Retailers Must Evolve with Changing Shopping Habits

By Akhilesh Srivastava, akhileshcs@us.ibm.com

As per recently released NRF analysis for holiday 2012 sales, the overall year-over-year sales growth for 2012 topped at 3% compared with 12% for the online channels. Only a handful of leading national retailers like Nordstrom, Macy’s and Gap had a reasonably successful season compared with J.C. Penney, Sears and a majority of others.

These results were in perfect alignment with my own analysis and conclusion that in order to be successful retailers have to be in constant touch with the changing behavior of their customers and continue to re-invent themselves to stay relevant. In absence of this, they run the risk of being outdated and will be driven out of business in a matter of time.

In last few years, as smartphone and tablet sales have zoomed, a number of retailers seized the opportunity to establish their online presence and won fair share of their customers’ online spend. Initially, the online and store channels were operated independently, however due to fragmented customer experience; recently, a few of them have initiated the efforts to integrate their channels.

As a result of increasingly improved online shopping experience, I sense that in very near future, even for a conventional consumer like me, a typical shopping day will be inherently omni-channel, and would resemble something like this:

7 a.m.: Text message from my favorite brand Alpha that the jacket I was looking at their website last week is available at my local store. It also included a surprise 20% off coupon, link to their website and directions to my local store.

7:30 a.m.: On my iPad, I visit Alpha online site and checkout the jacket once more, specifically the sizes and colors and inventory availability in my size at my local Alpha store.

6 p.m.: Coming back from work, I walk into my Alpha store and log on to the store Wi-Fi. An associate greets me on the floor. I show him the jacket on my mobile; he looks up jacket’s shelf on his mobile device and takes me there. He leaves me alone while I try the jacket.

6:15 p.m.: I decide to buy the jacket and approach the sales associate who was arranging the items and updating the inventory on his device. Associate scanned the jacket tag with his mobile device, it showed the price. In addition, it showed a complete ensemble including the jacket and a nice blue pair of jeans. Associate also informed me of another special offer which was applicable if I chose to buy the ensemble. Associate clicks on the ensemble to see the available sizes/colors for pair of jeans. He finds one in my size and brings it to me.

6:30 p.m.: After trying on the ensemble, I decide to buy the pair of jeans along with the jacket. Suddenly a reminder for my dinner appointment pops up on my mobile. I ask the associate if it's possible to put the items on hold since I didn't want to carry shopping bag to my dinner appointment. Instead, he offers to ship the items to my home by next day delivery for free of charge, I couldn’t have been happier. I provide him with my payment information; he looks up my profile, confirms my shipping address and thanks me for being a valuable customer with Alpha. He asks me for a suitable delivery window and sets up shipping.

5 p.m. next day: I have a parcel waiting at my home with my jacket and pair of jeans, a thank you card and an event calendar for future shopping events.

As illustrated in the above scenario, to continue serving their customers profitably and win market share, it is imperative for retailers to get their omni-channel right and execute it with utmost urgency.

The three key pillars for successful omni-channel strategy for a retailer must include:

1. Customer interaction and transaction platform: Leverage technology to provide a seamless customer interaction and transaction platform across the channels to enable buy/service/return regardless of the channels.

2. Stores as point-of-service: Establish retail stores as point-of-service by providing right tools and information to associates on their fingertips so they can service their customers better whether buying/servicing or returning and item.

3. Breaking down organization silos: Tight alignment between marketing and merchandising organizations to ensure that price, promotions and marketing campaigns are consistent across the channels and help improve customer loyalty. Furthermore, regular cadence was established among leaders of the marketing, merchandising, supply chain and store operations groups to ensure that all key business initiatives get the right visibility and support from the entire organization.

To the credit of Alpha brand, after struggling with negative comp store sales in 2012, their board and sr. management committed to omni-channel strategy and put their unflinching support to completely transform the organization and capabilities to become the leading multichannel retailer with one of the highest customer satisfaction scores.

Akhilesh Srivastava is an associate partner in the Retail, Smarter Commerce Practice of IBM. He is passionate about helping retailers to improve their market share by enhancing customer loyalty in an omni-channel environment. He can be reached at akhileshcs@us.ibm.com.


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Thanks Timo. The challenge is

Thanks Timo. The challenge is really for the retailers to figure out where and how to start. Per latest WWD report, omni-channel integration will see majority of the investments from retailers in next couple of years. Clearly, this investment has to be used wisely to bring the desired benefits.