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Retailers too complacent about their multi-channel models
Retailers have not thought through the long term strategic issues about multi-channel retailing and the integration of their various channels, which is resulting in them missing out on many potential sales as shoppers increasingly expect to shop across-channels.
By Glynn Davis
According to a recent report ‘Multichannel retailing 2010’ from BT Expedite and Martec International, retailers’ continued high sales growth online has led to overlooking the need to develop long term strategies. This could be a problem in the future as the market gets more competitive and more sophisticated systems and processes are employed.
Jason Shorrock, business development director at BT Expedite, says: “As consumers get used to consistent across-channel experience then retailers will launch [ever more] new systems. But to run them all efficiently, to scale them, and to make profits it is very difficult. They are finding holes and things are not working efficiently so there is a risk of disappointing consumers.”
What is particularly worrying is that the retailers surveyed (both in the UK and US) are generally satisfied with the level of integration they have across their various channels. For supply chain and logistics 7.7 per cent were happy with their levels of integration, while for buying and merchandising it dropped to a still high seven per cent. This then fell to six per cent for business intelligence.
The latter is not too much of a surprise as maintaining information about customers across channels was highlighted as a major concern by 50 per cent of US retailers. This, however, differed dramatically in the UK where only 19 per cent regarded this as a key challenge. Strangely, UK retailers did not highlight any areas of their businesses as being key challenges, unlike their US counterparts that admit to having issues with many parts of their organisations.
This suggests the US operators have serious problems or that UK retailers are oblivious or complacent about the issues they face. The latter might well be the case when you consider that only 52 per cent of UK retailers have a cross channel order management system and that only five per cent of the others intend to implement one. This leaves a large proportion of retailers with no visibility and access to stock across their various channels.
Not surprisingly this means there is a distinct lack of visibility across channels with 39 per cent of retailers admitting them have none and 15 per cent even believing that they do not need this visibility. This undoubtedly contributes to the problem many retailers have with attaining the much lauded ‘single view of the customer’. The survey found 60 per cent of US retailers have such a view while only 38 per cent in the UK are in this advantageous position.
Shorrock says: “Bringing information about customers across the web and stores is a problem and retailers are trying to catch up on this. They do not often have a single system to put the information in and then analyse it...but I think this issue is coming more to the fore as the web channel becomes more significant and they look for what’s the next thing for competitive advantage.”
Fran Risley of Martec International questions the validity of these specific findings as she believes many retailers that say they have a single customer view probably only have a low level of visibility: “It’s better than it was but it’s not a real single view of the customer.”
The key reason for such a situation is down to the immaturity of e-commerce and multi-channel retailing. Risley cites the situation with websites that differ greatly to other technologies. “Some systems can be kept running for 10 years but with websites we’re talking about only four years. You might have spent a significant amount only two years ago but you still have to keep working on your website as things keep moving.”
Such has been the growth of sales online that Shorrock says even updating websites has often been overlooked. This is a mistake as she suggests double-digit increases in returns could be enjoyed by retailers from simply refreshing their websites and ensuring things like no broken links exist and downloads work .
This immaturity of online - combined with a lack of visibility across channels – extends to the lack of KPIs for multi-channel retailing. This lack of measurement capability within most retailers is a serious concern for Risley and means that most retailers cannot even measure the level of cross channel cannibalisation that exists in their businesses. The survey found that only 25 per cent have the capability to measure this most important of metrics.
There is also a general lack of consistency in measuring results online versus in-store. Whereas there are long-standing KPIs in-store such as sales per sq ft and gross margin percentage, the online measurements are very different and include visits per page and conversion rate. Risley says she found many retailers relied on “gut feel rather than real figures” when measuring many of their online metrics.
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