10 May 2010

Today’s customers have an ever-increasing number of channels at their disposal through which to make a purchase. Not only this, but they want to mix and match the way they shop to suit their needs. Lindsay James takes a look at the challenges this presents to retailers and the technology that can help.

Today’s customers have it all. They can shop online from the sanctuary of their own home, on the move via their mobile, or in store. They can also pick and mix from these different channels, choosing to buy online and collect or return in store, do their research online and then buy in store, or use special offers and coupons sent to their mobile to save money through whichever channel they choose to buy from.

That’s not to mention the numerous other channels that customers can use to access information about a brand. Customers today are going beyond traditional media, such as television, radio and print advertising, to inform their purchasing choices. Social networking sites give everyone an arena to air their opinions, and customers are sharing information about products with their friends online via blogs, tweets and chat rooms. They are even experiencing more interactive forms of company messaging through online gaming like Xbox Live, in which advertising experiences are rich, immersive and highly targeted.

“Multi-channel retail is continuously redefined by a rapid expansion of new methods and platforms that customers use to interact with their retailers of choice,” explains Jeff Marker, senior vice president responsible for the retail practice at Junction Solutions. “The days of connecting with customers through a single channel are already largely gone. Recent expansion in social networking, the establishment of ubiquitous network access, and cell phones as mobile computers are already providing new and unique ways for the retailer to interact with customers.”

Matt Muta, Microsoft’s worldwide industry solutions manager for e-commerce, agrees that retailing is quite apart from what it was as little as two or three years ago. “Rather than window shopping in store and then buying online, customers can carry out competitive transactions right on the shop floor using mobile devices that are today more powerful than yesterday’s laptops,” he says. “The retail experience is now governed by the needs and wants of customers – it used to be that you’d get proactive or visionary retailers that would work to adopt new technologies, but now these things are being very much driven by the customers, who want to be able to flip from one channel to the next seamlessly.”

Multi-channel retailing is set to get more complex as new channels and ways of interacting with the customer are created.

Tony Bryant, K3 In support of Muta’s opinion, an NCR poll of 8,500 consumers around the world showed that 80 per cent of shoppers are more likely to do business with a company that offers flexibility to interact easily via online, mobile and kiosk self-service channels versus a retailer that does not. “Converged retailing, encompassing the store, online and mobile experience, can help enable the repeat visits and loyalty that retailers desperately need,” says Michael Webster, senior vice president and general manager for retail and hospitality at NCR. “Retailers that fail to evolve could see their brick and mortar locations become mere ‘browsing centres’ where consumers verify product functionality and then finalise their transactions online to save costs.”

Although it is apparent that a multi-channel approach is the key to success, Russell Dorset, sales and marketing director at Maginus, says that many retailers still struggle with disparate solutions. “Retailers clearly need to integrate all sales and customer service across all channels in a consistent way, thereby allowing the consumer to choose how, when and where they want to interact with a retailer,” he says. “But this still remains a challenge for many.”

Sarah Clelland, marketing manager at Snow Valley concurs: “Many retailers have only scratched the surface in terms of connecting their stores with their Web sites and their call centres – there is still much more to do. This means that a single view of the customer is still a challenge, certainly in terms of understanding what that customer is doing and then delivering customer service, merchandising and marketing content across all channels that is appropriate to their position in the customer lifecycle. Master data management is also an issue – getting that single source of truth in terms of pricing and product information so that it can be syndicated efficiently, both within the business and to partners.”

These opinions are strengthened by a report released from AberdeenGroup earlier this year, titled Fast track cross-channel gains: the final frontier for customer share of wallet in retail. The research highlights that 67 per cent of retailers currently lack collaborative channel operations in the areas of unified marketing, inventory management, order management and customer fulfilment. It also highlights that although 70 per cent of all retailers consider cross-channel customers to be more profitable, 80 per cent do not have the technology or business processes in place to provide customers the opportunity to make purchases through different media, whether it be via the Web, a catalogue, or place a special order in store. This leads to customer dissatisfaction when it comes to gaining a single unified buying experience at a store. And a lack of unified cross-channel order management can lead to high customer attrition and lost sales opportunities leading to wallet share loss for the retailer.

“The execution of a true multi-channel strategy is challenging from both an organisational and technological perspective,” says Marker. “Historically, most retail businesses entered different channels by establishing distinct business units. It is not unusual to find separate business units such as call centre, e-commerce and store divisions within a retailer. This has resulted in organisational boundaries that have limited the ability of the enterprise to execute on a unified brand strategy or focus on the customer and that customer’s experience with a company. Some of the larger retailers have overcome these challenges with brute force by investing heavily in integration technologies and significant IT support. The resulting customer experience is adequate at best; so many retailers continue to miss out on the true return on investment that comes with a multi-channel strategy.”

Marker continues: “Once a company realises the benefits of organising themselves around the customer instead of a particular channel, the business cost of continuing to operate in the existing IT silos becomes obvious. Reorganising the company’s operations to overcome the challenges of operating in multiple organisation and IT silos can be very challenging. Very basic things like identifying a customer, identifying what transactions they have done, fulfilling orders and accepting returns across channels become extremely difficult. Throw in cross-channel promotions and loyalty programmes and most companies start to flounder. Yet, these are the things that are expected from customers today.”

Best-in-class retailers are overcoming these challenges at acceptable costs by deploying a flexible, distributed technology platform that delivers a consistent experience across the shopper’s digital life, within stores, across stores and at their enterprise locations – providing sales-enabling information to both shoppers and employees. “Converged retailing solutions brings structure to the chaos and confusion of consumer interactions,” says Webster. “It will allow consumers to easily communicate their presence and preference via the channels of their choosing. It will deliver timely, personalised transactions, information and promotions. And it will do this seamlessly across all channels, including assisted and self-checkout, informational and transactional kiosks, digital signage, e-marketing sites and mobile technologies.”

Take global video game retailer GameStop, for example. An ambitious growth strategy at the company called for enhancements to the online customer experience, along with tighter integration between online and brick-and-mortar sales channels. However, an ageing e-commerce system hampered the retailer’s ability to add new functionality. By upgrading to an e-commerce solution, based on Microsoft Commerce Server 2007, with help from Microsoft partner Cactus Commerce, the retailer gained the ability to offer in-store pickup of products ordered online, expanded product look-up capabilities and enhanced customer-generated content.

“The GameStop solution leverages the strength of Microsoft Commerce Server – the most robust, flexible and scalable e-commerce platform on the market,” explains Fab Di Carlantonio, senior vice president of sales and marketing at Cactus Commerce. “This provides the best foundation for retailers like GameStop to offer a multi-channel experience for their customers today as well as in the future. Generally speaking, agile e-commerce platforms such as Microsoft Commerce Server will ensure that retailers do not get left behind when new technologies and applications get introduced to market. The ability to take advantage of new trends as they arise is significant, especially when first mover advantage is important.”

The advanced e-commerce capabilities that are built into Commerce Server 2007 were instrumental to GameStop in its efforts to integrate its online and brick-and-mortar channels. The new solution facilitates the retailer’s ability to offer customers store pickup of games pre-ordered online. “The in-store pickup feature has been very popular with customers,” says Curt Burgess, director of online operations at GameStop. By aggressively promoting the in-store pickup feature, we’ve been able to drive increased traffic to the stores.”

Since the upgrade, the number of unique visitors to GameStop sites is up by 14 per cent and the average amount of time that visitors spend there is up by 10 per cent. The robust, flexible solution also provides GameStop with a solid foundation for future growth.

Microsoft technologies like those used at GameStop are fundamental to multi-channel success, helping organisations to better connect information, systems and people. This provides retailers with a true competitive advantage with an enhanced customer experience, improved employee productivity, better inventory use and more efficient store operations.

“Microsoft offers a breadth of products and technologies for connecting retailers with the digital customer,” says Muta. “Microsoft solutions including SharePoint, Commerce Server and Dynamics, are better connecting information, systems and people, giving retailers a competitive advantage through enhanced online customer experiences, easy-to-manage Web sites and simplified integration across channels.”

Clelland agrees, adding that Snow Valley uses a range of products from the .NET family, including Commerce Server, BizTalk Server and SQL Server, to deliver multi-channel solutions to the retailers, brands and manufacturers. “Microsoft .NET offers a range of advantages that make it the world’s leading platform for e-commerce and it is powering some of the world’s largest online retail systems, including Tesco in the UK and Costco in the US,” she says.

Maginus’ Dorset says that Dynamics AX is a fundamental part of its solution, Multi-Channel Commerce (MCC). “Microsoft technologies allow retailers to offer their customers the opportunity to connect with them how, when and where they want to,” he says. “From a retailer’s point of view, a click and collect capability will give the customer the benefit of ordering online and improved service by giving the customer the opportunity to collect straight away. There’s a payback for the retailer too, as customers collecting in store typically buy other things too while they’re there – spending on average a further 23 per cent on top of the online purchase value. Such technologies also reduce costs, because integration reduces duplication and errors creeping into the system. Such technologies can also increase turnover and margins, as capturing CRM data helps with upselling.”

K3’s Retail CRM solution, built on Microsoft Dynamics CRM, offers another way to capture important customer data. “Customer information linked with product data is a powerful mix,” explains Tony Bryant, business development manager at the respective company. “Microsoft Dynamics retail applications with Retail CRM are a very powerful proposition. A single view of product master data and having real time visibility across the business is now essential.”

Microsoft technology is also allowing retailers to leverage information from social networks, using this information to drive a successful multi-channel strategy. “The most important lesson that retailers can learn from customers’ engagement with social media is that listening to your audience and learning what customers and prospects truly feel about your brand is vital,” says Caroline Worboys, managing director of Callcredit Marketing Solutions. “Using integrated technologies such as Microsoft Windows 7 to gauge consumer demand, harness their voice, and analyse real-time customer data allows retailers to use the information to create real intelligence and understanding of their customer base. This insight, in turn, enables them to ensure that the next interaction they have with their consumers is relevant and timely.”

Stuart Ingham, senior director at Avanade, explains that his company has teamed with Accenture and Microsoft to create a solution that allows retailers to embrace social media. “While tracking activity on a retailer’s own site is fairly simple – and valuable – there is a vast landscape of social networks that have participants sharing opinions, comments, possibly even photos and videos about a brand. Ideally, retailers could create these forums themselves, on sites that they control. But the reality is that much of the conversation will take place outside of their site – so they need to find those sites and monitor customer’s ongoing perception of their brand as it is being formed. Unfortunately, finding those sites has been a classic ‘needle/haystack’ proposition in the past, but, by working with Microsoft and Accenture, we have been helping our customers harness the potential of both home-grown and external social networks. In addition to including social networking functionality in our e-commerce platform, we have been developing a kind of ‘social network scanner’ or dashboard that could keep tabs on chatter certain keywords that you define – brand names or even topics like mobile phone plans or fashion.”

Looking to the future, multi-channel technologies will play a much more critical part in retail operations. Andrew Donn, regional sales director at Honeywell, says that as the Internet generation continues to grow larger and cover greater proportions of the population, even small retailers are extending from a single shop to the Internet to extend their reach and take their businesses nationwide. “The opposite is also happening,” he says. “Online organic grocers are now setting up retail outlets as the Farm Shop phenomenon continues to take hold. We will continue to see this adoption of different channels by new and established businesses. The successful retail businesses of the future will offer an infinitely varying level of customer service through all the different channels available. We may, in fact, see some new channels emerging as retailers look to make additional sales on the back of deliveries heading into outlying communities.”

“Multi-channel retailing is set to get more complex as new channels and ways of interacting with the customer are created,” concludes Bryant. “These will include using mobile technology to deliver personalised promotions, location-based promotions and so on, as well as social networking technology to create a more interactive relationship with customers. For this decade we will see greater exploitation of online success. We will start to see mobile commerce, and so retailers will need mobile specific versions of their Web site and will have to recognise how best to manage payments via a mobile phone.”

This article first appeared in the Summer 2010 edition of Retailspeak magazine.

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