Strategy – How many stores do we really need?

In the midst of announcements from major retailers that they are downsizing their estates Tony Stockil, CEO of Javelin Group, provides comment on what the future holds for UK store and multichannel retailing.

ECOMMERCE and multichannel retail are now dominating the retail agenda and Javelin Group’s forecasts suggest that ecommerce will continue to grow its share rapidly to 2020 at the expense of town and shopping centre store sales which will shrink by 27%.This will result in 21% less retail space and 31% fewer non-food stores in these venues.Average space productivities and gross margins will decline among the stores that remain, in the face of rapidly shifting customer behaviours and competitive dynamics. In short, retailing is now entering one of the most disruptive phases in its history.

Given this, the implications for major retailers are urgent. For those who can make the necessary transformation swiftly, a significant opportunity exists to win market share from the many who will not.

Javelin Group has undertaken detailed research and modelling across the four largest non-food retail sectors (Electricals, Clothing & Footwear, Furniture & Floor Coverings and Health & Beauty) which together account for over half of all non-food sales.We have considered how sales in these categories will grow to 2020 and the share which will be taken by different retailer- and venue types and by different customer journeys (e.g. store only with no influence from the web, research online and purchase in store, click and collect etc).

We forecast very slow headline growth across these four categories and across all channels, of somewhat less than 1% per annum in constant terms. However, the share of ecommerce (through all devices and from all locations, including kiosks in the store) will grow from 14% to 34% of sales in the four categories.Most of this will be accounted for by the ecommerce operations of leading store-based retailers but internet pure players will nearly double their share of the total market from 4% to 8%. Sales transacted ‘over the counter’ in stores, including those researched online but transacted in store, will decline from 86% to just 66% of sales by 2020.

The continued growth of ecommerce in its various forms will be fuelled over the next 5 years by the rapid expansion of mobile commerce which will transform the customer’s multichannel journey beyond anything yet seen at scale. By 2020, the mobile device will have replaced plastic loyalty cards, will be the main method of payment for retail transactions,will be a major form of localised direct marketing for retailers and, of course,will be an important source of product and price information for customers on the move and within stores.

It will be further fuelled by the coming of age of in-store ordering through self- or assistedservice kiosks, in-store tablets held by store staff, and e-boutiques (i.e. spaces within stores dedicated to presenting extended ranges through interactive screens).

By 2020, chain stores across all major non-food categories will see the web playing a role in 75% of their transactions (up from 44% today),most often as a source of research before buying in store (research online and purchase offline/instore, or “ROPO”) but also for ordering online and collecting in store (click and collect, or “C&C”), ordering in-store, or ordering from home for home delivery (“direct only”).

For many retailers in these categories, gross margins are falling as customers seek out the best prices online and store volumes are falling as customers increasingly shop online and in supermarkets.Thus the economics of retail are changing, driving a reduction of store space as retailers migrate to more cost-effective formats, venues, and channels.

Overall,we expect chain store space in town centres (including shopping centres and high streets) to fall by 20%, and chain store numbers in these urban venues to fall by 31%, as sales go online or (to a lesser degree) to larger destination stores and supermarkets.

Of course, the impact of the channel shift will differ across different sectors. It will be most acute in the Electricals sector where we expect to see the number of stores on high streets and in shopping centres to fall by 45%.Clothing & Footwear and Furniture and Floor Coverings will also be hit hard: by 2020 there will be 30-35% fewer stores in each of these categories in our town centres, marking a significant change in the business models of these retailers. And, finally,we expect to see the web playing an important role in the “Beauty” end of the Health & Beauty market (although rather less in the “hygiene” end of the market) resulting in 18% fewer H&B stores in town centres.

The priorities for mature retailers across all of these categories fall into six key areas. They must:

1) Invest in ecommerce and multichannel as one of the few bankable growth areas in the coming decade

• Develop the online assortment and offer more choice: more lines,more brands, more categories
• Improve product presentation and content with better descriptions, images, videos and customer ratings
• Develop ecommerce skills in areas such as merchandising,marketing, user experience and analytics
• Develop the core ecommerce infrastructure for good availability and reliable/convenient delivery options
• Develop IT systems for multichannel, especially “single view of stock” and “single view of customer”
• Develop integrated store and ecommerce systems/processes so that customers can shop across channels
• Place ecommerce at the centre of the business as an enabler of sales across all channels
• Build critical mass to capture customer “share of mind” and drive efficient economics
• Reallocate resources to reflect the growing role of the web in driving sales across all channels

2) Invest in retail brands and private labels as the best defence against margin erosion from the web

• Develop strong product design capabilities for distinctive own labels with strong customer appeal
• Develop the retail brand as a provider of differentiated products and services not easily replicated online
• Develop third party (e.g.wholesale) channels to exploit successful own labels and build scale

3) Redefine the roles and formats of stores so as to exploit fully the value of multichannel retailing

• Develop the in-store “e-boutique” to bring ecommerce effectively into stores
• Stretch out the portfolio boundaries with both larger destination stores and smaller in-town stores
• Experiment aggressively with “micro” town centre formats supported by ecommerce
• Develop larger “destination” out-of-town formats to present the extended range

4) Reshape, renegotiate and, in many cases, downsize their estates based on these new store roles and formats, and a realistic assessment of space requirements

• Focus the estate on fewer winning town centres and retail parks
• Be more flexible in the deployment of space (e.g. concessions, JVs, splitting and temporary units)
• Develop an informed value-allocation model across channels to drive appropriate investment decisions
• Be more aggressive in managing the estate, demanding flexibility and reduced rents from landlords
• Not be afraid to walk away from unattractive or marginal leases on renewal
• Revise the portfolio planning process to recognise critical channel effects in regression and gravity models

5) Roll up and build ecommerce scale
(especially for those with strong core operations and brands)

• Take advantage of falling valuations and a consolidating market to acquire complementary retail brands
• Exploit, across multiple brands, the significant economies of scale offered in ecommerce

6) Expand internationally to achieve global scale
(for those with strong brands and a sound domestic base)

• Use ecommerce to reach out to customers around the world, initially with a uniform offer
• Select best target countries and gradually introduce “localised” ecommerce (language, currency…)
• In parallel, identify attractive growth markets for exploitation with stores
• Define the best strategic approach for exploitation of these markets (own stores, JV, franchise…)
• Expand: for some large UK retailers, “ecommerce” and “international” are now the main profit engines

The implications for major non-food retailers are urgent. In view of the long lead times involved in building strong ecommerce and multichannel capabilities and in reconfiguring store estates, retailers should be planning now to ensure they have clear multichannel and store estate strategies on which to act over the coming months.This planning should include a thorough review of best practices from other retail sectors and geographies, as many of these can be applied across conventional boundaries. For those who can make the necessary transformation swiftly, a significant opportunity exists to win market share from the many who will not.

For a copy of Javelin Group’s white paper entitled “How many stores will we really need – UK nonfood retailing in 2020”, please email whitepaper@javelingroup.com

---

Marketing – Building cross channel conversions

Multichannel retailers are being failed by siloed marketing approaches. But marketing automation promises unified cross-channel conversations to optimise marketing return on investment, says Martin Smith, Head of UK Marketing at Neolane, a vendor of conversational marketing technology.

HAVING improved customer access to shop via mobile,digital and in-store channels and integrated customer service across those channels,what’s next? Analysts and many retailers say that the competitive opportunity now lies in unifying and optimising crosschannel customer marketing.The objective: to optimise long-term brand loyalty, customer value and overall profitability.

Known too as ‘360 degree marketing’and taking a ‘single customer view approach,’ delivering personalised direct marketing messages that are unified and synchronised cross-channels can offer big rewards.According to research conducted by an independent analyst firmAberdeen Group, conversion rates improve by 22% when shifting from segmentation-based personalisation to one-to-one. Also,customer retention rates improve by 60%.

But how can internet retailers optimise crosschannel customer marketing?What guidelines are there on technology platform choice?What level of success have other firms had?

With an increasing number of communications channels through which to target shoppers, the marketing processes in most organisations have become ever-more siloed – email, social,mobile, iPhone apps,direct mail, call centre…the list goes on.While it’s relatively easy and inexpensive to blast mass campaigns at customers via any and all channels possible,evidence suggests that impersonal, ill-informed and channel discordant approaches confuse and frustrate customers.

According to one North American survey,consumers felt that just 10% of direct mail and only 7% of the email marketing they received was relevant to them. Customers expect better; to be recognised as individuals and for communications to be relevant to their unique lifestyles,wants and needs.

The risks of hit and miss direct marketing go beyond poor response rates.The damage extends from lost immediate revenue opportunities to potential disengagement with the brand altogether. There’s an operational cost too: running multiple siloed marketing teams,numerous software platforms and processes is an inefficient way to run a business.

To maximise return on marketing investment, the entire direct marketing strategy must be built around presenting relevant communications which meet the habits,preferences and expectations of customers.To do this, it is necessary to both track customer purchases across sales channels and to capture details of all interactions cross channels.

To capture cross-channel data,and to provide the necessary platform for personalised cross-channel marketing, it is necessary to invest in cross-channel marketing automation software. Essentially, crosschannel marketing automation software provides a single enterprise-wide platform on which to build the single customer view and to analyse, plan,develop, execute and measure cross-channel unified marketing activities.

EVIDENCE OF SUCCESS: DEBENHAMS

Department store Debenhams now manages most of its customer communications from a single, centralised point of control. This improved speed to market, allowed it to design and launch the Debenhams Beauty Club loyalty scheme in just 12 weeks and define and ready for launch mobile marketing in just 4 weeks. Progressing from mass, towards cross-channel personalised communications, email conversion rates now exceed 75% and email driven sales volume is up 200%.

In planning a move towards cross-channel marketing, think beyond just outbound activity. There’s inbound to consider too, with channels such as the corporate website, stores, branches,call centre,mobile iPhone apps and brand pages within social media; even online avatars.

If outbound is not interlinked with inbound, customers making direct contact either spontaneously or encouraged by outbound campaigns,can once again,become aggravated at the impersonal content and hence seeming lack of joined-up knowledge and service.Missing this opportunity could be costly: it’s well known that response rates to laser-targeted offers presented during inbound enquiries are significantly higher than those for outbound approaches.

Often left untapped are service or transactional messages (e.g. statements,order confirmations and dispatch notifications).These are frequently read. There’s a good chance that relevant marketing offers inserted into them will be noticed, read and responded to.

Selecting the right marketing automation technology provides unique support for corralling these messages into a single strategy, fused with inbound and outbound marketing efforts.

With increasing inbound and outbound channels and to encompass the service message opportunity, customer marketing is entering a new era; the opportunity to create‘conversational marketing’ strategies.

Conversational marketing is aimed at optimising relationships and long-term loyalty and revenue through heighted interactivity and personalisation. It means unifying inbound and outbound communication strategies,by tracking and managing all marketing activity data, in all channels and in real-time, to generate personalised messaging – making the best,most relevant offers based on customer behaviour and established preferences. Conversational marketing is all about the customer and building a personal relationship. It addresses three core requirements that every marketer should adhere to:

• Know every individual before you engage them with outbound messages (email,SMS,direct mail, social etc.)
• Respond to inbound contacts (contact centre,web, store) with real-time offers
• Optimise channel capacity, offer coherence and managed contact frequency/marketing pressure; monitor results and fine tune tactics

Conversational marketing represents the next generation of customer engagement: It empowers marketers to master complexity, accelerate speed to market and generate sustainable revenue.

Conversational marketing was only achievable in the past on a small scale; usually person to person. Conversational marketing technology now makes it possible even for organisations with a million customers to automate and sustain personalised relationships.

To be effective,conversational marketing technology must provide the following:

• A real-time, cross-channel single view of the customer
• A central catalogue of marketing offers
• The ability to manage eligibility rules, priorities, rendering and channel capacity; simulate alternatives,control pressures and measure effectiveness
• Real-time recommendation engine integrated with inbound and outbound channels
• Offers personalised offers based on individual profile and behaviour
• Audit trail for all interactions: recommendations and responses

The speed of the ‘real-time’component of any conversational marketing technology is essential. Only with the ability to suggest offers and capture a response in milliseconds, is the marketer placed in position for each“speak-listen-get ready to speak” cycle that defines a conversation.Marketers can then set automated journeys to steer individuals in a direction that has been predetermined by taking advantage of every opportunity to converse.

Both for heightened customer satisfaction and loyalty as well as for revenue optimisation, it’s essential that all channels – web, social,avatars, mobile, email, the call centre and more are unified in customer communications.The road ahead is one of conversational marketing.

EVIDENCE OF SUCCESS: PHOTOBOX

A 16% increase in introductory offer take up was just one benefit to Photobox. Retention emails, targeting customers who create Photo Books without buying them, saw opening rates increase by over 200% and reactivity rates grew by 50%. Running customer marketing from a single platform, the company shares best practice between its operations in 15 countries and can compare, analyse and optimise campaign performance. Local marketing teams are now more creative and can move more swiftly from ideas to actions.

---

Operations – Aligning the cross-channel stars

When planning internal operations for cross-channel retailing, three things are often cited as being key to smooth implementation: technology, processes and people. Emma Herrod takes a look at how retailers are developing and integrating their internal channels.

WITHOUT the right systems a company cannot gain the all-round view necessary for real-time insight into stock and customers. Without cross-channel processes, the operations fail and customers don’t receive a seamless browsing, buying and returns experience across the channels.And without buy-in from everyone in the organisation – from board members to temporary peak-time store staff – the whole project is likely to fall over. All employees must believe in the cross-channel business and be fully engaged; they need to be kept in mind and not pushed to one side by the demands of the immediate process or customers.

Most retailers incentivise in-store staff by allocating click-and-collect sales to the store rather than making it a separate online part of the business. Messaging in store reminds employees and customers that products can be bought online – and in some cases advertising is bringing in the mobile channel as well as purchasing in store and online messaging.

The first aspects of a company’s central operations to be merged are marketing,with crosschannel campaigns and messaging matching being run across digital and offline channels.But systems need to be integrated with staff – or vice versa – and ensure the business remains agile and innovative to anticipate and respond to constantly changing customer behaviour and trading patterns. At the same time the company has to retain firm foundations for day-to-day trading in multiple channels and cross-channel retailing.Not much to ask, then.

As Mark Hodgkinson,Marketing & eCommerce Director,HMV Group (and a former Director of Asda), asked delegates at the recent Internet Retailing conference: how is the internet brought to life in your own organisation? Is it a separate part of the business, bolted on,or fully integrated?

Connecting Systems and People

For fashion retailerWhite Stuff the need to reorganise staff around a cross-channel model and implement corresponding cross-channel systems and processes has come at a natural growth stage in its business.

The company’s Cross Channel Director,Alison Lancaster,explains that the firm has been growing all channels rapidly,and the need for systems to support that expansion came at the same time as customer demand for cross-channel shopping.

As part of systems planning,every one ofWhite Stuff’s more than 1,500 employees was asked to think about how to do things across the business – in its 78 stores, for home shopping customers and in operations and warehouse environments. It wanted to do things better not just by individual channels but across channels, says Lancaster.

Its new systems will also enable the company to expand into m-commerce as well as international markets. For example, it is about to launch a shop in Copenhagen,Denmark,and is considering on and offline expansion into Germany and a number of other Northern European countries.

“I cannot emphasise the need for planning enough,” says Lancaster.“You cannot do enough planning up front – and then do some more. For White Stuff, the planning process has meant monitoring how people carry out their jobs on a day-to-day basis – the web team,store staff, pickers – understanding how they do it,how we’d like it to happen and how to make it better in each channel and across channels,and then stitching it together to make a better overall business.”

When new systems are implemented, some members of staff find following them simpler than others.The default is to do things the old way rather than following new, cross-channel processes.Which is why, as part of systems planning and later training stages,White Stuff set up cross-functional workshops and engaged key stakeholders in every part of the organisation. For example,buyers have spent time in the warehouse,warehouse staff have worked at HQ and super users have been set up in each area of the business.This has helped show everyone in the company how what they do has an impact on other areas of the business and other people’s jobs:

Traditional teams across the business have been restructured, such as the marketing and brand team, which now drives footfall to all channels.Buying and merchandising has been restructured to look at a specific category across every channel, while the whole sales team is now responsible for all shop, web,phone,wholesales and concessions channels and reports to the Sales Director.

Mark Hodgkinson, Marketing & eCommerce Director, HMV Group advises:

• Always start with the customer
• Build the team and the new skills
• Visualise what you are providing
• Engage and regularly communicate with the whole business
• Technology is the enabler
• Ensure the social and the transactional join up
• Have a strong call for action and reason to return

A single warehouse, located in Leicester, fulfils all orders: home delivery, in-store delivery and shop restock.“It’s been a lot of change for people in the organisation, adapting from thinking about one channel to cross-channel,” says Lancaster.“It has been an accelerated learning curve,but the sum of the parts makes for a much bigger whole.”

According to Lancaster,a key factor inWhite Stuff’s successful transformation of its operations has been its people,many of whom aren’t task specific and are happy to share experiences.She says:“The joy of a small company is that we’re in it together.”

While the new systems, operations and processes were bedded in internally before the launch of White Stuff’s customer launch of ‘4 Ways to Shop’,a daily clinic allowed employees to raise issues about the new systems and collaborate in providing the solutions.

Lancaster,whose past portfolio includes John Lewis,Debenhams and Harrods,comments that cross-channel integration is harder for larger retailers. She says:“Marketing and customers lead the way but what holds you back are legacy systems.To replace them is not cheap.”

In response to a question about the challenges of moving to cross-channel retailing, Dev Mukherjee, President, Sears Home Appliances, said recently: “It’s a consumer thing. You start; you learn something; you build on it. It’s a voyage of discovery. You have to be willing to experiment and change.”

Large retailers are biting the bullet and replacing legacy systems as ongoing announcements testify. M&S, for example, is moving away from its Amazon platform to a new cross-channel solution delivered by SapientNitro in January 2014.

Best Buy

In the US, Best Buy had 200 people working for five years to develop and deliver an amalgamated system for order, retail, field and warehouse management.The solution aimed to offer a better experience for customers ordering multiple products and third-party services such as home theatres, which included installation and a product or service relationship with multiple suppliers, such as a television, display stand and cable programme package.

No retailer wants to say that they can deliver a television in two weeks,charge the customer and then find out that there is a six-week lead time to set up, says Chap Achen,Best Buy’s Senior Director,Order Management and Credit Risk.

“You have to make it easy for the employee so they can create orders quickly and easily,”he explains.“If it’s too complex, the employee won’t do it as they won’t want to seemdaft in front of the customer.”

Issues arsing from this lead to a bad customer experience such as a third party service operator trying to set up a cable service before the television has been delivered,or the stand arriving a week before the set.

So systems have to be integrated to fit with the people who are delivering the experience in store, but they also have to fit into the rest of the business. “You have to be part of the whole process and not just the technology solution and understand the ramifications down the line,”says Achen.

For example, he warns marketing departments that they have to ensure that the OMS can process the order they want as the result of any promotions.He cites a marketing promotion whereby customers receive a discount on a television if they also take out a certain third party service.However,some customers want to take up the offer but don’t want the third party service.Does this stop the television being sold in the shops,or leave customers turning away the cable installer?

This single view of everything – people, processes, technology and product – is close to the heart of today’s retail businesses.At the very heart,though, are the customers and an organisation’s goals need to correspond with what is important for them at each touchpoint.

“Rather than having a business plan,have a customer plan,” advises Adrian Foster, Lead Enterprise Architect at Tesco.com.“Having a customer plan leads to a customer-centric organisation, with crosschannel alignment of people, processes and technology,and a long-term vision and plan enabling us to productise and re-use.”

Optimising staff,processes and technology around serving customers across all touchpoints, rather than channels or functions,should lead to a more agile business,one that is able to stay ahead of changes in customer behaviour and technology adoption. BrianWalker, analyst at Forrester Research,dubs this ‘agile commerce’.

“Agile commerce requires a new model that shares core capabilities while activating touchpoints,”saysWalker in the Forrester report, ‘Welcome To The Era of Agile Commerce’.“Incenting the organisation to optimise against their channel metrics – perhaps at the expense of other channels – no longer makes sense.

“One observed successful model is the formation of smaller teams – or cells – combining marketing, product, technology,analytics and service functions into discrete units that optimise a touchpoint, while other roles like customer experience professionals manage and optimise the business across lifecycles.Another is the matrixed model, in which teams are organised around touchpoints that are tethered to functional groups – marketing and merchandising, for example. Finally,a hybrid of the two models keeps channel teams in place,but key functional groups operate against touchpoints independently.”

No one said the move to cross-channel retailing would be without its challenges and the learning curve is a necessary one that involves pretty much everyone within a retail organisation, whether they work in systems development,marketing,operations, logistics, stores or personnel.The integration of the separate parts of the business into a single seamless operation is one aspect of the transformation, but each individual has a key role to play in the end result of a seamless customer experience.Keeping the wheels of business change and innovation turning while staying in tune with day-to-day trading is what makes the role of cross-channel management a constantly evolving one.

---

IT – The age of the digital shopper

Helen Slaven, Vice President of Retail, Torex, explains why a centralised view of customer and stock is vital for bricks and mortar retailers, as they become the pivotal point of the multichannel experience.

PROCTER & GAMBLE coined the phrase ‘The First Moment of Truth’ (FMOT) in 2005, to describe what it believed was the most important marketing opportunity for a brand – when it first interacts with a shopper in-store.A mere six years on and the widespread adoption of the internet and smartphones have dramatically changed the way we shop.

A new eBook from Google calls this evolution the “Zero Moment of Truth,”claiming that in the age of online reviews, the way shoppers make their decisions has changed – and that brands need to place as much importance on the online decisionmaking moments as the ones made in the real world.

Of course,what shoppers want hasn’t actually changed – they want to be able to buy quality products at the best price and to experience the best customer service in a way that is most convenient for them.But now they are gathering information from multiple sources to make more informed buying decisions.A recent report from location-based company JiWire found that more than 70% of US consumers researched future purchases on their mobile and then made a purchase online or in store later.

So,what does this mean for bricks and mortar retail? Gartner estimates that “through 2015, the percentage of revenue coming through electronic-commerce channels is expected to double.

Regardless, the store will remain the channel through which retailers receive the largest proportion of their revenue”and that“the store will be responsible for approximately 84% of retailers’ revenue by 2015.”

Bricks and mortar retail is also increasingly becoming the hub of multichannel retailing – both fulfilling and refunding sales from all channels and being a point where customers will engage with staff for service they cannot get through a virtual medium.

What clinches the sale in store has come full circle. We used to shop in local, specialised stores,where the shop owners would know our personal preferences, clothes size and what colours we liked to wear.Then shops went mass market to cater for a mass audience.Now shoppers want a personalised experience again – and because word-of-mouth has gone digital, they want to share their recommendations and experiences with their friends and acquaintances through social networks too.

The digital shift presents both exciting opportunities and complex challenges for retailers.How we want to shop might change from day to day utilising different channels.Therefore retailers that operate on the high street as well as online need to be able to adapt to a customer’s buying preferences and profiles across all channels, to guide the purchasing journey and make the in-store experience memorable enough to make a sale – and encourage the shopper to come back.

Importantly, retailers need to understand how a customer interacts with the brand in different ways. Many retailers have a digital presence yet there isn’t a‘one size fits all’when it comes to shaping their digital brand.Gone are the days of lengthy and cumbersome technology implementations.What we are seeing now are strategic projects which can lead to immediate ROI.

Systems

Retailers do need to deploy a technology platform that can give a single view of the customer and orders across all channels.Having a centralised platform is more important than ever.As well as giving retailers the ability to fulfil customer orders and returns seamlessly, it prevents duplication and fragmentation of information,which is where a disjointed customer experience can occur. Retailers also need to be able to adapt their business processes easily and quickly to keep pace with the ever-changing needs of consumers,and the volatile retail environment,through tactical initiatives and changes in strategic direction.One example of this could be Facebook mirrors in the changing rooms, where consumers can share their experiences with their social communities.What can foster strong brand loyalty and link between the real and virtual worlds need only be a simple add-on instead of a special implementation,as long as the back-end is already integrated.

Having the right stock in the right place at the right time is a basic requirement but personalised, assisted selling in-store is also key to securing sales.Brand loyalty is earned by creating an experience across all channels that is consistent, positive, rewarding and meaningful for the customer.

The advent of portable touch technologies means that retailers can put power into the hands of their sales associates and transform the in-store buying moment.Using a tablet device, the retailer can extend the customer journey.The ability to take the customer through a journey that takes into account their individual buying preferences,product affinities, relevant promotions,how they like to pay and what they have been buying through other channels via their purchase history,will transform the customer experience.The idea is to replicate what the best sales people already do,by modelling best practice sales engagement on a technology platform using mobile devices.

Ultimately, from the shopper’s point of view, the online and real world brand experience should be seamless.They don’t care that a retailer’s view of its stock is siloed. If a product is available in one channel it should be available in all channels – they just want to make a purchase or return, through whatever channel they choose, without any fuss. Many retailers still suffer from reconciling web payments with in-store payments,which can lead to product unavailability.This is where intelligent stock fulfilment can facilitate,providing access to stock positions and calculating the amount of stock in each store.By intelligently managing the stock and having control of the fulfilment, retailers can offer customers a better service with collection times.

The next step that retailers must consider,once they have established their digital brand to evolve in line with the age of the digital shopper, is how to engage via social media with their customers. Online and mobile technology is remodelling retail – but also opening up opportunities for bricks and mortar organisations to go beyond what they previously considered feasible.Click and collect, web refunds in store and digital couponing can all be effective in driving footfall where empowered sales staff can then add value and up-sell.The savvy shopper will want to take advantage of both the online and offline world purchases and increasingly want to engage with its favourite retailing brand in any sphere.The more bricks and mortar retailers can listen to their customers and have a system in place to add tactical implementations to suit the customer’s preferences, the more they are perfectly placed to act as the pivotal point of the multichannel experience.

---

Logistics – Working without a multichannel model

As multichannel forges ahead as the likeliest blueprint for sustainable retail sales
growth, it’s hard to see how pureplay etailers can justify remaining web-only for ever.
Alison Clements investigates.

IT’S CLEAR from the IMRG/Capgemini E-retail Sales Index thatmultichannel players have consistently outperformed pureplayers for the last two years,says ChrisWebster,Head of Retail Consulting and Technology at Capgemini.“Recently the gap between them closed up,so we’ll see what happens next.But generally customers are highly attracted by the choice multichannel operators give them for home delivery or collect in-store,”he says.“It’s a strong proposition, particularly for brands that want to align the online and offline shopping experience more closely,and use their existing stores to build the ecommerce side of the business – where all the growth is expected to come from in the next few years.”He says the multichannel players are completely rethinking the role of the physical store,so that they are geared to helping drive online sales,“as well as offering complimentary experiences and services”.

House of Fraser.com’s ‘Click and Collect’ store, which opened in Aberdeen’s Union Square shopping centre this Autumn,shows how multichannel players are blending the web with a physical presence.The 1,500 sq ft store doesn’t display merchandise like the usual department stores,but allows customers to use iPads and interactive screens to order more products for home delivery or store collection.“The idea is for House of Fraser (HoF) to still reach customers for store collection and returns services,at points where the existing store network doesn’t reach,” saysWebster. “By doing it in-house they’re protecting the HoF brand values and customer service levels, rather than simply providing a counter for passing parcels across.And the technology in this unit makes it possible to up-sell and cross-sell, without needing to have whole ranges on display.”

Embracing the high street

With so much to be gained from having a physical presence to reach customers, it’s not surprising that many companies which started out as pureplays are now embracing the high street – opening stores and concessions (Kiddicare.com,Screwfix),offering services through third-party owned sites,or providing lockers for product pick-up.Secure delivery points are the easiest to arrange and won’t have a massive impact on the cost model, saysWebster.Hoping to make life easier for customers expecting deliveries or returning goods, Figleaves.com uses the ByBox service,and Boden uses the Collect+ network of pickup points for its customer returns.

FIGLEAVES & BYBOX

ByBox is a next day delivery service that Figleaves’ customers can select at checkout. The customer is required to enter their postcode so they can search for their nearest ByBox and select their preference. Once the order has been delivered to the preferred ByBox the customer is sent an email and text to notify them of their locker number and security code. The customer then has 40 hours to collect their order. For convenience the locker can be accessed 24 hours a day.

“Offering ByBox as a delivery option gives our customers another alternative which encourages customers to believe we are an innovative retailer that highly values customer experience. It is an added incentive for people to use Figleaves.com,” says Christina Acklam, Marketing Manager at Figleaves.com. “Our customers love the service, with feedback including that it’s convenient, easy to use, great for commuters, trackable and also it’s private which makes buying gifts easier.”

The service has been greatly received with 6% of customers now using it.

“With a network now of over 4,000 participating Collect+ stores, including BP garages,independent corner shops and late opening chains such as McColls and Costcutters,we can help our retail clients provide a safe and convenient presence wherever online shoppers live,or pass on their way to work,”says Mark Lewis,CEO of Collect+.The service is a joint venture between Yodel and PayPoint.“People love not having to make a special journey,and so we are seeing over half of parcels collected the evening they are dropped,typically picked up by people coming home from work.”

Lewis says the fact that parcels are fully tracked, and communication is made about delivery by text and email, the system is gaining in popularity,and ensuring customers shop again“knowing they can rely on this system to get hold of their goods quickly and easily”.Naturally this is helping retailers such as Very,Boden and Asos bridge the delivery and service gap caused by not owning stores themselves.“But we’re also seeing multichannel retailers including Asda Direct,Arcadia Group and New Look offering Collect+ as a delivery option because it gives them greater density of coverage beyond their store networks,adding an extra layer of service,” says Lewis.

Chris Potter from Boden says that within weeks of introducing Collect+ for returns,20% of ‘free returns’ were being sent back this way.“The feedback from customers has been overwhelmingly positive,”he says.

Amazon has taken a small step,with big implications,by installing its own lockers in London offices and Land Securities-owned shopping centres, to serve as delivery and collection points for its online customers.Over in the US, the web giant operates lockers through the ubiquitous 7-Eleven convenience stores,which trade 24 hours a day.The lockers are helping to reduce the number of failed deliveries and disappointed customers Amazon has to deal with,so we can assume Amazon will look for many more ways to reach customers here in the UK.

Now owned by Morrisons, online phenomenon Kiddicare.com has wasted little time before announcing plans for a nationwide network of 45,000 sq ft destination maternity superstores.Chief Executive ScottWeavers-Wright has a vision for these stores to reflect the online experience Kiddicare is known for.So we can expect“in-store video either on kiosks or digital signage”and“easy access to ratings and reviews,demonstration videos, social videos, inventory information,and ordering and home delivery of product”. The company will also benefit from 30 kiosks already live in Morrisons stores – a trial that if successful could see a thousand interactive units in 440 supermarkets nationwide.By teaming with a solid bricks and mortar retailer, Kiddicare.com has neatly extended its pureplay reach and looks set to become a formidable multichannel player.

Tony Bryant,Head of Business Development at K3 Retail says pureplays like this are well placed to compete on the high street.“They have established the ecommerce expectations and standards,and now they have the opportunity to establish the next generation store‘click and collect’,”he says, suggesting we’ll likely see more stockless stores, – i.e. with no merchandise display’s but stock “backstage”.

Research from the IMRG shows the average basket value for multichannel retailers during 2010 was £165, which compares with a much lower £108 achieved at pureplay merchants.So why haven’t the pureplays entered the property market sooner?“The problem these businesses have is that retail stores cost a fortune to run and thereforewould change their very successful operating model and would likely negatively impact the bottom line,”says Bryant at K3. Despite the cost challenges he predicts many pilots during 2012,as pureplays reach out into the physical world.Pop-up shops could be one option, to test the water before committing toamajor property portfolio. And Click and Collect units, like House of Fraser’s are more likely than traditional high street stores.

“If you haven’t already got stores, introducing them adds extreme complexity to your model,”adds Webster at Capgemini.Also, if you want to showcase the brand,and offer a compelling customer experience – like the Apple stores – you’re not going to be able to do things on the cheap.”

Yet multichannel marketing will become ever-more powerful,and this puts pureplay etailers at a greater disadvantage.“Knowledge of customers’ preferences through data collected on their previous behaviours will increasingly be placed – in real-time – in the hands of the sales advisors in-store who could then provide the much needed value-added services to the shopper,” says Bryant.“Consumers recognise that if the product is not available in-store but is available to order for subsequent collection at the store or for delivery to the home then this is an acceptable alternative and is sufficient for them to maintain their loyalty to the brand.Crucially, it’s about saving that sale.”Some clever commercial thinking is needed from the pureplays if they are to compete.The irony is that some form of bricks and mortar could become a necessity.