Insights / Multichannel / Operations
Who is the fittest in cross-channel integration?
- 12th May
- Grant Arnott 209
Nikki Baird of Retail Systems Research talks cross-channel best practices with Grant Arnott. Nikki is presenting “Selling the store staff on the web initiative” at the Internet Retailer Conference in San Diego.
Fears of cannibalisation and alienating store managers and franchisees still deter many top retailers from investing in ecommerce. What advice would you have for overcoming these hurdles given there are a number of successful models for ‘omnichannel’ retail integration?
One, cannibalisation is going to occur, and from our experience in the US, the more you try to fight it, the unhappier you will make your customers. They want to shop across channels, and they don’t understand or like it when you put up barriers to that.
Two, buy online/pick-up in store does help offset some of the cannibalisation that occurs. From retailers who have implemented it, they have found upwards of 50% of online orders result in an in-store pickup. A large, very large (over 50% in most cases) percentage of those in-store pickups are incremental trips – shopping trips to the store that would not have otherwise happened. And once there, shoppers tend to buy more – in the US, a small handful of retailers have reported anywhere from 50-75% of the online basket being spent on incremental purchases in the store. That business case becomes enormous very fast.
Three, return to store of an online purchase, despite the painful supply chain implications, actually also drives incremental trips to the store. And depending on how painful or easy the returns experience is, it can also drive incremental spending once a customer is there.
With franchisees, it’s a little bit different. For a parent company working with franchisees, the strategy needs to be about enabling the franchisees with e-commerce selling tools. Maybe you’re not going to sell online, but you might put inventory availability online so that shoppers can at least make sure that a store has what they’re looking for before they go there. Ace Hardware in the US is a good example of a company with a franchise model who has found a way to accommodate both. But the plain reality for them was that even the franchisees got to a point where they said, “We have to have this, just to compete.”
‘Selling the store staff on the web initiative’ is an excellent topic – what inspired that, and what are the key messages you’ll be imparting?
I’m a “store person” – I came out of the store side of the retail business. About a year ago, I saw a huge shift in the flow of information between store and corporate. Up until then, the primary flow of information was from store to corporate – sales, customer insights, which products are hot and which ones are duds – stores had the best view of the customer, and corporate was always trying to pull those insights out of store employees. But with the growth of online, and especially with the depth of information that online activities provide – both on the retailer’s own site and from activities right before and right after shoppers browse a retailer’s site, not to mention social networking activities – retailers started realising they have a much richer source of information about customers. And the flow of information needed to reverse – stores stopped being the experts on customers, and because the flow of information has long been optimised to get info out of stores instead of into stores, stores started being the LEAST knowledgeable about customers.
Plus, with mobile shopping starting to come into the store, bringing the power of the web to the shelf, stores are now at a serious disadvantage. But any worker anywhere is always focused on at least one thing at all times: how they get paid.
In stores, anything that threatens store sales, and thus store manager bonuses, is resisted heavily. But add on to that new requirements for dealing with customers – whether handling mobile phone price comparisons, or managing in-store fulfillment of inventory, or selling “endless aisle” kiosks – if you can’t make a business case to the store associate, it’s going to fail. And it’s critical for retailers to get these things right as soon as possible. So I took a look at some of the things that retailers have learned from implementing workforce management in stores – best practices in selling store associates on those initiatives – and I took some of the things that retailers have learned about managing cross-channel shopping, and I’m putting it together for a presentation at the Internet Retailer Conference & Exhibition. It’s such a touchy subject – how do you compensate a store for in-store pickup if the web should get credit for the sale? – that we couldn’t get one single retailer to speak about it. So I’m pulling on a bunch of case studies and interactions that I’ve had, as well as RSR’s benchmark surveys of retailers. We’ll get there. I think it’s a really important topic.
In terms of attribution and incentive models to get buy-in to the online channel from the traditional store teams, what are some of the best practices you’ve seen?
Two approaches work best – either, revamp your bonus pools so that you can give double credit (ie. buy online/pickup in store results in a “sale” for both the online channel and the store, but only from a bonus perspective), or attribute all web sales to stores based on postal codes or geographic boundaries of some sort. Best Buy does the latter – in fact, for eight years now they have only reported same store sales growth as a combination of store and web sales based on the geographic boundaries it’s assigned to stores. I’ve seen some retailers try to incent their store associates with bonuses for web sales, but none of them have seen a return on that investment.
You’ve executed a number of studies on cross-channel retail integration – what are some of the key trends you’re seeing now?
Mobile. In the US, mobile is probably one of the top concerns of retailers, not just to have a presence there, but to come up with some kind of answer to mobile price comparison at the shelf. In Europe and the US both we’re also seeing a lot of re-examination of the supply chain, driven by cross-channel concerns. I don’t think a separate distribution centre for direct will ultimately be the end-state design for a cross-channel supply chain.
Retailers are pushing to get to “buy anywhere/get anywhere” but it requires a lot more flexibility in distribution than they have today. We’re also seeing a lot of focus on promotions and getting cross-channel loyalty and pricing down pat, in part because of concerns of price transparency, but also just an acknowledgement that if you’re going to try to present one face to the customer, then you can’t have coupons or gift cards that only work in one channel and not the other, for example.
What do you see as the critical challenges most retailers have to overcome to achieve ‘omnichannel nirvana’, and how can these be resolved?
Ha! That is a very big question. I think the biggest challenge retailers have is their store orientation. They are trying to figure out how to adapt a store-based business model to an omni-channel shopper. No one really has the luxury of starting over from scratch, but if they really want to make progress towards omni-channel nirvana, then they have to step away from their business and think about, “If I was starting this business today, how would it be organised? How would I offer my goods and services to my shoppers? What would I want to do to engage with them?”
Even if what you come up with is a million miles away from where you are, at least you have a better understanding of what it really means to be omnichannel, and not just stores with some cross-channel stuff. That’s a very hard thing to ask of retailers, who operate on very thin margins – transformative business models just aren’t in the budget. But if they don’t figure it out, their customers will – or worse yet, some competitor will emerge on the scene who will steal their customers.
What should retailers be considering now to futureproof their business in preparation for the omnichannel customer?
One view of customer, one view of inventory. Customer order management. With these things, you can go pretty far.
So which retailers are achieving cross-channel harmony?
No one is there yet. In the US, I would point to Best Buy and The Container Store. But even in those examples, there are issues. The Container Store has been relatively late to the scene, just making a push in the last 18 months or so. Best Buy has been the leader by far, but they’ve had issues with deceiving customers in stores with fake web sites that show store prices instead of the real online prices, just as one example. There have been a lot of bumps and bruises along the way. And even the most advanced retailers still have a long way to go.
Nikki Baird is Managing Partner of Retail Systems Research, the Candid Voice in Retail Technology.
