This holiday season was one of the first real opportunities for retailers to flex their omnichannel muscle. A shorter-than-usual holiday season, combined with ongoing economic uncertainty, led consumers to turn to a variety of shopping channels in their search for the most efficient and cost-effective way to round out their gifting lists. Likewise, many shoppers also demonstrated a desire to return products across these various channels. But were retailers ready?
Not surprisingly, most companies were underprepared. According to a Hay Group survey conducted in advance of the 2013 holiday season, 86% of major retail organizations were either still in the process of developing their omnichannel strategy or did not have one at all. The result was exactly what we might expect: more of the same.
Many organizations were still unable to provide key services that customers demanded, such as cross-platform product delivery. Shoppers purchasing holiday gifts online from these companies, for example, were unable to pick up the item from their local brick-and-mortar store location. At the same time, customers looking to return items were often required to retrace their steps instead of exchanging an item purchased online while shopping at an in-store location, or vice versa.
In essence, “more of the same” meant more frustrated customers. Given that many stores offer extended return periods after the holidays, these problems are likely to continue well into the New Year.
While many retailers today understand these evolving consumer demands, they still struggle when it comes to developing an effective response. Part of the challenge is that no one has clearly defined what omnichannel means to a retailer, though most will agree that it’s critical for their future success. Some organizations see it simply as getting closer coordination between e-commerce and stores. Others approach it as a total redefinition of how they will develop an effective and integrated two-way relationship with their customer base. All organizations can agree, however, that creating a seamless way for customers to shop and interact with retailers is the foundation of this approach. The race is on in the industry to roll out a new way of doing business, both to protect current market share from the e-commerce business as well as to steal market share from others who are behind the curve.
So what is causing most retailers to move so slowly on what is clearly a critical strategic effort? The major issue is that this transition requires a major investment to change the way they operate. There are two major barriers in the implementation of their omnichannel approach. To keep up with the customer, organizations will need to address merchandising systems and data analytics.
Merchandising technologies used by retail organizations have traditionally operated as independent units supporting the different sales channels. For this reason, it’s not uncommon to see different processes used for stores, e-commerce and even catalog — a fractured structure that is already outdated. To update these systems in response to customer demands and amplify the company brand in one voice, many retailers are now moving towards a single, cohesive system that allows them to track customers and merchandise across all channels.
The ability to properly mine and analyze customer data is one of the most crucial aspects of the omnichannel process. The emergence of new technology, including social media, website analytics and internet cookies, has flooded the market with additional data sources for retailers to harness key information about their customers’ shopping habits.
This has proven to be both beneficial and overwhelming, as organizations are still figuring out how to track customer activity across all of these channels in a meaningful way. If the full scope of data is not being captured and leveraged, a true omnichannel approach will be difficult to reach. On the positive side, if executed well, retailers will have more consumer data than ever at their fingertips — not just after-the-fact sales data, but also data that captures intention to buy, which is an insight that has never before been available.
Both of these efforts require major investments both in capital infrastructure as well as creating new skills and capabilities that can successfully operate in the omnichannel environment
Developing an Omnichannel Workforce
Recognizing that these issues need to be addressed, leading companies are taking action to build effective omnichannel teams. Successful organizations will be those that are able to build a workforce that operates across channels as a single unit with the support of robust data and IT capabilities. While we’re still years away from this being commonplace, select companies are moving in this direction.
For example, corporate headquarters are beginning to blend the in-store and e-commerce functions in an attempt to facilitate information sharing and managing cross-functionally. E-commerce merchants bring with them a broad category perspective, but often lack a deep understanding of the individual product lines. In contrast, store merchants have a very robust knowledge of the products being offered, but at a much narrower scope based on their particular product focus. Collaboration between the two is an excellent first step in creating a consistent brand experience: one of the most critical aspects of omnichannel.
Retail is also heading towards a more matrixed structure that breaks down the traditional industry silos. In doing so, successful organizations will be able to develop more fluid inventory processes, create better career pathing and establish more consistent pricing across channels. Companies can further engage their workforce by transforming reward policies that offer incentives that transcend the traditional channel format. Employees should be encouraged to close a sale with the customer, whether it is online or in-store, as both will ultimately benefit the company’s bottom line. To do so, this should be supported by reward programs that encourage employees to grow the entire “sales pie” versus just their “slice.”
Where Do We Go from Here?
The future of the retail sector will be shaped by the companies that best adapt to their customers’ needs and by the experience they offer to the shopper. For shoppers, relying on brick-and-mortar store locations is a thing of the past. Today’s consumers have instant access to thousands of products, in myriad models and colors, and at various prices — all at their fingertips.
Maintaining an ongoing dialogue with the customer across every channel is the only way to accomplish a successful omnichannel experience. Data through mobile shopping platforms and websites, coupled with the real-time feedback offered in stores and via social media platforms, will allow organizations to truly understand what the customer wants. Seamless coordination of the workforce across these channels and the supporting organizational structures will allow for the clear and consistent branding and pricing that the customer will recognize. Finally, the overarching omnichannel supply chain processes and unified inventory management will allow companies to adequately meet the customer’s logistical expectations.
The sector is still far from perfecting this process, but in time, retailers will wonder how they survived without it.
Maryam Morse is national retail practice leader at Hay Group, a global management consultancy that works with leaders to develop talent, organize people to be more effective and motivate them to perform at their best. Hay Group has more than 2800 employees working in 88 offices across 49 countries. Visit www.haygroup.com for more information or contact Maryam at Maryam.Morse@haygroup.com.