Looking at the IMRG Capgemini eRetail Sales Index which tracks the performance of online retailers, there is a trend that jumps out - the growth of the multichannel retailer.
Just a few years ago the concept of a high street brand having both a bricks and mortar, and an online presence was rare. Today however, the vast majority of the retailers that we see on the high street are equally active in cyberspace. It’s not just limited to the big players either; much smaller, independent retailers are often the most pioneering and innovative in this area.
Multichannel retailers are now very much a part of our lives and have a unique influence on the way we shop. With the explosion of technology, such as tablets and smartphones, we have incredible access to retailers – we do not need to walk into a shop to buy something, we can buy it on the bus. A result of this freedom is retailers now have a lot to contend with; no longer are they limited to just satisfying a physical customer, they now have a virtual one too, one who can compare your items with your competitors at a touch of a button. It is important therefore to consider the way in which they perceive customers purchasing over these various channels. If a shopper purchases something on the high street or online, does the business consider them as two separate entities or one and the same? Is there an internal conflict that differentiates the customer? When we talk about multichannel is it one head office operating through multiple channels selling to what it views as distinct customers, or is it one business selling to a customer base with shared goals across all of them?
Who is winning?
Before we explore these questions in more detail it is worth discussing the rapidly changing e-tail industry landscape in terms of growth and share of market - essentially who is winning; the multichannel retailer or the pure-play? Perhaps the best starting point is the latest index results which reported the growth of the multichannel retailer in August was 16 per cent year-on-year, compared to their online only counterparts, which reported just ten per cent. This is not limited to August; in fact it is a trend that has lasted over 21 months, with the multichannel recording significantly larger year-on-year growth than pure-plays.
The motivation for a traditional bricks and mortar retailer to migrate online is clear; the high street is consistently reporting poor sales whilst e-tail continues to grow at a comfortable pace; a 14 per cent year-on-year increase in August (and 20 per cent for the 12 months prior to that). This disparity was highlighted last week when one of the UK’s biggest and well known retail brands, Next, released its interim financial results, reporting a 1.8 per cent drop in store sales in the six months to the end of July. In contrast, its online channel, Next Directory, saw a growth of 15.1 per cent.
However the argument isn’t black and white; there is a lot of grey to consider. Reviewing the index over the last five years we can see that the conversion rates (the number of shoppers actually purchasing an item they are viewing) for retailers in the UK have fallen by over 50 per cent, from 8.4 per cent in 2006, to just 3.8 per cent now. Specifically, the multichannel suffers much more than their pure-play counterparts, regularly reporting half the click through. The reason for this is down to the consumer behaviour the format encourages, a shift from online purchasing, to online shopping. Consumers have become extremely savvy and over the last few years have taken to browsing, researching and comparing products on more engaging retailer sites, rather than just viewing the internet as another purchasing channel. Shoppers will often view items online and then go in store to try on an item of clothing before purchase.
Traditional view of multichannel and its limitations
People that shop through the various channels are worth much more than those using just one; they are a minefield of useful information in terms of buying behaviour, preferences, location etc. Valuable details can be captured at every point of the interaction between the customer and the retailer: Point-of-sale transactions, online transactions, mobile transactions, call centre enquiries, customer service requests etc. Loyalty schemes too are fantastic ways in which to build up an accurate picture of your customers’ buying behaviour. What the business does with all this information is what is key and sadly, more often than not, it is not joined up to build a single view of customers, rather segregated amongst the various channels.
This segregation extends further than data gathering and analysis; divisions of the same business are often incentivised within a channel, not encouraged to sell through another etc. The bottom line is, too many retailers operating a multichannel model are not employing multichannel thinking.
True multichannel thinking
This is not to say that the task of viewing all of this data in a single, connected way is easy and it is made all the more challenging with the advent of location and community based technology and mobile browsing – the profile of the customer is constantly shifting. But thanks to these developments, retailers now have an unprecedented level of exposure to a customer’s behaviour and can act accordingly. These same customers will have much greater levels of expectation, but via social media channels, retailers now potentially have full 360 degree communication. Retailers have the opportunity to gather all of this data, from all of the various channels, to develop a single view of the customer - they know their shopping behaviour, where they are based, what they buy, what they discuss online – and can respond with a targeted offering that extends across the channels – something I have dubbed ‘Total Retailing’, as separate from today’s multichannel.
Burberry is a good example of this ‘Total Retailing’ approach and has worked hard to implement a full social enterprise. At the recent Dreamforce exhibition, Burberry CEO Angela Ahrendts explained the concept
“Any customer can have total access to Burberry across any device, anywhere and they will get the same feeling of the brand, feeling of the culture regardless of where they are,” she said.
“To any CEO that is sceptical at all, you have to, you have to create a social enterprise today, you have to totally connect to everyone who touches your brand. If you don’t do that, I don’t know what your business model is in five years.”
Top-tips for retailers
As I say, it is not an easy task; and not something that can be implemented overnight. However there are some basic practices you can employ to shift towards a ‘Total Retailing’ model:
- Start with the real time view of the customer, which can be used to personalise your offering
- Incrementally add other data sources over time to improve your view
- Get onto the location and community based, mobile web to understand the implications for your business
- Understand the implications on your operating model and align performance metrics to incentivise multichannel behaviour
Looking to the future
The retail industry has evolved dramatically in the last few years with the explosion of technology and the options available to consumers, and as a result it is hard to keep up to date. But it is vital to remember that multichannel is not a fad, it’s here to stay; the challenge is to embrace the knowledge you have at your fingertips and make the most of it to boost your ‘Total Retail’ performance. The future is here today and never before has a retailer been given so much to truly differentiate the customer experience or their brand. It is up to all of us in the retail sector to live up to the possibilities.
Note: The views expressed here are those of Chris Webster and do not necessarily represent the views of Retail Gazette.