Increased investment in Multichannel - NRF Annual Convention and Expo in New York
The unprofitable nature of non-store sales for the majority of retailers is the major prompt behind their increased investment in bringing their channels together to create a seamless multi-channel operation. By Glynn Davis in New York
Speaking at the 101st NRF Annual Convention and Expo in New York Darryl Owen, vice president of head of trading industries EMEA at SAP, told Retail Bulletin that “maybe 30% of retailers are making profits from their non-store sales” and with increasing turnover shifting from stores to online this is a worrying scenario for merchants who are now making investments to address the situation.
This is occurring at a time when the shopper journey is increasingly straddling channels, and new disruptive technologies are giving consumers greater powers – with mobility and social networking having a big impact – and taking control out of the hands of retailers.
These are combining to prompt a behavioral shift. “Consumers have access to a lot of information, are impatient, and they are not very loyal. We can all do things with the trusty iPhone and it is very unpredictable for retailers,” said Owen.
He also outlined a number of other operational challenges now hitting retailers including the silos within which they currently operate their individual channels, which he says has led to great amounts of duplication. “There is now a lot of extra stock in the system and the cost bases of retailers are significantly higher as a result,” he said.
Another cost issue revolves around pricing and promotion online versus in-store, with hypermarkets running maybe 200-300 promotions per month whereas on the internet this could be 200-300 per day, which is leading to a “death spiral in pricing” both in-store and online.
Further complicating the stores versus online scenario is the ever-shortening product lifecycle. With products on the shelf for as little as three weeks in many fashion stores there is an issue of retailers needing to heavily discount any stock left in-store in order that they can clear the shelves. But in contrast, the same product might be in big demand online and be going out-of-stock. This lack of stock management capability across channels is leading to significant lost revenues.
“Many retailers can’t even say ‘what the levels of online sales are in a specific region’. Multi-channel retailers really need to understand this. We’re taking the view [at SAP] of looking at where was the stock delivered to as opposed to where was it sold. This better enables retailers to manipulate the mix across the channels, suggested Owen.
What retailers have to adopt in order to address these manifest issues are: applications that operate in real-time; standardized data across their organisations; simplified interfaces; and have everything is built for personalization. “If it’s not instant and personal then it’s not relevant,” said Owens.
Such a scenario would require retailers to eliminate cross-reference tables, take out batch processing and replace it with real-time solutions, and reduce the number of interfaces to a minimum. Owens recognised that the complexity of such a move would “not be a cookie cutter approach” and would need to be tailored to each retail business.
But with this backdrop he says retailers can then start to deliver personalization in real-time to their customers, which he regards as likely to be an increasingly important aspect of their business in the future. SAP’s Apollo solution looks to provide exactly this through the creation of customer profiles that include their preferences.
These can then be used to drive promotions by linking to the retailers’ stock positions and communicating the messaging to the customer down the relevant channel (determined by where they are at that particular time). “The system can be used to make relevant promotional suggestions as well as sending recipes and product reviews. It could increase both the basket size and promotional conversion,” he said. This solution is currently being trialed by three retailers who Owen said have enjoyed boosts to their businesses.
Don’t miss the Retail Bulletin’s Multichannel Retailing Summit 2012 February 1st in London. Sponsored by eDigitalResearch, the theme of the day is ‘Driving ROI through profitable, engaging, seamlessly integrated and consistent multichannel strategies’. Speakers are from GAME, Marks & Spencer, Santander UK plc, Boots.com, Schuh, Halfords , Irisa Group Ltd,Tesco.com,Joules Clothing, Everything Everywhere, o2 Telefónica, Adnams Plc, r, eDigitalResearch, Collect Plus, Norbert Dentressangle, K3 Retail, 2ergo, mBlox. Click here for full details and registration.
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