Photo: Kohl’s
Reality hits omnichannel retail with a hard truth
Does a customer really care who handles their purchases, customer service questions or returns so long as it’s fast and convenient? Is a unified back-end process managed by a single entity the key determinant of loyalty in 2022?
Having recently purchased an item from Walmart.com and returning it to a FedEx office closer to my home than the nearest Walmart store, I’d say no to each of these questions. Walmart’s willingness to “farm out” this aspect of product returns points to an opportunity that goes beyond traditional operating models.
The same could be said of department stores spinning off their e-commerce businesses. Many retail experts express horror at what looks like a regressive step in the pursuit of a unified customer experience.
Some fear competition for customers between formerly unified store and e-commerce operations. Others see stores becoming simple distribution centers optimized to support digital sales and returns.
Retail’s omnichannel problem has been characterized as operational silos preventing a seamless customer journey across channels. That was true in the past, but there are factors redefining omnichannel now.
A software engineering team focused on customer experience is concerned with the in-store experience to the extent it helps customers find, buy and collect their purchases most efficiently. Nothing in that statement suggests stores must be owned and operated by the same entity. It’s a research exercise, not a required business model.
Shopping behaviors have been forever changed by the pandemic, with consumers buying more online. Successful digital operations are a necessity, not an option. These need funding and focus given the rapid pace of innovation and competition.
Speaking of innovation, Industry Clouds from AWS, Google, Microsoft and others are driving massive growth in these technology businesses. These are bringing best practices, lower costs and agility to retailers struggling to adapt to constant change, given decades of legacy IT acting as an anchor on digital transformation.
The cloud offers easy access to analytic methods like AI and external data to power differentiated experiences across any touchpoint — be it digital or physical. Greater intra-industry partnering, technology integration strategy and Cloud will define omnichannel success in 2022 more so than intertwining store and e-commerce operations under a single banner.
Discussion Questions
DISCUSSION QUESTIONS: Do customers care who handles their purchases, customer service questions or returns? Can retailers maintain seamless customer experiences via separate physical and digital operations?
Poll
Loading …BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Mark Heckman
Principal, Mark Heckman Consulting
Customers don’t care what company handles their purchases, fulfillment, customer service or returns with one caveat – as long as it doesn’t impact a seamless, frictionless, and fast service. Separating physical and digital operations into two different entities can exacerbate potential issues, such as seamless fulfillment, a focus on customer service and revenue attribution. If the order is placed via an online entity and it is fulfilled in the store (another entity), does the store get compensated in any way for servicing the customer?
Yes – seamless, frictionless and fast service indeed. I had to buy a washer and dryer this past weekend and the whole process took over two hours.
Good thing you didn’t have to apply for a credit card to get 0 percent interest, it may have taken longer!
You are correct — I did!
Separate physical and digital businesses can create seamless experiences but it is more difficult to engineer – hence the reason Saks has a bazillion operational agreements and protocols between its two entities. That isn’t efficient and doesn’t bode well in the longer term when the different businesses may wish to diverge. This whole article also ignores the elephant in the room: why is it necessary to split the businesses? This isn’t about creating more value for the customer or a better experience or allowing more investment to flow to digital. This is a financial move that allows Wall Street to over-inflate digital valuations and profit from it while devaluing stores that play a critical role in supporting the brand. Long term it is a recipe for disaster.
Spot on, see my comments!
As long as I’m satisfied that my concerns are heard, it doesn’t matter where I return the product. But there is a huge possible issue there: for example: FedEx purely takes a return – they don’t hear concerns. The lack of a company who works out a problem has frustrated me considerably with Amazon and most retailers today.
If customers are to stick with you for the long run, they must not only be able to toss product back at you, but be satisfied that someone worked with them. We must not believe that it is sufficient to offer an arms length, impersonal opportunity to toss products back to someone.
Activist investors are pushing stores like Macy’s and Kohl’s to separate their brick-and-mortar and digital operations, but this is totally counterintuitive. Customers want “seamless,” and the best omnichannel retailers have figured out how to deliver that experience. To create two competing entities — both named “Macy’s” — makes no sense from a customer-centric point of view.
I agree that customers don’t care which entity is involved in delivering each touchpoint in a customer journey, but brands should. That does not mean the brand has to control/employ the personnel delivering the service, but brands need to make sure the right framework is in place so they can retain control of what really matters. That means the customer relationship is to the brand and does not end up being with the outsourced service providers. The CRM makes sure the brand is capturing the rich customer insight that comes from each touchpoint so they can improve personalization over time. And there is a focus on revenue/EBITDA so the brand is maximizing its business potential via economies of scale.
After all, you can get very different customer experiences from different employees in the same company, so standardizing around best practices (possibly provided by third parties) should lead to improvement as long as the right framework is in place.
There is no single model that will adequately serve all retailers, products and shoppers. Do I care how and where my Tide Scent-Free Pods laundry detergent comes from? Probably not. Do I care about my suits? YES! (Brooks Brothers, measured and tailored to fit, ready by Tuesday, with final fitting in store!) Ultimately, the shopping experience is part of the relationship and experience with the customer, and there is no “one size fits all” solution. Tech should augment the store and shopper’s experience, not eliminate the need for a relationship between them.
Consumers want a seamless transaction. As long as it is hassle-free they don’t care how each leg of the journey is handled or who handles it. They just want it to be easy.
As long as we are talking seamless, they do care about transparency. Retailers who charge one price online and another in-store are not consumer favorites. Standing in a store but doing a BOPIS transaction on their phones to get a better deal is more common that you might think.
In this omnichannel market we now live in, efficiencies have to be explored and embraced where ever they can be found. I was one of those expressing horror at the spinning off of e-commerce businesses. But that was totally from a merchandising and brand management point of view. The execution of the delivery and return functions can absolutely be handled by third parties. Yes, Amazon owns a lot of its own planes and trucks and can be largely vertical in that regard. But UPS and FedEx work for a great many, many more retailers.
My wife recently bought a pair of new reading glasses that had to be returned. The brand offered “package-less” returns and supplied a QR code. I took the unpackaged glasses to a UPS store where the code was scanned, I was handed my receipt and on my way in less than 60 seconds. That’s about as friction free as a return can get. It’s a credit to UPS but it’s a huge credit to the brand that put that process together. The return wasn’t just free, it was as hassle free as it could get. The brand needed a capable logistics partner to pull off this friction-free return. Points for UPS and huge points for the brand for really thinking it through.
Omnichannel — What does it mean? If you are reading this, you probably know. But your customers might not know, and they don’t care. What they do care about is how easy you make it for them to do business with you. Whether they are online, in-store, or a combination of both, they simply want the experience they want. If you give it to them, they just might come back for more!
The simple answer is YES. Retailers can wisely join forces with a best-in-breed partner that offers certain aspects of customers service or returns.
The difficult part is ensuring a seamless experience for consumers. If there is a hint of disconnection or if the customer has to jump through additional hoops to interact with the retailer, the partnership is doomed.
Returning products can be some of the most painful experiences at retail. Customers don’t care who handles the return as long it is done fairly, efficiently and they are treated well. We’ve been talking about omnichannel in retail for 10+ years now and with all of the digital acceleration in the past two years, customers have come to expect a seamless experience and flexibility. Moving to distinct brick-and-mortar vs. online experiences and processes will be a step back and a competitive disadvantage.
Customers inevitably care about not by whom but how all of their interactions with providers of goods and services are handled. (If they don’t, they should.)
Customers want a seamless experience, delightful product choices, and great customer service. That’s it.
They don’t differentiate between channels or who handles their customer service questions or product inquiries.
I am not convinced separating physical and digital channels is a good idea as the intent is for investors to free up cash and the customer is not in the center of the decision. The customer loses as retailing becomes much more complicated. It’s financially motivated and the physical store, merchants/planners, and store staff seems to lose in the physical/digital war. We should be unifying commerce, creating seamless engagement across channels and this is the exact opposite.
From a customer perspective, anything that makes returns easier is better. There is a business opportunity for a single solution for all online purchase returns.
Unfortunately retailers, or restaurants for that matter, are generally on the losing side when trying to keep up with consumer demand for a seamless experience, whether ordering groceries or dinner. It has not been successful and the industry must find a way to make each side profit fairly. If not, the only ones making money will be the cloud services we all use — AWS, Azure and Google.
Customers have different expectations for service. These are based on category, brand and retailer. What I would expect from Nordstrom is really different from what I expect from Walmart, and there is a difference between my expectations of buying toothpaste and a video game console.
Customers want seamless experiences, from purchase to return. Retailers need to consider what their customers expectations are for their brand when they make decisions about splitting off their digital businesses. Can they insure that the model they go with can the continue to deliver their customers expected experiences?
This line that shopping behaviors have forever been changed just doesn’t hold water. Yes there are many options but that’s not why cleaving off online is popular. It is Wall Street. Shoppers go where they feel they matter. If they don’t feel anything, they might as well shop online. If it is just a replacement, they might as well shop online. But looking at stores as mere waypoints to delivery is a big misstep.
Remember the word synergy? Synergy means “the interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects.” For a historical perspective on websites spinning off from brick-and-mortar, recall Barnes & Noble. During the e-commerce “boom” CEOs and their Board got the advice that you could exponentially increase the value of the enterprise through spinoff of the e-commerce business. Today, digital transformation, tools/solutions enabling seamless customer/member management, DMP and CDP creation for 360-view of the customer, and enabling the ability to efficiently and effectively manage the customer experience are key.
Processing credits to payment type with a return, taking on customer comments relative to return experience, splitting transactions from store and web based on what can be fulfilled immediately and then once items are in stock, call center associates having a single view of customer experience, lifetime value and the benefits they are eligible for — what are the benefits to the customer when things go bad? Do customers care? You are darn right they care — as soon as operationally things fall apart. Be careful on this one, go back and study what occurred pre/post this spinoff scenario and avoid inevitable mistakes.
Beware the risk of oversimplifying “seamless.” While offering specific services from multiple companies may be feasible in certain use cases, I strongly believe there needs to be one holistic strategy for the entirety of the customer experience. Two separate companies, with two separate strategic objectives, investor groups and tactical plans will make it extremely difficult to ensure a unified holistic customer strategy.
If it were true that customers didn’t care about whom they spend their time and money interacting with, then the entire branding tower would have been an expensive mirage. The reality is that customers do care with whom they engage but are not as motivated to peek under the hood into how things get done. Take the post’s suggested argument that the cloud is changing everything and positioning an either/or choice of cloud and technology versus connected commerce under one entity. It does not serve customers, employees, or brands, however it does serve Wall Street interests of moving money around with promises of future realized values that never materialize.
I have been opposed to the word “omnichannel” since the first time I read it for a variety of reasons. First, it was obsolete before it was coined to mean Internet, physical store, and mobile commerce. The consumers had, once again, already moved past the industry and found lots of other ways to transact. Second, Gib is right. Consumers don’t care about how the industry does things, they only care about transactions, service, and service recovery if necessary. How those three things get done and by whom couldn’t be less important. As a shopper I want to find what I want, acquire it, receive it, and be able to return it – all as easily and painlessly as possible at any given moment. As to the second question, if retailers can’t figure out how to accomplish those four things through networks they won’t be able to survive the future, at least at scale.
Yes on every point, Ryan. From the shopper’s perspective, all that matters is that they interact successfully with one retail brand. So the configuration and ownership of back-of-the-house operations are of little interest as long as transactions, fulfillment, and customer service work flawlessly.
Things go wrong for the shopper experience when separate entities are organized to favor passing the buck over taking responsibility. This can be infuriating for customers. It certainly can undermine the shop-any-channel, buy-any-channel, return-any-channel ideal that omnichannel (sorry) is supposed to reflect.
Dissonance in a transaction undermines loyalty. Customers want to be respected. Fair and honest treatment matters. Partnerships that facilitate transactions require clarity. Someone has to own the customer relationship, it can’t be a “hot potato.” Satisfaction remains relevant.
Remember when the so-called outlet business weakened brand integrity, often selling lesser-quality products under that same mark? In many examples, outlets sold brands that the full-line store would never consider stocking. And how did they handle returns? talk about a poor customer journey.
This is exactly the same paradigm, except for the inevitable fight over who gets to control SEO for the respective websites.
Two words. Sports Authority. This is exactly what sank them – the separation of e-commerce from physical stores. What’s more, in the early days of ship-from-store, it took a long time for retailers to align their incentive/compensation models to ensure a good omnichannel customer experience. While I have no doubt that new fulfillment and reverse logistics partnerships will arise, separating e-commerce from stores will result in competing priorities. And the siloed inventory pools will result in higher inventory carrying costs. In the end the customer will be the long term loser.
Customers do not care who manages their experience. What customers to care about is consistency, reliability and predictability. Traditionally, when an organization farms out key responsibilities to a third-party, there are information lags between organizations, so a customer service rep from a third-party may not know about the status of a return from another third-party. As a result, the experience suffers. And it is clear that consumers blame the main brand of the purchase for everything that happens afterwards. To the extent that retailers can create a 360° view of the customer and share that with affiliate organizations, the idea of jobbing out responsibilities is a viable one. When that information breaks down, the retailer will be blamed.
As many as already asserted, as far as the customer is concerned, there should be just one relationship with the retailer irrespective of shopping online or in-store. Accordingly, services and products available should be as close to identical as physically possible to provide the shopper with consistent experience. Where separation may makes some sense is on the fulfillment side of the business, where orders are picked from a warehouse and not a specific store.
The same could be said of department stores spinning off their e-commerce businesses… Whoa! there: that’s a titanic leap of logic. I say the onus is on those who want separation to prove it will work … not to just claim is doesn’t matter.
Sorry Gib, not on board with your hypothesis, though it may be partially correct. Branding is a key element for any retailer in the market, whether they’ve formed it through millions spent on Super Bowl ads and locations or through years of consistent customer engagement. Customers do care about who is handling their purchases, questions, and returns, otherwise businesses like IKEA wouldn’t drive $40B of business, and there would be no such thing as a luxury market.
The second half of your question is about profitability — the integrated market for omnichannel is really an in internal metric and operation. It has little to do with the customer, other (and here’s where you’re right) than enabling fast, reliable, convenient service. That said, it’s the complications of running partner-based operations rather than a vertically integrated operation that changes both profitability and the efficiency of the service. Yes it can be attained, but at what added cost? An internal question for most retailers for sure, but those with more verticalized operations under a single banner (Amazon, Walmart, Target, Costco, Home Depot, etc) have shown more resilience in the market and more retail success.
Omnichannel retail is about the seamless integration of physical and digital retail experiences. It doesn’t really matter who owns what, as long as the environments are harmonized. A website, store, pick-up location, return location, delivery company drop-off location, etc. are all pieces of an omnichannel puzzle that need to fit together perfectly, but do not necessarily need to be part of the same organization. The glue that will hold all of these pieces in place is technology, like open APIs.
It’s not the customer’s job to care about the cost or efficiency of a business they are buying things from. Naturally, all that they care about is quality, cost and their own experience. Behind the scenes, it can be complete disaster, but if you have enough money, the customer can always be right. I have 2 colors of the same rug in our place because the retailer insisted I keep the one in the wrong color at no cost rather than ship it back.
I have read compelling arguments about how physical stores are dead weights compared to fast-growth digital channels. But if the majority of the revenue (and most likely, the majority of the margin) is in the low-growth channel, surely turning that business around makes more sense than stripping out the growth engine. Several years into this pandemic, it’s clear that physical channels are strategic to the long-term profitability of many successful brands. As so many DTC brands have shown, digital-only channels often make for wonderfully unprofitable growth.
But for me, the biggest concerns I have with these arguments is data integrity and data governance. Truly seamless customer experiences and data-driven businesses need a single source of truth. Supplier agreements aside, the data processing agreements to manage increasingly regulated customer data and standardized inventory data across multiple companies and systems would be something to behold.
At some point, this becomes an issue of theory vs practice. In theory, most consumers will say, just give me whatever is fastest, most convenient and reasonably priced for the quality. In practice, however, consumers are used to doing things a certain way: you buy from store A, you return to store A. While technology is available to offer a different, likely faster and more convenient way to manage returns and other operations, it may take some getting used to from consumers. Retail behavior is long ingrained, easily entertained, yet difficult to change. Therefore, both the benefit and risk of implementing new ways of doing things at retail is adoption.
Customers want speed and convenience, but some also like the idea of dealing with the same person or place. It needs to be about giving the choice. There are huge benefits of consolidating and outsourcing returns processes as the outsource company specialises and can attain economies of scale by working across multiple retailers — plus they are likely to have a convenient set of locations to aid the customer.
Future retail is all about ecosystems and collaboration — as long as that is in keeping with the brand promise that should work for the customer.
As suggested in other answers, the real question is what’s important to the business. If returns are considered a necessity that can be handled conveniently through multiple third-party locations, using a third party makes sense.
If e-commerce is a small portion of your business and gets minimal focus and investment, you won’t be able to hire the top tier talent to execute e-commerce versus a pure play e-commerce provider who wakes up every day focused on improving their e-commerce performance. A standalone business that lives or dies on how well it competes could make more sense.
If your customer service philosophy is to do just enough, you won’t attract and build a world class team to support your returns, questions and customer satisfaction follow up. Maybe a third party focused and expert in servicing should be considered.
Smart and skilled employees choose to work where their skills and experience will make them a contributing member of a team that furthers the objectives of the company. Add in that they are looking for some challenge to grow and improve. People needing a job where there’s an opening and are willing to be trained to check off as done whatever you want to check off as done.
Retailers who pride themselves on world class service are more rigorous about hiring, training, motivating and measuring customer success. It should not be surprising that this focus on service creates a magnet for the people who can help them continue to realize their vision of world class service. Start cost cutting and reducing the importance of this group and you’ll see how quickly this world class level fades.
A customer never cares enough if the customer service is handled by a bot or a human. The only thing that matters is the quality of the experience: was it unpleasant or worthwhile, and how quickly the problem was resolved.
It’s hard to provide seamless customer experiences through separate physical and digital processes. Customer experience is more about the whole brand experience than operational efficiency. And, in order to provide a positive brand experience, each and every team member, whether in digital or physical operations, must be onboard with brand initiatives and customer values. Brands must also keep in mind that they are giving a vision, not just an experience.