Retailers face multi-channel challenge of following the customer
As growing numbers of consumers adopt multi-channel shopping journeys it is proving increasingly tough for retailers to keep control of their customer base in the same way they did when operating only stores. By Glynn Davis
Speaking at last week’s packed Retail Bulletin 4th Multi-channel Summit 2013 in London, Karen Dracou, head of omni-channel development at John Lewis, told delegates: “We’re not in control – it’s down to the customer, and we need to respond to them. Omni-channel is about connecting the channels so customers can seamlessly go between them. We’re trying to grow cohesion in the business.”
Keeping control of customers
This has meant developing click & collect, and then extending it to the Waitrose stores. She reveals that discussions are now taking place to bring the contact centres into the omni-channel world by making partners’ expertise available for those people buying online and at all hours.
Alan White, chief executive of N Brown Group, also recognises the difficulty in keeping close to the customer especially with the rise of marketplaces (such as Amazon and eBay): “Everybody wants to control the customer and we’re keen on them coming directly through us, not through somebody else’s portal. That’s why we’ve been slow to go on to other people’s marketplaces.”
He says the questions that arise are: How a retailer stops “monolithic” businesses (like Amazon) from controlling their business – as well as their customers – and how do they preserve their brand?
Differentiate through delivery
One way, according to Tom Allason, founder and chief executive of Shutl, is through superior delivery options. For multi-channel retailers he suggests it is potentially their biggest threat to Amazon. Whereas the giant competes on its low prices and its extensive range, its delivery proposition is the same as other retailers.
But Allason says multi-channel merchants could beat it on delivery by using the Shutl service, which would enable them to fulfil online orders from their store stock using local couriers – who in many cases can deliver orders within a 90-minute window.
The big challenge to Shutl is that many retailers do not have great visibility of where their stock is throughout their supply chain – across their warehouses and stores – which makes it tough to integrate the Shutl service into their systems.
The power of data
In contrast for a long-standing home shopping business like N Brown data has always been “absolutely key” and the power of the internet has made it possible to know its stock positions and to track its customer’s journeys.
But White says it is only possible to do this if the customer is coming through the retailers’ sites rather than via Debenhams or the Amazon Marketplace because he says “they don’t want to share the data”.
Adapting to customers’ behaviour – and the growing appeal of multi-channel shopping – has contributed to N Brown opening Simply Be stores. There are currently seven and White says their evaluation is not just on the sales per square foot they deliver but also on the “halo effect” they have on the online business.
Utilising bricks and mortar
Physical outlets were also not in the original game plan of A Suit That Fits when its co-founder David Hathiramani sought to build an online bespoke suits business. But this has changed: “We thought we’d develop an online tailoring business but as we’ve evolved it has become a multi-channel business. It has become more about what the customers want and we need to respond quickly to this,” he explains.
This has led it to open 33 studios around the UK from where it has style advisors who are assigned to each customer. They guide them through the process - from fabric selection through to fitting and final delivery of the suit.
“A big part of tailoring is ensuring the delivery is smooth and so service makes up 70% of the customer experience. That is why a customer’s positive feedback on a style advisor doubles their commission. Their net promoter score also affects their bonuses,” says Hathiramani.
Changing consumer mindsets
Bringing together the technology with the personal service of the style advisors has helped the A Suit That Fits business, but he admits the challenge remains for changing the consumer mindset from thinking bespoke suits are exclusive – the average three-piece the retailer sells is around the modest £450 level.
Matt Curry, head of e-commerce at Lovehoney, says the customer can be tough to control and change their mindsets but complicating things even further today is the potential for them to be swept along by great shifts in the marketplace.
Like many online businesses he says Lovehoney has used tools to build profiles of its customers and analysed search terms and product searches to decide what to present to its specific customer segments on the site but then ‘50 Shades of Grey’ was published: “It completely changed the market. You can have the most accurate user model but customer tastes change so you [sometimes] need to re-evaluate your model.”
Lovehoney is now the world wide licensee for the 50 Shades brand of sex toys and it ships the goods around the globe, highlighting how it has been flexible enough to embrace change and to drive revenues as a result.
Flexibility drives relevance and sales
Bob Skeens, regional director of Western Europe for Demandware, suggests “this decade is all about agility” but he warns that “the ability of retailers to innovate is not catching up with customer demands”.
This is a mistake, especially if his predictions come to fruition. Whereas the desktop impacted on 10% of the retail economy he says mobile will impact on 50%. And in five years time when there will be five billion smart mobile devices on the planet then the impact on retail will be enormous.
David Hoeflmayr, chief operating officer of Gravis Germany – which sells Apple products, has sought to adapt his business to such changes in consumer behaviour – driven by the growth of multi-channel shopping.
The price of buying a product from a rival online retailer can be Euros 110 cheaper than from in a Gravis store, which is a problem when the firm has wanted to keep its store and online prices the same. The answer has been to create bespoke sites for specific user groups such as Universities that allow access only to students who then enjoy lower prices than those available on the general Gravis website.
These clone sites now represent 15% of all its online sales and are “growing faster than other online sales”, says Hoeflymayr.
Another development he has brought in is offering accessories and services such as repairs, customisation, insurance, upgrades and training. The margin on these has been significantly greater than the 10% the business achieves on its core Apple products. Whereas Apple represents 80% of group sales this only accounts for 45% of gross profits.
The value of people
But highlighting how tough it is to manage the different channels cohesively is the fact consumers behave very differently on them. While insurance will be sold with 75% of the PCs bought in-store, only 30% of online customers take up the option of insuring, according to Hoeflmayr, who is attempting to bring more parity.
The difference in the uptake is clearly down to the effectiveness of the people in its stores. David Kohn, multi-channel director at Snow + Rock, recognises the power of people in-store that adds value to bricks and mortar.
“The principal asset of retailers is people. The reason you go to a shop is to touch the products but also to talk to people,” he says, adding that bringing technology into stores will also help improve service but will only have maximum benefit if the shop floor employees are also empowered to make decisions.
For all the talk of segmentation of customers – particularly online – in order to personalise the experience Kohn says it is people in-store who can give the best personalised service, based on their knowledge and perceptions of the individuals, which cannot be replicated online.
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