Retailers’ top four omnichannel investments in 2017
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
Our annual benchmark on retailers’ omnichannel strategies shows that core omnichannel technologies added over the last decade are getting a little long in the tooth. What omnichannel means to retailers has changed enough that it is time to re-evaluate whether technology investments are still hitting the mark.
Unfortunately, many retailers are finding their existing systems need to change. The top four places for planned omnichannel technology investments are:
Distributed Order Management:
(46 percent planning a change, 14 percent with net-new budgeted projects)
DOM has evolved significantly over the last few years, especially if you include store capabilities that drive ship-from-store and other cross-channel save-the-sale activities. If existing DOMs can’t take advantage of these new capabilities, retailers can’t afford to lose that much control over their inventory.
Enterprise Wide Inventory Visibility:
(37 percent planning a change, 19 percent with net-new budgeted projects)
Ship-from-store and other cross-channel modes are demonstrating glaring inefficiencies in inventory tracking. I’ve come to suspect that retailers are so bad about inventory visibility in part because they don’t have a strong definition of the term — visibility means something different to a merchandiser than to a store employee. Internal organizations need to home in on what they really need, how “real-time” they need it, or how often they need it.
Enterprise Content Management:
(42 percent planning a change, 17 percent with net-new budgeted projects)
Content management systems have evolved significantly to incorporate both product and marketing needs, and may yet evolve again to include capabilities like managing user-generated content that is posted on social media channels.
Enterprise Cross-Channel Analytics:
(32 percent planning a change, 25 percent with budgeted projects)
Many retailers that use enterprise analytics to look across channels are looking at siloes only and maybe aggregating only financial data, if anything. The most frustrating gap we found was retailers’ inability to tie digital insights to larger business decisions. If they can’t figure that out, how are they going to succeed with omnichannel shoppers?
Discussion Questions
Discussion questions: In what areas should retailers focus their omnichannel investments in the year ahead? Do you see 2017 as a year when retailers will make major tech investments or more of a sit-and-wait year?
Poll
BrainTrust
Ross Ely
President and CEO, ProLogic Retail Services
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
When considering omnichannel, retailers should be presenting their value proposition to shoppers through several different channels and allow the shopper to interact with whichever channel she prefers. Omnichannel for a retailer means providing a consistent experience in the physical in-store environment, the e-commerce environment, the web environment and the mobile environment.
Retailers should be investing in providing a differentiated yet consistent experience in all these environments in order to meet shopper expectations and remain competitive.
Agreed Ross … empty aisles are much less a reflection of poor traffic generation than they are indicative of a poor shopper experience. When in-store shopper engagement is improved the location becomes a destination of choice … and in-store dwell time turns browsing visitors into buyers. What part of win-win-win (brands, retailer, customer) cannot be understood in this?
I have never been a fan of so-called omnichannel thinking. For one thing, to me, it reinforces the notion of executing in silos, albeit with an eye to better connecting those silos. Let’s look at the three “omnichannel” support functions Nikki has highlighted to illustrate my point.
The problem, we’re told, with Distributed Order Management, is that retailers lose visibility to inventory. Now, today’s consumer wants what he or she wants, when he or she wants it. Not knowing if you have it or not, or where it might be, or how you might get it from wherever it is or isn’t to where it has to be is a real issue. The fact that so many retailers are failing to fully leverage the benefits of User Generated Content (UGC) both in terms of co-creation of offerings and advertising and marketing is almost unforgivable in this day and age. You can call it a failing of Enterprise Content Management if you want but it strikes me as a fundamental mis-think about how all retail organizations need to function today. Finally, we come to Enterprise Cross-Channel Analytics — a phrase that couldn’t exist in an organization without silos. The assumption that channel silos need to be institutionalized ought to be scary. The fact that the silos don’t communicate well out to be obvious.
As to the second question, it’s the wrong question. The right question is, “Will 2017 be the year that retailers finally understand that technology alone can’t fix fundamental, organic organizational shortfalls?” We need to rethink retail organizational models first. Then, and only then, do we have a shot at making the right technology investments.
Silos have been deemed inefficient for at least 30 years. During ECR era predictions were made that if companies did not focus on the technology and processes to fully integrate inventory, assortment and communication/promotion information through their supply chain they would become obsolete. Technology has allowed consumers to become more knowledgeable, sophisticated and demanding. Companies need to have fully integrated systems regarding their inventory and communication (including consumer-generated social media messages) to survive and thrive.
Omnichannel is still about traffic and conversion. Of these, conversion is key, a fact too seldom lost in the face of ad buying and other marketing investment decisions. In the measure of revenue per customer, the actions that move the needle on visit frequency, basket size and enquiries drive retail success. Store visits that do not convert to profitability are a tree falling in the forest that nobody hears. It is no surprise that the significant failures of omnichannel have been in areas that do not generate large and ongoing spending by retailers and brands. In-store dynamic signage and media is such a case. Very high ROI is typically realized on minimal investment that is rapidly applied. Its growth rate of about 14 percent annually suggest that some retailers are getting it, but the job security of analysis paralysis is a short-term comfort. Retailers need to place much more emphasis on shopper conversion.
Out of the four areas highlighted, the two that would have the greatest impact for shoppers are Enterprise Content Management and Inventory Visibility. These can be achieved today and provide the most rewarding results for shoppers, brands and retailers alike. While quantitative analysis is core to my business, I use analytics to support retail process and shopper experience designs. I look for pragmatic designs that require “little data” as opposed to Big Data. There are wonderful cost-effective technologies and processes available today that could immediately benefit the omnichannel experience. The question is, will retailers and brands have the courage to move beyond the status quo and internal politics and implement meaningful change? The shopper expects these experiences and she’ll be drawn to those brands that deliver on her expectations. Those that don’t come to terms with that reality will continue to be marginalized.
Sit-and-wait is not a viable strategy in a dynamically changing industry. Customer expectations and competition will put pressure on retailers to up their game and technology investments in 2017. I would figure out a way to address all four of the above areas of orders — inventory, content and analytics — as they are all relevant and vital to success in a world defined by the digital consumer.
Having to pick just one area, I’d put enterprise wide inventory visibility at the top. Having the right inventory, knowing where it is and how it’s performing will positively impact the shopping experience and create more satisfied customers and empowered associates with top- and bottom-line results. Additionally, being forced to view inventory across the enterprise can kickstart efforts to break down organizational silos and accelerate the digital journey.
Transmedia in enterprise content management — the re-use of brand assets — reduces communications cost, time and complexity while supporting brand fidelity (the consistent presentation of the brand). Inherent in this is the testing and optimizing of messages to segments that are more and more granular. A significant side benefit is that the silos of marketing communications and customer experience interact with each other internally. But, lest the pendulum swing too far to the side of common use of brand assets (logos, photos, video, etc.), every communications device brings different strengths and messaging must exploit these.
Static signs for example are five times more effective with slight animation for presentation on dynamic signage. Only parts of a video used online or for TV are needed to get action when presented on digital signs, and only the key value proposition and call to action from website information are needed to generate buying intent from in-store digital display.
We are definitely seeing an intensity of interest in DOM (Distributed Order Management). Many retailers are becoming aware of the challenges of omnichannel and their full needs, while others are realizing their older on-premise systems need a change.
I agree that a fundamental part of a robust DOM is inventory visibility with the ability to pool, manage and control stock regardless of location. A recent stat from Forrester showed that 73 percent of consumers who knew a store had the stock they wanted were likely to visit the store. Show and sell it online, then provide the choice of immediate pickup in-store. When in-store there is a high chance for extra purchases. That’s the omnichannel promise.
As Nikki points out — a good DOM and Inventory Visibility is where it all starts for retailers!
Based upon my interactions this week at a large (10k attendees) event, retailers with whom I spoke anecdotally did state they have huge interest in investing in the coming year. External studies are also showing this. I think the areas articulated in this article are spot-on. I’d add real-time personalization and predictive customer analytics.
What’s shocking to me is the lack of focus on profitability around distributed order management (DOM). DOM is rightfully at the top as it allows retailers to meet missed demand. However, if you crank it up without any thought on process, you quickly run out of profit. A simple example — splitting orders to be fulfilled from multiple locations is expensive … more labor to pick the order, more expense on shipping materials, more shipping expense, etc. Also, the opportunity cost can be high. If you sell through store inventory due to omnichannel fulfillment, you end up missing sales for in-store shoppers. Now there are other benefits, such as selling through items before they have to be marked down, but overall the lack of controls around profitability have made this top investment area feel like “empty calories.”
Nikki would likely not be surprised to hear that I agree with her recommendations as to the areas of investment, but I learned the hard way yesterday that I must always remember to try to help retailers prioritize their investments. While co-hosting a webinar yesterday, I was asked this question:
“As a retailer early on the journey of a digital transformation strategy … do you have more info on the best steps to take to achieve that, what to avoid, learned pitfalls etc.?”
I somewhat guiltily realized there are likely a lot of retailers asking this question, and that I had failed to provide any guidance during the webinar. So, here are my (belated) thoughts:
While there are dozens of theories as to the “best” way to evolve, I believe a few building blocks must be in place:
There are certainly other building blocks to consider (especially CRM and Sales Audit), but with respect to the specific items outlined in Nikki’s post, this would be my prescription.
Given the uncertain nature of the retain environment, the best retailers will have to double down in investments that can drive customer retention and cost management. Inventory visibility will be critical for Buy Online Pickup in Store (BOPIS) as well as ship from store and other initiatives. One important factor in inventory visibility is improved inventory forecasting that includes both the quantity of inventory available and where that inventory is located. Combining both factors will allow the best retailers to reduce stockouts, improve BOPIS performance and reduce costs at the same time.