With the release of the IRUK 500, InternetRetailing asked our knowledge partner Kurt Salmon to reflect on the research. Siobhán Géhin, Partner at the UK practice gives her views.
The pace of change within retail has been relentless since the introduction of click and collect in 2000 and with it consumer demands for seamless and easy shopping across all channels have exploded. This has driven omnichannel to become the key development focus for many UK retailers, but what does a truly successful omnichannel retailer look like? Retailers in the UK have been shown to exhibit class leading capabilities across multiple but not all dimensions of performance as they wrestle with the challenge of optimising investment in omnichannel to best meet ever-evolving customer needs. Even companies in the InternetRetailing Elite group of companies (Amazon, Argos, House of Fraser, John Lewis, M&S) do not perform at Elite level in all dimensions. In fact, none of them rank as Elite in the Customer dimension (responsiveness to customer queries and site performance).
Testing omnichannel capabilities following Black Friday and Cyber Monday and the run up to Christmas, when peak order volumes place maximum strain on technology and the supply chain, can be the ideal time to review performance and identify execution gaps. Logistics is an obvious area which is placed under enormous stress at peak trading times and is growing in its importance to the retail mix, with changing trading patterns as well as customers evolving to more click and collect. A Kurt Salmon US survey showed that 13% of Christmas orders placed on the cut off date for retailers to deliver for Christmas missed the mark. This clearly undermines performance in all other aspects of the business. Conversely, those leaders with a strong and responsive supply chain and logistics/carrier infrastructure are well placed to invest harder in other performance dimensions such as customer engagement.
Engaging customers during every interaction whether in store, online or via mobile is an area that retailers are looking to develop to ensure consistency and earn sustainable loyalty. Macy’s and Nordstrom in the US are often considered as leaders in the space. They have a clear focus on being channel agnostic, providing valued experiences and helping customers to shop whenever, wherever and however they prefer. Nordstrom shows live store inventory levels online and allows customers to collect on the same day as the order.
In the InternetRetailing Elite group of companies, Amazon and John Lewis have been very successful at expanding collection points for customers by utilising existing partnerships such as Collect+ or Waitrose; the partnership with Waitrose has helped to drive the proportion of click and collect orders from John Lewis to 56% of online orders (the first time this has been higher than home delivery). To develop operational capabilities in these areas, retailers need to align the organisational structure, invest in the right technology and ensure the supply chain is fit for purpose.
Setting up an organisational structure alongside operational developments has been key for Macy’s, with key owners identified and staff rotating between store and dot.com to enhance collaboration. Macy’s also use local buyers to oversee a selection of stores and define a localised offer which dictates the rules for shipping orders from local stores where the product is least likely to sell at full price, thereby using ship-from-store to optimise stock levels and minimise markdowns.
Being able to fulfil orders efficiently is only important once the customer has decided to purchase the product; building customer engagement with the brand is another critical dimension. Engaging with customers via social media is increasingly being used by fashion brands to drive engagement. For retailers with a high proportion of branded hard goods, such as Argos and Amazon, customer reviews form an important part of the decision process and serve as a mechanism to drive customer engagement with the retail brand. The “secret sauce” for the retailer is to identify which areas of focus will make a difference with its customers and to prioritise those areas.
Having clear strengths in one or two dimensions can give retailers a competitive advantage but does not make them a truly great omnichannel retailer. Being able to articulate and execute a clear customer-driven strategy and balance customer engagement with operational capability and consistent delivery – at the right cost – will be the mark of a truly successful and resilient omnichannel retail business.
The IRUK 500 research can also be viewed online at internetretailing.net/iruk.