer

“When you have that beautiful, physical store it is the best type of marketing [in a new country]”

Multichannel director of a fashion retailer

£7.4bn The amount international consumers spent on UK-based sites in 2012, according to IMRG

£10bn

The amount international consumers are forecast to spend on UK-based sites this year, according to IMRG

Multichannel Now 2013 31

for our businesses outside the UK, the UK provides a very good model that is being lifted and replicated in them.”

Global limitations of multichannel Fashion retailers and other businesses that sell non-perishable products have particularly benefited from the access to new markets ecommerce offers. However, for businesses that sell perishable goods, including groceries, multichannel does not offer the same immediate and relatively easy access to overseas markets due to the supply chain demands of stocking and transporting such goods.

As one ecommerce director of a grocer concedes: “We are not doing international ecommerce at the moment. But I think for us international has definitely got legs with a lot of our non-perishable stuff.”

Moreover, for retailers selling third-party ranges, multichannel cannot overcome the significant hurdle of intellectual property. The chief executive of a department store explains that despite having the technical capability to sell overseas, as the business doesn’t sell its own brands, it may not have the rights to sell the brands they stock in the UK in other territories.

The chief executive of a department store says: “We buy Armani and we sell Armani, buy Ralph Lauren and sell Ralph Lauren. These third-party brands already have their own retail fashion shops and [their own] customers around the world. Many already have exclusive distribution rights around the world. [Therefore] if we use our technology to try to sell blindly around the world it could be a disaster.”

Multichannel domestic priority Even for many retailers with strong own-brand offers of non-perishable goods, underdeveloped multichannel capabilities in the domestic market means that their priority remains improving business at home, with international growth shelved for the meantime.

The head of a department store says: “At the moment our focus is on being the best in [the UK] sector in terms [of] being able to satisfy orders online. Once we have achieved [that] we will go international.”

Many of the retailers surveyed agree that improving multichannel capability, especially ecommerce, will eventually help make international growth a viable prospect, but the opportunity is longer term. The ecommerce director of a department store explains: “We were very late to the game of ecommerce. We only launched our website in 2008. We want to do more from an international perspective but there is a lot of back-end stuff that needs to happen. We do ship to 131 countries already but to do multi-currency, multi-language and that sort of thing, we need time. So we won’t be looking at that until next year.”

“We etail in other

countries the way that the local market does. We try not to be a foreigner in those markets”

Chief executive of a fashion retailer

“For our businesses

outside the UK, the UK provides a good [multichannel] model that is being lifted and replicated”

Ecommerce director of a leading retailer

“Our focus is on

being best in the [UK] sector in terms [of] being able to satisfy orders online. Once we have achieved [that] we will go international” Head of a department store

“We want to do more

from an international perspective but to do multi-currency, multi-language... we need time”

Ecommerce director of a department store

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Multichannel Now 2013 32

7. Internal hierarchy

O

f all the barriers to becoming a true omnichannel retailer the need to rearrange organisational structures around this new retail paradigm is perhaps the greatest.

Technological capabilities can be bought and customer data management outsourced, but the internal shift to a culture of channel integration can only be achieved by retailers, and more pertinently, people themselves.

The Multichannel Now 2012 report described how the seamless movement of consumers between channels was leading to a blurring in the roles of ecommerce, marketing and IT directors and a resultant growing inter-dependency between these departments. This was exemplified by one ecommerce director, who told us: “Customers think of the business as one brand, whether using online or going into the stores. And senior management needs to think in the same way.”

What this year’s survey has uncovered is that a continued shift towards omnichannel strategic thinking has forced retailers to further revise the structure of their internal operations. For many, this has meant channels that have previously been run separately – for instance, bricks-and-mortar and online stores – are becoming integrated with the emphasis on shared decision making and organisation around the customer rather than each individual channel.

This is neatly demonstrated by one fashion retailer whose multichannel director notes: “Up until now we [multichannel and store operations] have sat on different floors. We have a multichannel director, an operations director, a brand and creative director, and a chief executive who pulls us all together. But very soon retail and multichannel will be sitting together and making decisions together.”

What this year’s survey has also shown is that while there is consensus among those interviewed that management of online and store activity should be combined, retailers across the sector are at very different stages in their integration of these channels. “In our early days we did run the ecommerce operation separately and our ecommerce team was actually in a different building,” says the omnichannel director of a department store chain, which has recently transitioned to an integrated operational structure. “But over the last three years we have increasingly developed our omnichannel strategy and brought our online and retail store businesses together.”

Other retailers continue to run each channel separately for now but are at least some way down the road towards integration. “There is a director to run multichannel and a director to run store retail, but we work very closely with our retail directors,” says the director of ecommerce for a department store. “We do have a separate multichannel team within our business that has a marketing function and an operational function and a trading function.

Longer term, the multichannel team will be the whole business.”

For a minority, however, delineation of the online and bricks-and-mortar businesses is still clear cut. “We [still] run our ecommerce separately in terms of management… just like our bricks-and-mortar business,” says the chief executive of a department store.

“Very soon retail

and multichannel will be sitting together and making decisions together”

Multichannel director of a fashion retailer

“Over the last three

years we have developed our omnichannel strategy and brought our online and retail store businesses together” Omnichannel director of a department store chain

“We [still] run

our ecommerce separately in terms of management”

Chief executive of a department store

Leadership buy-in The key question for most retailers is not whether to integrate the internal management of the various channels, but the degree to which this integration will occur. How fast and how far along the road to integration they can travel depends, to a great extent, on buy-in throughout the organisational hierarchy, starting with the board of directors.

If directors and senior management buy into the vision, there is invariably a trickle-down

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Multichannel Now 2013 33

effect through the rest of the organisation as decision makers articulate their belief in the value of omnichannel to those further down the hierarchy, ensuring it remains high on the agenda when making day-to-day decisions.

“The most successful multichannel retailers are those that have good leadership from the top,” says the ecommerce director of a general merchandise retailer. “The person at the top has to believe in it, otherwise it doesn’t get done.”

The marketing director of a high street retailer adds that the successful multichannel retailer is one where the organisation completely embraces the digital and the bricks-andmortar offering: “An organisation that when you engage with it feels as though the whole organisation is supporting it from a retail perspective. So that when you walk into one of those stores their colleagues are as confident and comfortable with their online offering as their offline offering.”

“The successful multichannel retailers have good leadership. The person at the top has to believe in multichannel”

Service culture

on staff that have digital experience and the rest are being trained in digital marketing and digital analytics”

If getting buy-in from business leaders is key to a shift to an omnichannel mentality, the need to engage staff lower down the hierarchy is equally important. Some retailers naturally attract younger, tech-savvy staff that are eager to embrace the omnichannel mind-set. Others, however, are proactively changing their recruitment and training strategies to attract and develop digitally literate candidates. “We are only taking on staff that have digital experience but you know that is most young people,” says the chief executive of a general merchandise group. “The rest of the staff are being trained in digital marketing and digital analytics.”

At the store level, retailers are looking to employ and promote IT literate sales assistants, often younger in age, who are able and willing to encourage customers to use online and mobile channels in store and therefore show customers the value of the integrated experience. “We are watching our young staff closely for talent who can give the customer a better experience in store through what they have learned on our website that day,” says the customer and multichannel managing director of a high street fashion retailer. “We notice when staff have taken to using the tablets to show products to customers.”

Training is becoming increasingly important as ubiquity of product information is enabling consumers to develop expertise on a par with store staff. “These days they need to know a lot more about the products because of the internet,” says the chief executive of a specialist retailer. “Customers do a lot of research themselves and you can’t have the customer knowing more than the store staff.”

Retailers are also beginning to view digital skills as crucial for employees in head office roles with those who possess a strong grasp of multichannel retailing increasingly being earmarked as future business leaders.

“From now on we will only hire people who use multichannel and social network channels,” says the customer and multichannel managing director of a fashion retailer. “It will change our head office infrastructure in terms of the scale and calibre of people we need in head office.”

The biggest challenge in human resources, however, is not in recruiting digitally literate staff, but in training existing staff to use such technologies. To achieve this, some retailers are implementing new training programmes that give staff the competencies they require.

“In 2011 we introduced a horizon learning package,” explains the omnichannel develop-

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Ecommerce director of a general merchandise retailer

“We are only taking

Chief executive of a general merchandise group

“We are watching our

staff for talent who can give the customer a better experience in store through what they’ve learned on our website”

Customer and multichannel managing director of a high street fashion retailer

“From now on we

will only hire people who use multichannel and social network channels” Customer and multichannel managing director of a fashion retailer

Multichannel Now 2013 34

ment manager of a department store. “We had a review of our Scottish branches on staff advocacy towards the internet and found that a lot of our staff were averse to using the internet. We came up with a training package designed to teach them how to use the internet to their advantage.”

Staff incentives Part of the challenge in instilling an omnichannel culture is in breaking down the tribal instincts of staff who work in different channels. Often this means offering new remuneration terms so that store staff don’t resent sales being taken away when customers complete transactions on digital devices. Typically, this involves attributing online sales to a store if those transactions occurred within a certain distance of the shop.

The customer and multichannel managing director of a fashion retailer explains: “Regardless of whether the sale is placed from a customer at home and delivered to the home or through click-and-collect or the store, all of the sales in that given postcode will be attributed to the store [in relation to commission allocation].”

Others retailers require the store to play some role in the transaction in order for the store staff to receive a commission. “The stores get the credit only for the sales that are achieved in-store,” says the chief executive of a general merchandise group. “If the online sale is a home delivery sale they don’t get that, however, if the customer goes to the store to collect the product or make the order in store for home delivery the store gets the credit.”

Of course, there are some retailers that do not have sales commissions at all and others who believe that retailers aspiring towards a truly omnichannel culture should not concern themselves with where the sales came from. The ecommerce director of a high street fashion group says: “There is another school of thought which is ‘get over yourselves and get on with it and let’s not start mucking around with the numbers’.”

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“We came up with

a training package designed to teach staff how to use the internet to their advantage”

Omnichannel development manager of a department store

“All [online] sales in that postcode will be attributed to the store”

Customer and multichannel managing director of a fashion retailer

Multichannel Now 2013 35

Conclusion: from ‘multichannel now’ to ‘omnichannel when’

A

mid the online movement, digital sales are becoming an important proxy for multichannel success. But, while general lessons apply to omnichannel outperformers, retail categories are experiencing different levels of online penetration.

This is prevalent in the feedback from senior executives interviewed for this report.

9) Percentage of sector sales online in 2012 6% 34.5%

“We have grown massively over the last 12 months, but it is going to be so hard from now on to get that [ecommerce] growth” Multichannel director of a retailer

“In two years’ time,

DIY AND GARDENING

ELECTRICALS

10.8% 44.5%

I expect 10% of my sales to be online.

At the moment they are not even 1%”

Chief executive of a department store

FASHION

BOOKS

Source: Conlumino Sector Report series

Grocery leaders consider online growth to be in its infancy, with online penetration in food expected to reach 15% to 20% of sales over the next five years.

“The percentage of sales we think will move online depends on the category but on food I think once we get to about 15% to 20%, we will be topping out and when we look at non-food and other product categories it will go much higher, maybe 90%, because those products will be moved online rather than in store,” says the ecommerce director of a grocer.

In contrast, fashion leaders are more divided in views of growth prospects. In a category that travels well, there is evidence of ecommerce, which previously experienced dynamic growth, starting to slow in their UK businesses.

“I think it is starting to level off in terms of the UK. We have been online for five years and grown massively over the last 12 months because we invested so much in new technology.

But to be realistic it is going to be so hard from now on to get that growth. Our biggest growth will be in international, especially in the US where it has grown 120% on the year,” says the multichannel director of a fashion retailer.

However, bricks-and-mortar retailers have generally been slower to develop multichannel capabilities, and therefore online penetration is growing from a lower base.

“Growth in ecommerce sales is not levelling off. The percentage of sales moving online will be about 20%. A fifth of the company will be turned over online in about three years,” says the multichannel director of a retailer.

The department store sector is a fragmented market with regards to multichannel

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Multichannel Now 2013 36

maturity. As traditionally lifestyle-focused destinations, some of these players are among the youngest in terms of multichannel development.

“We have barely started. But I do speak often with other luxury fashion retailers and they tell me there is no sign of sales levelling off. In two years’ time if I have achieved my goal and have become best in the sector I expect 10% of my sales to be online. At the moment our online sales are not even 1% of my group’s turnover,” comments the chief executive of a department store.

“We are not even close to the stage where ecommerce sales are levelling off. I wouldn’t say ‘moving online’ because a lot of it is incremental, but I would say the maximum percentage of online sales will be 30% to 40% of the total business,” says the director of ecommerce of another department store.

Executives of wider apparel retailers and general merchandisers view potential ecommerce growth in their categories as similarly embryonic.

“This year [online sales] will certainly grow. All the research points in that direction. If you include online click-and-collect and online sales that happen within the store, I think in two years it will be 25%,” says the ecommerce director of a general merchandise retailer.

“No, it is not levelling off. I think the online sales will grow to 35% in two years and 50% in 10 years,” remarks the chief executive of a sporting goods retailer.

Achieving omnichannel success This report has laid out the key multichannel developments seen among retailers during 2012. Though change is more analogous to ‘evolution’ than ‘revolution’, thinking has fittingly moved from ‘multichannel now’ last year, to ‘omnichannel when’ this year.

There is undoubtedly an underlying theme in retailers seeking how best to link multichannel presences to provide one, seamless customer experience, as part of an omnichannel strategy. Therefore the challenge facing retailers is now how to synchronise channel touchpoints, as opposed to developing new ones. Rather than asking themselves, ‘what channels should we be in?’ retailers now have to ask, ‘how can we connect our channels?’

But an omnichannel strategy is far from a cure-all remedy for everybody. With different resource constraints and product characteristics, full integration is desirable and achievable for some retailers more than others.

Though there are a mass of opportunities afforded by multichannel technologies, old marketing principles prevail, and the customer still comes first. This is the key change in mantra since last year. Retailers are less concerned about chasing the latest must-have innovations and more focused on those which add value.

As the ecommerce director of a general merchandise retailer says: “The stand-out people [retailers] for me are people who recognise the way customers use their website and their shops, and fix the fundamentals around that before spending heaps of money on technology projects that customers ignore.”

Despite this, there are commonalities in the cultural and operational revisions undergone by omnichannel outperformers, which highlight the key questions retailers should be asking themselves in the market ahead.

“I think the online

sales will grow to 35% in two years and 50% in 10 years”

Chief executive of a sporting goods retailer

“The stand-out

[retailers] recognise the way customers use their website and their shops, and fix the fundamentals around that before spending money on technology that customers ignore”

Ecommerce director of a general merchandise retailer

Know your shopper Under the banner of ‘big data’, customer orientation increasingly necessitates measuring consumer preferences. Key to achieving this is the use of loyalty schemes married with

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transactional data, to develop a database of cross-searchable views of individual customer’s buying behaviour across store, online and mobile channels. This understanding is then being used by omnichannel leaders to personalise brand communications and promotions.

Targeted innovation Channel proliferation cannot be ignored. The customer journey has become multi touchpoint, and mobile-led. Smartphones, and especially tablets, are playing an increasingly important role in the customer journey; something which retailers need to account for. However, utilising big data, retailers should focus on integrating presences in channels most pertinent to their target market. The best-performing retailers are those investing in technologies customers value, rather than the latest fads. Indeed, rather than focusing solely on newer channels, many leaders are also reinvigorating presences in more traditional channels, such as catalogue, to support their overall proposition.

“[The store] used to

be all about location, location, location.

It’s now about convenience, convenience, convenience” Omnichannel development manager of a department store

Pursue an ‘integrated’ culture To facilitate channel integration, retailers need to structure business models for an omnichannel future. To drive this, senior management need to communicate their belief in the value of omnichannel capability down the hierarchy, to ensure it remains high on the agenda of decisions. There is a stark contrast between ‘silo’ mind-set retailers, where multichannel is a standalone function, and those where omnichannel is at the heart of corporate culture.

Among omnichannel outperformers, this leadership buy-in is allied with recruitment and training policies that encourage staff to provide customers with a fully integrated channel experience.

In a climate of tight budgets, this type of company-wide push is required in order to ensure that the omnichannel agenda is not brushed aside in pursuit of shorter term financial returns.

Get more from the store As the omnichannel development manager of a department store puts it: “It used to be all about location, location, location. It’s now about convenience, convenience, convenience.”

Though the store’s purpose has been brought into question amid the digital and online movement, it now has a new role to play. National store footprints of the scale we’re used to may be a thing of the past. But physical outlets will remain a key channel in the buying journey; its new function lies in its ability to be a ‘showroom’ for product ranges and provide a more experiential branding environment.

Meanwhile, as consumers with internet access show a preference for free ‘collection’ and returns, accessible out-of-town formats have added appeal. The question for retailers therefore is not, ‘should I have stores?’, but ‘what stores should I have?’, and ‘how many?’.

Deliver on fulfilment Fulfilment has certainly emerged as a key retail battleground. Whereas previously newer services, such as same-day delivery, free delivery and click-and-collect, were a source of competitive advantage, these options are now established in customers’ expectations. To keep pace with demands, omnichannel outperformers are striving for the Nirvana of full stock visibility across channels, to allow consumers to have access to the same product catalogue whenever they desire it. Amid consumers’ price and convenience sensitivities,

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click-and-collect is emerging as the fasted growing fulfilment option. A key challenge for retailers will be how to leverage store formats to optimise service to satisfy this demand, while for etailers, Collect+-style services are becoming an effective vehicle to leverage third-party destinations as collection points.

Balance domestic position with international expansion Integrating channel presences ultimately improves the agility of a retailer’s business model, which can then be flexed to take advantage of new opportunities. In a time of domestic sluggishness, foreign markets, especially developing economies, are proving attractive growth prospects. Multichannel capabilities, through ecommerce technology, are being used by retailers and etailers alike to test foreign markets, before committing to infrastructural investments. Mode of entry, whether it be ecommerce or physical stores, is ultimately a key factor retailers need to consider. However, a retailer’s ability to reach international audiences is largely dependent on integrating its multichannel structure at home.

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