BrainTrust Query: Four Keys to High Online Growth for Omnichannel Retailers
Earlier this summer, we conducted a private benchmarking study for clients that were interested in learning approaches to omnichannel integration from peer companies. All of the participants were historically strong brick and mortar or catalog retailers in various stages of growing their online business. Four of the companies in the study grew their direct business in 2012 faster than Internet Retailer’s Top 100 average (range was 20 – 40 percent growth).
As part of the study we looked for commonalities among those four high-growth companies and here is what we found:
1. Shared Services for Merchandising and Creative – At these high-growth retailers, merchandising groups are organized by product category, not channel. Within the teams, store and direct merchants collaborate to present a consistent offering to the customer, regardless of channel shopped. Similarly, the creative function operates under a shared service model, following product launches or marketing campaigns across channels.
2. A Different Approach to Talent – The retailers are sourcing talent and making key hires from tech companies like Amazon, Microsoft and IBM. Some of them are located in tech hubs like Seattle and San Francisco and those that aren’t are opening "lab" style satellite offices in one of these key digital talent markets.
3. Technology Investment – A shared services approach won’t be effective unless the systems are in place to support it. The leading retailers in the study are now benefitting from their previous investments in fundamental infrastructure, including integrated inventory management, product information databases and creative asset repositories. They have turned their attention to the "front-end" and are investing in both e-commerce features (ratings and reviews, social integration etc.) and digital tools that empower store associates to serve the omnichannel consumer.
4. Reinventing the Catalog – Many retailers have changed or cut back on their catalog strategies, but the leading retailers in our study have reinvented how they use the catalog. Printed catalogs have become "lookbooks" incorporating high quality photography and design values, while digital catalogs have emerged with direct click-to-purchase functionality. In some cases, merchandise is now featured alongside editorial feature stories. Whether print or digital, the primary role of the catalog is now as a marketing vehicle and a venue to tell brand stories.
While these four strategies are not the only ways for a traditional retailer to grow an online business, there was a clear correlation in our study between a high degree of channel integration including the strategies above and a high rate of growth in the direct channel.
Discussion Questions
How would you rate the four strategies mentioned in the article toward guiding omnichannel integration? Which approach is the most challenging for retailers to tackle?
In order to maximize the efficacy and efficiency of communicating with your digitally empowered customers, both merchandising and marketing teams need to collaborate and work as a synchronized unit. Historically, these two departments never worked together in a retail environment. The expectations of today’s shoppers have (and should!) forced retailers and brands to break down these silos and create a structure where ALL departments are integrating their efforts into a seamless shopping and buying experience.
I do think that merchandising and creative is the most challenging for retailers. It is the same old story of too many silos. When the online management and the in-store management are not the same, you have problems. Too many cooks in the kitchen, which creates more problems, instead of helping the customer to shop.
In my experience, shared services for merchandising and creative is the hardest to execute efficiently and also has the highest impact potential (good or bad). As with any major project, this involves people, process, and technology working together toward a common vision of success.
There are obstacles in all three areas to overcome. The webstore represents a small percentage of a mature omnichannel retailer’s revenue, yet it requires more individual merchandising and marketing effort than a similar unique brick and mortar location. Assortment planning, allocation and replenishment systems can handle localization via segmentation, profiles or other mechanisms. The webstore isn’t just unique in its size, it’s unique in its mix, in how the mix can be presented, what the competition is, how the product is marketed, and to some degree, how sales are driven promotionally.
So while integration of merchandising, creative and marketing is essential to driving a holistic omnichannel experience, it is a highly complex outcome to engineer. And once engineered, it requires business performance monitoring in place to ensure that the forces which seem to act against that integration are mitigated.
Any plan for business to engage a market is made with tangible and intellectual components, timing, and a course of actions and integrations to reach a specified goal. PERT, CP/M and GANT charts are a clear demonstration of these needs working together for a purposeful goal. The testing of the plan for removal of identifiable excess and to qualify the plan’s ability to reach its goal inside of budget and on time is only an assurance to investors, not an insurance of success.
Once a plan is approved, budgeted and put into motion, no component is of any more value than another. The possibility for budget shortfalls must be compensated and/or reconciled with time. The additional time can be placed into the plan in any one or all of the components as the directors complete plan testing, and with test results seek approval for the timing changes by demonstrating plan integrity.
But the removal or redesign of a component(s) will surely provide a different result from what was paid for and expected when initially approved and budgeted. To suggest or plan for components on a priority basis is what the charts are for, but to remove an approved component will open the operation to turmoil and risk unpredicted delays and even complete failure.
Today’s discussion provided an excellent snapshot of new and ingenious components put into place for a 21st century retail business plan. I am confident that they may be scheduled for completion separately or even prioritized differently, but all are necessary for the goal and rewards to be attained.
Without the right infrastructure, all else is moot! Retailers have been challenged by their cobbled together technology platforms for as long as I have been in retail…almost 40 years! The mis-mash is the result of trying to adapt to new technology over the years without ripping out and replacing.
I feel their pain! But the time has come to build out that new infrastructure that will allow them to move into the future. With the cloud, some retailers are finding a way to work around without having to rip out all at once. They are also adapting SaaS solutions and that can be a really smart move on many levels.
Once the infrastructure is in place, the silos can come down, there can be one version of the truth as far as inventory goes, and they can start to have one view of the customer. It’s a hard row to hoe, but it’s time to take the first step, if they haven’t already! Just sayin’….
Good strategies. The toughest part to implement would be Shared Services for Merchandising and Creative because of the inherit differences in approaches of store and web operations. It is easier for retailers who started on the web or with catalogs that also has stores to do this integration, than a store-centric retailer. If the retailers have an even split between web and store, I think it is very hard process-wise to merge with the the classic Store (big $, low growth) + Web (small $, high growth) model.
Are these strategies or tactics? I love the list, but strategically, I think the overarching theme, unmentioned perhaps because it’s so obvious or overused, is a focus first on designing the appropriate customer experience. When customer experience is the north star, then these tactics make total sense. Customer experience is not tactical, it’s theater and theater is much easier to execute digitally then physically.
Retailing is in the movie business, and the question one might ask is: “What tune do you want your customers to whistle when they leave the theater?” Write your script and then work on figuring out what types of trucks you need to rent to feed the crew.
Of all the strategies mentioned above to support omnichannel integration, the most important—and the most difficult to achieve—is the integration of merchandising and creative across all the channels. Traditionally, the direct and web channels have been measured individually, and often have their own buying organizations—purchasing product that is “right for their channel.”
One of the barriers to this integration is the lack of education among the merchant teams in digital and direct marketing approaches and product preferences. Buyers must begin to look at their categories and consider what products will appeal to consumers at what time in what channel. For example, consumers may wish to purchase hard goods at retail, but purchase parts and consumables online.
Merchants need to shift their definition of success. It will no longer be the amount of MDF obtained nor the margin percentage; rather, the new metric will be share of customer spending and the associated raw margin dollars. After all, those dollars are “what keeps the lights on,” not margin percentage.
The retailers who achieve this goal will be very formidable indeed.
I agree that presenting a consistent offering and brand experience across all channels is vital to growing an omnichannel business, but it’s also important to recognize the unique opportunities for optimizing your message for each channel. The true challenge is to build a team that can both maintain consistency while effectively tailoring the presentation for each individual channel.
This isn’t really a new concept. For years marketers have been tailoring messaging based on media (TV, radio, print, billboards, etc.) while maintaining a consistent brand image, but the challenge is magnified significantly by the interactivity and targeted nature of digital channels.
This may be a biased perspective but I would say the area where we have seen the most success for omnichannel retailers has been in technology investment. From behind the scenes tools, to on-the-floor tools (such as mobile apps to give the employees timely and accurate competitive price and product intelligence), investing in technology has enabled retailers to transition from reactive to proactive market approaches. Best Buy Canada is a great example of an omnichannel retailer who is using technology to improve it’s omnichannel presence.
In terms of which approach will prove to be the most challenging, it most likely will depend on the retailer and what infrastructure they already have in place.