Retail’s rocky road to omni-channel
New research from Accenture and Hybris Software, conducted by Forrester, finds that organizational, operational and technological challenges are hampering retailers’ efforts to meet customer demand for a seamless shopping experience across channels and touch points.
According to the study, 71 percent of shoppers expect to view in-store inventory online, and 50 percent expect to buy online and pick up their purchase in a physical store. Yet, only 36 percent of the retail decision makers surveyed said that they’re able to provide customers with in-store pickup of online purchases, online visibility of cross-channel inventory and store-based fulfillment of online orders.
Accenture said the list of challenges that retailers face can be broadly categorized under three themes:
1) Organizational and ownership challenges. Despite the fact that 46 percent of the retailers have a dedicated omni-channel team, fundamental silo barriers and conflicting priorities remain. Thirty-four percent of respondents report that conflict between channel organizations is still a major barrier to success. Only 16 percent of retailers report that attribution of the sale revenue is irrelevant. Said Accenture, "The reality is that only a few retailers have yet completely dismantled their online, offline, and mobile channel silos, implementing a single retail P&L with an associated organizational structure for all sales regardless of channel."
2) Technology and integration challenges. Forty percent of retailers report difficulty integrating back-office technology across channels. Only 32 percent currently expose real-time store inventory online. Retailers have aggressive technology investment plans to support its omni-channel efforts but face often-lengthy implementation timelines. Said Accenture, "Many retailers are simply paralyzed; unable to implement simple capabilities like store pickup despite the fact that their customers already have basic expectations for these capabilities."
3) Operational and execution challenges. With associates expected to be "not only sales associates, but also product evangelists, customer service advocates, and distribution experts," 40 percent of retailers say that associate training is a major barrier to omni-channel success. For example, the 48 percent that have rolled out ship-from-store programs are challenged or very challenged with picking accuracy, and 44 percent struggle to find the resources in-store to perform these pick-and-pack tasks in a timely fashion.
Discussion Questions
What are the biggest barriers you see being faced by retailers when it comes to developing omni-channel capabilities? Why is it taking so long for retailers to utilize their physical stores as a strategic omni-channel asset?
First is C-level leadership and buy-in: all facets of the organization must be on board and work together toward the goal, whether it’s called “omni-channel” or something else. This leads to the issue of siloed functions: marketing needs to share data with merchandising, stores and the e-commerce team. If each business team is functioning with different data, then a cohesive omni-channel effort will be fruitless.
The companies having the greatest struggle in this area are the long-standing, large brick-and-mortar merchants that started with stores and then moved to e-commerce. It’s a struggle for many to break away from the ways they’ve been conducting business for 50 years. They can learn a lot from the newer companies that started with an e-commerce business.
Well, 100% of retailers have “expected” to view in-store inventory for generations. We’ve all had the experience that the counts don’t match the computer for a variety of reasons.
This from one of my Facebook fans: “I went to a large home improvement store and, when unable to find what I needed, I asked ‘Where is ___?’ and the employee pulled out his smart phone, opened the app for the company, typed in the name of what I was looking for, clicked “find in store” and told me it was on aisle X, bin Y. Then – while standing a few aisles away – showed me on his phone the 5 options they have online. Finally, he took me to the aisle and bin and they only have one style in stock. So he suggested I download the app to my phone and shop online.”
Would that online tool have been more accurate?
Retail has always had flaws due to shrinkage, mis-placed items by consumers, mis-tagged, and simply missing items.
Is this expectation that a 100% view of inventory possible? And if so, is it being driven by the service providers chastising retailers they aren’t doing it? I think so.
Retailers are not blind to the importance of developing omni-channel capabilities. The challenge is organizing and managing all of the stakeholders to architect a holistic solution. Getting them all together and in agreement of a meaningful workflow to the benefit of their shoppers and customers is counter to the long established culture within a retail organization. Once you actually get consensus you now have to execute. This is a very disruptive exercise and the forces of the status quo are extremely difficult to overcome.
Online and mobile are hot topics and frankly fun to develop so the lion’s share of attention and resources go towards those initiatives. The physical store is a difficult challenge to address in the digital landscape. The design of the environment and workflows of the physical store in the world of the digitally empowered shopper is still being understood. Between that and the simple fact that the required changes are expensive, disruptive, and frankly not very popular.
Saying that you are “omni-channel” does not make it so. The only vote that counts is that of the consumer.
Consumers are increasingly “getting spoiled” by those retailers offering seamless service across all shopping channels. When leading retailers make it possible for consumers to see what inventory is available by store, that becomes a benchmark that consumers come to expect as a standard.
The biggest barrier that many retailers face is that they have a store heritage and think of stores first. Tom Ryan makes two excellent points:
1. Change starts at the top. Retail executives must remove the barriers and competition between store operations and online ecommerce. For that matter, they need to get teams to focus on mobile as the “store” many future consumers will prefer.
2. True omni-channel retailing requires systems and technology. Most bricks and mortar retailers lack the critical infrastructure to make online and stores seamless for consumers.
Retailers tend to focus on problems that touch the most customers and affect the most dollars. For many, this relegates omni-channel matters to the second or third page of the list. Clearly, this is a mistake. The future of many of these retailers rest in their ability to anticipate the shopper’s growing expectations of a seamless interface between on-line and in-store experiences.
Small issues such as not be able to easily return an online purchased item in a bricks and mortar store is enough to dissuade the shopper from repeating another purchase from a retailer that has not figured out the basics of omni-channel engagement. Retailers must be able to see the shopper across all touch points. This is still not the case with many retailers who are struggling with omni-channel commerce.
It typically is the systems that are the barrier, but along with systems comes the stores’ personnel and know-how in terms of demonstrating that a relationship and experience with the retailer is consistent whether it be online or on-foot in the store.
High tech has long seen the rise and fall of entire companies based on foundational shifts. Adapting and taking advantage of Internet and mobile rocks the very core of how retailers are structured, how the operate and how they view success. As always, this fast pace of change is driven by the customer (not the store) and is having a huge impact on retailers. It’s the Innovator’s Dilemma…applied to retail. Many companies will disappear but a few great ones will manage to take advantage of the changes and thrive.
The barriers outlined in the report are all real, but the overarching issue is corporate culture. It is part and parcel of the operational, technological and execution changes and needs to be transformed to help lead the change.
For a humorous April Fool’s take on omnichannel – http://bit.ly/1ebYFev.
I could say the biggest barrier is technology, but that’s really pointing the finger back to the real culprit – the organization. Marketing and merchandising groups have been in a turf war since before Harrods opened its doors almost 200 years ago. While many CEOs have tried to temper this battle, some even going the route of combining the two departments, it still is an issue.
And omni-channel is just pouring gas on the fire. Marketing thinks they should own the strategy because they are charged with creating demand. Merchandising thinks they should own the strategy because they are charged with fulfilling demand. Only when these two groups to truly collaborate will companies can get the benefits from omni-channel strategies.
There really are only two problems as I see it:
1. Mindset – the hardest of all things to change.
2. Software quality – the poorest quality man-made product since the beginning of time.
I think one barrier is enabling the feeling that there is a human contact that is coordinated with others across all channels – we spend a great deal of time, absolutely necessary to be sure, on inventory and data, but shopping is so integrated with life that I think a well trained intermediary can help add value to people’s lives and help define a brand.
The disconnect between shopper expectations and retailers’ ability to create seamless experiences is not new. The reasons for the phenomenon run pretty deep, or the problem would have been fixed by now.
The operational and executional challenges are simply legacy systems, built to deliver maximum efficiency under a different shopping paradigm. It’s the legacy of the past which is holding back retailers. Amazon didn’t have a pre-internet legacy, so it was able to establish its business model in the modern world. Same with eBay.
To me, the lesson here is to create flexible merchandising, ordering and delivery systems, which are geared for a digitally connected shopper — regardless of what platform, location, payment method, or language she is using.
Until retailers are indifferent to where a product is sold, they will never fully understand or accept omni-channel. They have to understand a sale is a sale is a sale. It is not more valuable if it is made in the store or online.
Unfortunately, most retailers are in the mindset that they associate revenues with the walls that make up the store. They panic if same-store sales drop. They do not see that if if same store sales drop 4% but all channel sales increase 6% that is a huge win.
The retailer mindset has the tail wagging the dog. The tail is the store. The dog is sales. In this discussion, I have had retailers ask me, then what do I do with my stores? The answer is simple, it doesn’t matter as long as the sales increase.
Hmmm: Corporate silos, lack of IT integration, and retail execution. This study’s summary kinda sums up the industry’s challenges for decades! No news, really. If these three areas can be effectively improved, much more than just the omni-channel obstacles could be overcome. In-stock conditions at the physical store, shopper experience throughout all channels, supply chain inefficiencies and marketing messaging can all be positively impacted by these three areas’ improvements.
The first step is to create or revisit the entire retail omni-channel strategy. Create actionable vision and mission statements. From there define the goals to indicate successful execution of the vision and mission. Then create objectives to implement the goal actions. Simple, basic stuff. Just not that easy.
Get the silos together and define ownership. Review IT and eliminate redundant and irrelevant systems. Then, the hardest part, execute at retail level in all channels. There are plenty of great examples out there. Don’t be too proud to leverage them. No need to reinvent the wheel.
The number one challenge facing self-service retailers is their #1 source of profits: their suppliers – trading allowances, slotting fees, promotional money. These, essentially “advertising costs” for their suppliers, have made self-service retailers into merchant warehousemen over the past 100 years.
It is a devilish fiction that their main business is serving shoppers. Bull roar! Their main business is managing their suppliers’ access to the shoppers who visit their neighborhood warehouses, aka “stores,” to sell themselves what they, the shoppers, want. These simple facts account for the dunderheaded efforts they make when the greatest salesman on earth simply poaches their customers at will. They think: Ah, he is ONLINE, so let’s add online to our portfolio.
Here’s a clue: it is NOT online that is Bezos’ not very secret weapon. It is an intense and relentless focus on, and understanding of the shopper. My documentation of how self-service retailers, as a class, trample on the shoppers’ interests, is extensive and public. But who cares, when the REAL source of your profits is your suppliers, not your customers.
Being a technology person myself, I must say that it’s the technology architecture that is the biggest problem. Once that part can be straightened out, organization and operation can happen.
Retailers have been living with cobbled up systems and redundant, unclean data for as long as I have been in the business. That’s a long time! Multiple operating systems, diverse hardware, old software, new software patched on, rigged data to make it work, high need for maintenance, you get the picture.
Just rip it out, you say. Not so easy. Not to mention, very costly. The solution for many retailers lies in the cloud. If they can just get that data clean, with one version of the truth, and lift it above the enterprise, they are then on the road to that needed visibility that will make omnichannel a possibility.
Next step, start tackling priority functionality from the enterprise perspective. This means technology, organization and operation, one step at a time. Save the dismantling of the cobbled mess to be done over time, all the while keeping the lights on. And that’s my 2 cents.
The mere existence of an omni-channel team in any retailer is proof of daunting organizational barriers. Do we really believe we can solve the silo problem by creating another one?
This concept needs to graduate from a program to a business fundamental, and in a hurry. Glad to see this report says so. It is well worth noting the enormous distinction between omni-channel retail operations (internally focused) and a seamless, consistent shopper experience across all touchpoints.
This study does a good job of exposing some shopper preferences, but its recommendations are operationally focused. The three actions here may well be prerequisites for delivering that shopper experience, but I gravitate also toward two others in the report:
“Establish clear goals that bridge the gap between your customer’s expectations and your existing capabilities.” Don’t make the trip without a road map.
“Turn your physical store into a service and engagement center.” Big idea for brick and mortar relevance. Move the service center out of the back corner and showcase inside the main entrance. Define policies that make shoppers feel successful just for asking.
This Forrester report does imply that retailers should begin with the shopper and build back. Sorry if that’s hard. You don’t really get a choice.
Trying to be everything, everywhere is the biggest barrier retailers will attempt to overcome, but likely end up being overwhelmed.
Recommend at this stage to only promote omnichannel at flagship locations to mature the service before rolling out to all lcoations.
Too many retailers view omnichannel as a to-do item on someone’s annual goals: implement the technology and we’re done, whew! Seeing this in black-and-white, it’s clearly an oversimplified view.
Omnichannel relies on technology but technology isn’t omnichannel. Omnichannel is a state of mind, a central philosophy on how a retailer chooses to engages its customers. It’s essential for leaders to refocus their organizations on this new philosophy in order to achieve omnichannel success: where the head goes, the body will follow.
Retailers with the proper omnichannel mindset will:
The underlying issue is that being a true omnichannel retailer requires a significant amount of change for a B&M retailer, and most people avoid or seek to minimize the scope of change until it becomes a crisis. In order to truly become omnichannel, a retailer will need:
1. Commitment from the top.
2. Restructured organization and compensation plans.
3. Technology.
It will require an extensive effort akin to retrofitting an airplane in the air, but it is completely within the reach of a committed CEO.
Why has it taken so long for retailers to utilize their physical stores as a strategic omni-channel asset? Uncertainty on the best approach, and an unwillingness to make a wrong bet. However, omnichannel is critical, and s/he who hesitates is lost.
The biggest challenge facing retailers is coming to the understanding that omni-channel strategies work because they focus not on the delivery, or on the communications channels, but on the customers who use them, enabling them to move easily from stores to the web or to a mobile app. This absolutely requires approaching business outside of traditional silos and with leadership from the top, as Chris Petersen, Ralph Jacobson and others point out.
As consumers increasingly adapt to multiple channels, they expect to seamlessly deal with a retailer through all of these channels when and how they choose based on personal needs, timing and mindset. Loyalty programs and the data they collect can play a key role in encouraging increased brand interaction, and serve as a unique identifier that can follow a customer’s purchase behavior across all touch points.
Many organizations have an in-store or web or mobile strategy. But they should have a customer strategy first. The question isn’t: What do we want on the web? You must first ask – how does the customer want to interact with each of these channels? Effectively implemented, such a strategy enables retailers to get the most mileage from their national inventories.