Two years ago, creating an integrated omnichannel strategy was becoming an important objective. Forward-thinking retailers had the luxury of trial and error and the chance to evolve slowly to create a seamless customer experience. That luxury has now gone. Today, in an era of instant consumer gratification, retailers need to deliver that experience quickly and effectively – and profitably. They have to get omni-channel right to provide that great and consistent customer experience every time.
This is not just about joining up the technologies – although this is clearly a significant undertaking. It is also about the people and process aspects of omni-channel which can impact operational success and customer experience. Technology is clearly a priority but retailers cannot expect the people and process change to just fall into place. Simple mistakes – from failing to incentivise in-store staff to handle omni-channel sales to underestimating the fulfilment costs of click and collect, and the knock on impact on customer experience and brand reputation – can be significant.
The opportunities presented by successful omnichannel are compelling, not least the rapid growth and fast-track geographic expansion. However, omnichannel retailing requires both successful technology integration and a radical change in people and processes; in essence it requires a new retail mindset.
The pace of evolution of the retail business model is phenomenal – as are the growth figures. Most retailers are targeting double-digit growth, with a significant number aiming for upwards of 50% from the online channel, compared with just 3% to 7% in store. However, look beyond the appealing top line figures and the risk/reward equation is a little less compelling. Online may be growing fast but while in-store sales are typically profitable, the evolving online business cost model is far less predictable. Furthermore, omni-channel is more complex than it may first appear. Just consider the huge rise in demand for click and collect which has created new challenges in logistics and fulfilment. Indeed John Lewis has recently announced a new £2 charge for customers collecting from a local store for any order under £30 because the previously free service is unsustainable.
Perhaps it should not be a surprise that, in the rush to achieve not only online success but also a totally integrated omni-channel business that delivers high levels of consistent customer experience, retailers are enduring unprecedented levels of technology failure – and associated brand damage. But when a seamless omni-channel experience is increasingly demanded by customers and analysts alike, there is no more room for failure.
People and process
Retailers are beginning to recognise the need to join up technology, people and process change to achieve omnichannel success. A single view of stock, a single view of the order and a single customer view are essential technology changes. It is then creating the right in-store incentives, understanding the reverse logistics cost model and identifying synergistic new markets that can make or break an omni-channel business.
As the vanguard has discovered, if every aspect of the new strategy does not line up and the technical elements are not synchronised with business change, a retailer will face problems. For example, what happens when a retailer sells a product online and the consumer brings the product back to store? This is a simple yet essential aspect of an omnichannel strategy. Clearly the requirement is not just to provide a customer refund but to determine how that transaction fits with the way revenue is recognised and how cost is accounted for in store. If the processes are not adapted to fit the new model, it could create a conflict with staff who will not be motivated to take an item back into stock that affects the store’s profit margin or their bonuses.
Similarly, by failing to address the people/incentive aspect of the process, retailers will miss out on up- and cross-selling opportunities. Training and incentivising in-store staff to manage returns and offer an alternative product is a fundamental aspect of profitable omnichannel retail and great customer experience.
Retailers are under huge pressure to get this model right, quickly. The good news is that once the core people, process and technology components are in place, retailers can embrace that critical business agility required to meet evolving customer and market expectation. From a great mobile experience to slick click and collect or creating a single customer view – with the omni-channel model retailers have the chance to achieve faster and faster change, deliver that best-in-class experience and critically, anticipate customer needs.
The challenge is that there is no time to go through the motions. Successful omni-channel is hard and it is expensive – and it is a continual process of evolution and change. This is just the start of the journey.
Mark Fagan is chief executive of eCommera