Retail and Hospitality

Commentary:

Channel integration for retailers

17 June 2008

K3’s Steven Hampson describes how IT departments can help multi-channel retailers build technology solutions around consumer habits by developing new channels on an integrated platform.

There is a lot of talk about how retailers need to integrate their various channels to market, if they are to both manage their rising costs and meet the needs of their customers. Many retailers do achieve this, but there are other issues that need to be taken into account.

First of all, it is important to point out that 34 per cent of retailers are still not even transacting on the Internet, preferring to offer a simple brand image site. Yet consumers are demanding that they do; they want more and more to browse on line, shop in store and return by post.

The first hurdle for retailers is to recognise that multiple channels are complementary, although there is a fear that the Internet cannibalises the store. While, for some retailers, this may be true in the short term, long term they have little choice but to compete with retailers that have used all channels to enable their customers to shop in the ways they choose.

The figures that should convince them are compelling. According to US retail giant, J C Penney, multi-channel shoppers spend 50-400 per cent more and are the growth driver of retail. In detail, this shows that where a consumer may spend £50-100 in a store, they will spend five or six times as much if they buy in store, online and via mail order.

Secondly, multi-channel integration is currently about channel specific propositions and separate channel organisations, when it should really be about common cross channel propositions and a 360-degree external focus on the customer.

However, many retailers have a long way to go. In a mystery shopping exercise carried out among top UK etailers by customer service specialist Talisma, overall service level was only 45 per cent. Only 23 per cent of e-mails were responded to and only 31 per cent of phone calls were answered. Moreover, over 50 per cent of e-mails were inaccurate.

Clearly, while shopping across channels is of course convenient for consumers, it generates a huge amount of complexity for the retailer, in a business that is often described as simple, but is now anything but.

However, building the retail infrastructure around the way people shop today is critical. After all, if people are happy, they will tell ten friends; if they are unhappy, they will tell not ten but up to 10,000 people through social networking sites. This is real consumer power. In fact, there are now many instances of consumers having forced retailers into addressing their complaints by using the Internet to launch petitions that have produced a higher ranking on Google Ad Words than the retailer’s own site!

So, how will the store of the future look once it takes into account the needs of the multi-channel shopper? There has been much talk for a number of years now about retail theatre, about how the store needs to be more exciting to attract the shopper. Whilst it is true that the store must gradually improve the shopping experience, it must also continue to turn a profit in its own right, as shop rents and management costs continue to rise. The store must therefore be geared to promote higher sales across all channels.

For this reason, the kiosk, which has been around for 20 years, may finally come of age. Kiosks are much cheaper to buy and run when compared to human capital, and they are ideal for selling items that retailers cannot stock on site. For instance, they can be used as fixed or mobile devices to show items in colours that are not in stock, ideal in the furniture retail business. They can also free up staff to attend to other tasks, leaving customers free to use kiosks that are set up in the same way as the browser on their home computer.

The humble mobile phone is now a full-blown communications device and will need to be supported by, and integrated with, the retailer’s other channels to market. Already, a promotional barcode sent to a mobile phone can be redeemed in store or via a PC – a marketing device that has been shown to be more successful than traditional voucher targeting. And on the Internet social networking sites, such as Facebook, will change the way that retailers reach and market to consumers. While the viral marketing opportunities are positive, there are also negative implications: as consumers club together to make decisions, there is a risk that the balance of power will shift from retailers to consumers.

Retailers can mitigate this by embracing best practice in on-line behaviour, including personalised e-mail marketing, integrated with web analytics tools to target behaviour. The way ahead for retailers who are not yet online is to begin the process, safe in the knowledge that they do have some advantages over first movers, in that they can ensure channel, data and process integration from scratch.

From there, it is important to have real-time stock visibility to all channels so that each one can be merchandised, allocated and replenished according to demand, and to support this with cross channel marketing to drive sales. Offers should be common to all channels, backed up by common brand and feel. No easy task, but it is the next big evolution in retailing and one that no retailer can afford to miss.

Steven Hampson is business development director at K3. This article first appeared in the Summer 2008 issue of Retailspeak magazine.