All Change for Omnichannel
Forwar-thinking retailers are doing at no less than transforming their businesses to meet the demands of omnichannel. Chloe Rigby how others can set about following their lead
The way we shop is changing fast and so profoundly that cutting-edge retail businesses are now not only adapting, but transforming themselves in response. As customers increasingly expect to buy whenever they want and wherever they are, retailers are now redefining and restructuring organisations in order to meet those omnichannel demands. Argos , for example, is becoming a digital-first business, while John Lewis has regrouped to put the customer at the heart of its business. Meanwhile, the company that was Aurora Fashions, owner of the Coast, Warehouse and Oasis brands, has transformed itself so distinctly that it no longer exists. In its place is a flatter, more agile structure, in which the layers of hierarchy provided by its erstwhile parent company are simply no longer relevant. These companies are all responding to a world, says Sophie Albizua, co-founder of multichannel consultancy the eNova Partnership, in which some 60-70 per cent of retail transactions now start online, even if only 10 per cent are ultimately completed over the internet. It’s also a world in which online has “shifted the balance of power dramatically, back to the consumer”. Albizua adds: “This is as massive a challenge for organisations as the online revolution itself.”
The challenge comes in a rapidly changing retail world. In April 2013 alone, figures from the Office for National Statistics show, 10 per cent of all UK retail purchases took place over the internet. In February 2009, that figure was 3.4 per cent. And, recent IMRG figures suggest, online is itself developing quickly, with the news that some 20.2 per cent of online transactions are thought to have taken place over mobile devices in the first quarter of 2013.
Beyond the 10 per cent of purchases that take place online lies the critical part played by online research to purchases made in store. For while sales of books, CDs and DVDs have moved fast online, retailers who sell larger and more expensive objects have found that stores remain integral to their strategies, as customers still want to touch and feel objects before buying them. Carpetright , for example, has found that while most of its sales of carpets and beds take place in stores, research begins online. It has changed the way it does business in response, slightly reducing the size of its store estate, but keeping strategically placed stores and investing in its online business. It doesn’t sell many carpets online, but it does send out samples to potential customers who order them over the internet. In the financial year to April 2013, it has said, it sent out 70 per cent more samples in response to online requests than it did the previous year.
But it’s not only true for purveyors of carpets that the store remains an important part of the retail landscape. Online-only retailers are also opening stores. Kiddicare , for example, built its reputation as a nursery retailer online but went on to open 10 new stores under the aegis of its parent company Morrisons in order to answer customer demand that doesn’t stem only from online.
At the other end of the scale, business card printer, pureplay Moo.com , opened a shop earlier this year so that customers could touch and feel the quality of its cards and design their own. For these retailers and for many others, this is firmly an omnichannel landscape in which each business, driven by its customers, will decide which channels are the most important and ripe for investment.
In response to customers, many businesses are bringing the channels ever closer together, taking online into the store, enabling mobile browsing in store and helping customers to browse their selection wherever they may be.ADAPTING TO NEW REALITIES
As retailers respond in new ways to new customer demand, they are also changing the way that they do business. Argos has responded by offering multichannel services, from the Check&Reserve service through which more than 30 per cent of its sales are now made, to offering an extended online range, to bringing the digital catalogue into stores. More than half (51 per cent) of its sales, worth £2 billion in total, are now defined as multichannel ones that involve the internet, while 42 per cent of sales are purely ecommerce. However, the store remains key, playing at least some part in 90 per cent of its sales. Omnichannel retail then involves all of its channels, which are often closely entwined.
In recognition of all this, Argos last October launched a five-year transformation plan aimed at putting digital commerce at the heart of its business, that would also rebalance, or ‘right size’ the store estate in the light of ecommerce. At the time, Terry Duddy, chief executive of Argos parent company the Home Retail Group, defined the mission: “The transformation plan aims to deliver growth by repositioning Argos as a digitally-led business from a catalogue-led business, leading the market growth of digital commerce through online, mobile and tablet, and offering customers more products with the fastest, most convenient fulfillment options.” This was a plan, he said, that would “provide the right approach for Argos to achieve a long-term sustainable performance and profit recovery".
Earlier this year, Aurora Fashions, owner of brands including Coast, Warehouse and Oasis, presaged its own demise as it de-layered its management structure. The move to spin out the Coast brand while introducing the new Fresh Channel parent company for the Oasis and Warehouse brands signaled a move away from bricks and mortar and towards a balancing of all the sales and distribution channels. “Retailing is no longer about gearing your operating model around bricks and mortar, something we have realised as a result of our omnichannel success,” said Aurora chief executive Mike Shearwood, at the time. “Instead, our businesses must adapt and utilise a number of distribution channels to ensure we continue to capitalise on the changing global retail environment.” The move, he said, would bring about “independent agile organisations where the management teams have full control and autonomy to delivery their strategies so that they can provide their global customer base with more choice”.
Other retailers taking a new approach to omnichannel shopping include John Lewis, which has reshaped itself around the customer and, as a result, reached its target of £1 billon turnover from online sales a year early. When that milestone was reached, Paul Coby, IT director at John Lewis, said: “The billion-pound success of johnlewis.com is a reflection of our strategy to put the customer at the heart of our online operations.”ROOM FOR IMPROVEMENT
But while some retailers are moving ahead to restructure for omnichannel retail, they remain in the minority. At many other companies, the reality is that online trading continues to be siloed, cut off by separate systems from the possibility of seamless, joined-up retail. Even as more than 20 per cent of online commerce takes place over mobile devices, studies continue to show that the mobile experience still isn’t measuring up. A recent study from omnicommerce solutions provider Skava found that 88 per cent of consumers had had a negative shopping experience when trying to buy from a mobile device, with difficulty of navigation (cited by 51 per cent of respondents), overly small product images (46 per cent) and security concerns (42 per cent) all mentioned. Shopping behaviour is adapting far faster than retailers, it seems.
A recent Shoppercentric study showed that 37 per cent of 18-24-year-olds have already made purchases via their smartphones, as have 38 per cent of 25-34-year-olds. Of the over-55 group least likely to have bought via mobile, 19 per cent have nonetheless done so. The study also showed strong use of smartphones to check prices and to find discounts and offers: 36 per cent of those 18-24-year-olds who used their phone for shopping had done so looking for a discount, while more than half (53 per cent) of 35-54-year-olds who used their phone to buy had also used it to compare prices. “M-commerce is undoubtedly transforming the retail landscape at an unprecedented rate and smartphone useage is at the heart of this change,” said Shoppercentric managing director Danielle Pinnington.PRACTICAL STEPS TOWARDS OMNICHANNEL
Most retailers, then, have room to improve omnichannel services. And for most, improvement will start with the way they organise their businesses. The deep-rooted change that some are already starting on begins with the structure of the board that is driving the omnichannel strategy. Notions of the ecommerce director, or even the multichannel director who currently brings the omnichannel project to the boardroom will soon be outdated, says Sophie Albizua of eNova, as, increasingly, the chief executive becomes the company’s principal advocate for multichannel or omnichannel organisation.
A natural aptitude for multichannel thinking is, she believes, currently likely to be found at relatively junior levels and the flatter hierarchy put into play by the likes of Aurora is necessary to allow that talent to rise to the surface. Such a move will also create more agile businesses.
“The task,” says Albizua, “is a changemanagement one. It is about redefining reporting lines, business processes and culture. For example, reviewing incentives and key performance indicators (KPIs) to include online, offline and multichannel KPIs into reporting and incentivisation. It’s about worrying less about sales per square feet or online sales growth and more about overall company sales, product rotation, marketing share, or customer satisfaction.”BE CONSISTENT
Incentives also play their part in the thinking of Niraj Shah, chief executive of Wayfair, a $600 million turnover homewares pureplay that was founded in the US and has been trading in overseas markets including the UK for more than a year. In the UK its website, Wayfair.co.uk, is complemented by call centres, mobile commerce and social media commerce. Shah says the company has thought omnichannel from the start. He argues that customers don’t think of the different ways that a brand enables consumers to buy as separate sales channels but concentrate more simply on whether it meets their needs. “We’ve always had one view of the business,” he said. “We don’t have physical stores, but everything we’ve done, whether in the customer service, folks on the phones, what we do on mobile, we’ve always kept it consistent. “A promotion is a Wayfair promotion and available everywhere. Pricing is consistent – if you’re talking to someone, or emailing them, there are no multiple prices.”
In order to achieve that consistency, he says, companies must find ways to aligns incentives with what the customer wants or needs. “If you have someone running the stores, have the incentives focused around what those customers buy, whether in the store or online. Make sure the online email reflects the impact on the store. If you do that then just naturally everyone in the business is working towards the end goal that you want.”INVEST IN SKILLS
But for those who are working to change existing businesses, there must be investment in skills that may be new to the company. That may happen by recruiting staff with with ecommerce, digital marketing and online merchandising skills. Equally, existing staff may be encouraged and trained to work across more than one channel. Thus a marketing team might be responsible for online and offline marketing. Where there is a talent gap at board level, Albizua suggests it may sometimes be necessary to wait for multichannel talent to rise. In the meantime, criteria can be redefined to spot rising stars, while new entrants to the business should spend time in online placements, whether behind a click-andcollect desk, shadowing a home delivery driver, or in online trading just as much as in more traditional areas. Training schemes should also be focused around multichannel, while existing leadership teams should spend time with GenerationY customers, and learn from focus groups about new technologies and behaviours.
There’s no denying that the coming years will be challenging for retailers transforming themselves into omnichannel businesses. But achieving that very necessary change is what will keep both individual businesses and UK retail right at the forefront of global trading.Speaking from Experience
WHAT THE CUSTOMER SEES
“Retailers need to make sure that the customer, what they see, whether pricing or promotions, is consistent whatever channel they see it in. They need to make sure organisationally that everyone in company supports that view.”Niraj Shah, chief executive, Wayfair
NOT A PROJECT
“Training programmes and HR initiatives around team building and/or the review of incentives will help, but only if the multichannel change project is not a project. It is the business.”Sophie Albizua, director, eNova Partnership
FOCUS ON MOBILE
“The smarter brands and retailers are already adapting their integrated marketing plans to ensure m-commerce is a strong touchpoint in the purchase process, and those that don’t do so at their peril since they risk losing our on significant market share and failing to attract a new generation of shoppers.”Danielle Pinnington, managing director, ShoppercentricWhat's Changed
In the past we’ve talked about the need to offer customers choice through multichannel retailing, and looked at ways that retailers can develop that single view of the customer in order to recognise them and offer them consistent service through whichever channel they touch the retailer. Now forward-thinking retailer s are starting to reorganise around omnichannel retailing, and that’ s having dramatic effects across their businesses – and influencing the rest of the retail industry at the same time.