Omnichannel Retail in Europe

Transcription

1 Gold Sponsor of the study Omnichannel Retail in Europe Strategies, Challenges & Measuring Success

2 SAP - Company Profile SAP is the world leader in enterprise applications in terms of software and software-related service revenue. Based on market capitalization, SAP is the world s third largest independent software manufacturer with more than 293,500 customers in 190 countries. With Run Simple as our operating principle, SAP s nearly 74,500 employees focus on a singular purpose that inspires us every day: To help the world run better and improve people s lives. For further information, please visit: - Executive Summary 2

3 Contents 1. Key Findings 4 2. Background & Methodology 7 3. Channel Evolution in European Retail Omnichannel: Drivers, Goals & Measures of Success Omnichannel & the Impact on IT Strategy Conclusion 31 Appendix 33 3

4 1. Key Findings 4

5 Key Findings The physical store will become MORE important! Perhaps the most surprising finding is that European retailers believe that the physical store will become more strategically important in the coming years. The majority of participants also stated that they expect mobile and online channels to become more important in the future, which highlights how the issue of managing and integrating multiple channels has become a hugely important success factor for modern retail organizations. The customer is driving omnichannel: Omnichannel has become such a buzzword in the industry that it is easy to lose sight of why it is so important it is because it is what the customer wants. The survey found that 85% of European retailers stated that their omnichannel retail strategy is in place because customers are demanding it, while 89% said that their omnichannel initiatives are being driven by a need to improve the customer experience. Non-tech challenges are biggest omnichannel headaches: The study found that it is business rather than IT leaders that are generally leading omnichannel programs. This is good news, as retailers also perceive their biggest challenges to be business rather than IT ones. More than 80% said that the development of a long-term channel integration strategy was either a major or clear challenge, while three quarters named transforming internal organization structures as a pressing concern. Support from third-party service providers is welcomed: The majority of European retailers (57%) believe that they would benefit from external support in implementing and integrating omnichannel solutions. This reflects how stretched many internal IT organizations at retailers have become in 2015, and shows that retailers have an appreciation of how difficult it can be to drive channel integration not just in terms of technology, but also in transforming and optimizing business processes. 5

6 The European Picture UK - Only 23% believe physical store will remain as number one channel - 70% see NPS as key measure of omnichannel success Nordics - 66% already sell through mobile channels - 75% have store-to-online integration in place Benelux - 90% believe branch is of high strategic importance - 100% see increased customer retention as key measure of omnichannel success France - 95% say customer satisfaction is main driver for omnichannel - Over 50% plan omnichannel IT investment in next 2-5 years. Germany - 85% believe physical branch will become more important - 73% see long-term strategy planning as major barrier to omnichannel Spain - 50% have omnichannel strategy driven by sales organization - 90% have click-and-collect in place at physical stores Italy - Less than 25% see mobile as important channel - 40% have omnichannel strategy driven by CEO 6

7 2. Background & Methodology 7

8 Introduction The European retail sector is undergoing a period of unprecedented transformation. Retailers have emerged from the financial downturn at the start of the decade to find that the purchasing behavior and demands of their customers have been radically changed by both economic conditions and the impact of digital technology, most notably mobile and social media. Established giants such as Tesco are battling a new wave of competition from fast-growing discount players, while sectors such as fashion and electronics retailing are being shaken up by the challenges and opportunities that online channels present. But perhaps the biggest battle facing European retailers is to meet the increasingly high level of expectation of their customers. The likes of Amazon and Google are raising the bar for product delivery from next-day to same-day, while forwardthinking brands such as John Lewis have invested heavily to provide a seamless experience across their different points of engagement, to ensure that the customer receives the same level of service, promotions and pricing. Good and bad news travels faster than ever in the age of social media, which is putting brand loyalty under growing pressure. Retailers need to work harder than ever to ensure that they keep their customers happy and continue to stay on course with the competition in order to survive. Against this background PAC conducted a survey among 200 CxOs in European retail companies (France, Germany, Italy, the Netherlands, the Nordic region, Spain and the UK) each with more than 500 employees. The study explores the following questions: How will physical and digital channels change in strategic importance in the next 3-5 years? What are the main goals of retailers omnichannel strategies? Who is leading it within the organization, and how will they measure its success? How far advanced are European retailers in integrating physical and online channels? How many are able to offer click-and-collect or in-store online ordering? What impact is the omnichannel strategy having on IT investment? What are the areas of their IT landscape that European retailers expect to enhance or modernize in order to drive improved channel integration, more streamlined operating models or a better customer experience? How will retailers execute their omnichannel strategies? Will they look to work with external partners, and in what areas will they look for support? 8

9 Survey of Retail CxOs in Europe 200 survey respondents in Western Europe Fashion 19% Electronics 18% Furniture 15% Food 14% Household 8% Office 7% Pharmacy 5% Other 14% 70% business respondents 30% IT respondents > 20% 20% 20% 10% 10% 10% 10% J F M A M All respondents had over 500 employees DE FR UK BEN ES IT Nordic Survey conducted in May

10 3. Channel Background Evolution & in Methodology European Retail 10

11 How do European Retailers Sell Today? Q. Which of the following channels does your business currently sell through? All of the retailers that participated in the study sold through more than one channel, with the majority (54%) selling through three or more. Some 15% of the retailers sold through all five major channels. 87% 82% Physical Branch Online/ Web Shop 45% 38% 34% Mobile Catalogue Social Media The two biggest adopters of mobile channels are retailers in the Nordic region (66%) and in the UK (60%). This puts them well ahead of 43%of mobile channel adoption in Germany and just 25% in Spain. It is a similar picture in terms of the use of social media as a sales channel, with 60% in the Nordics and 43% in the UK using services such as Twitter to sell and promote products and services, compared to a level of just 20% in Spain. Both Spanish and Italian retailers have a higher-than-average usage of catalogues with 40% of respondents in each country citing it as a major channel. 11

12 Current Channel Strategies Q. What is the strategic significance of these different sales channels for your business? Physical Branch No Importance 8% Low Importance 9% High Importance 83% 2015 Online/ Web Shop Mobile 8% 18% 27% 47% 66% 35% The physical branch remains at the heart of the strategy of the majority of European retailers. An overwhelming 83% see the store as having high strategic importance, with 90% of retailers in the Benelux region and 85% of German retailers putting the store front at the centre of their channel strategies. Catalogue Social Media 30% 31% 52% 49% 19% 21% It is a much more mixed picture in terms of attitudes towards the importance of digital channels. Mobile is seen as having high importance as a channel by more than half of UK and Nordic retailers, but by less than one third of their German counterparts, and only 25% of Italian retailers. PAC 12

13 Future Channel Evolution Q. Which channels will become more or less strategically important in the next 5 years? Physical Branch Online/ Web Shop Mobile Less Important 4% 4% 12% Stays the Same 20% 26% 33% More Important 73% 69% 50% 2020 European retailers expect digital channels to become more strategically important in the next five years, but not at the expense of the store. Some 85% of German retailers and 80% of their French peers believe that the physical branch will become more strategically important by 2020, compared to 62% of retailers in the UK. Catalogue Social Media 21% 15% 52% 46% 13% 27% Retailers in the Benelux (85%) and Nordic regions (90%) clearly expect their online/webshop channels to become more important in the medium term. It is again retailers in the Nordic region that expect mobile to rise in importance as a channel (75%) and while Spanish retailers currently lag in their use of mobile channels, some 55% expect them to gain importance. PAC 13

14 The Future of the Store Q. Will the physical store remain the most important sales channel for your company in the long term? I Do Not Agree I Wholeheartedly Agree 4% 5% 18% 42% 32% The physical store will clearly remain an essential point of engagement with the customer, even in the digital age. More than 70% of European retailers state that they either wholeheartedly agreed or strongly agreed that the physical store would remain their most important sales channel in the long term. There were some interesting regional variations behind this headline number. Retailers in Italy felt the strongest on the subject, with 45% wholeheartedly agreeing that the store will remain king, ahead of 35% in Germany. The least convinced are retailers in the UK, where just 23% backed the store to remain as their number one channel. What this means is that while retailers continue to enhance their digital services, they must also ensure that their physical stores continue to evolve as an integral part of an omnichannel strategy. 14

15 Digital Priorities Q. Is the expansion of your digital presence the number one priority for your company in the next 2 years? I Do Not Agree I Wholeheartedly Agree 3% 3% 25% 42% 27% The study found a largely positive response on the question of where the digital issue ranks among the most pressing concerns for European retailers. Some 30% of retailers in France, Italy, Spain and the Netherlands stated that they wholeheartedly agreed that the expansion of their digital presence was their top priority for the short to medium term. The impact of digital continues to reach new levels across the European retail sector in recent quarters. In the UK, visits to retail websites via mobile devices overtook desktop traffic for the first time in 2014, with retailer John Lewis stating that more than half its online traffic now comes via mobile devices. 15

16 The Store of the Future Q. Do you plan to use your physical stores for the following activities in the next 2 years? Already doing so Planned 33% 46% 31% 42% 41% 38% 41% 33% 41% 30% As a pick-up point for goods ordered online As a place for the exchange/return of goods ordered online Act as showroom for goods that are available online As a place to pay for online purchases For delivery of goods ordered online While the physical store will remain a critical point of customer engagement for European retailers, its role will evolve to meet changing customer demands. More than a third already use their stores for activities that support other channels such as a point of payment for online purchases or as a place for exchanging or returning goods bought online. Some 60% of retailers in the Netherlands already use their physical stores as a collection point for online orders, compared to a level of 30% in each of France, Germany and the UK. However, the UK leads the way in using the store as a showroom for goods that are available online, with 50% already having this in place, compared to 30% in Italy. 16

17 Online and Store Integration on the Rise Q. Has your company linked or does it plan to link the following sales channels in the next 2 years? Online 78% Yes 22% No Store Store 67% Yes 34% No Online A huge 90% of retailers in Spain and 80% in the Netherlands have already linked their online-to-store channels to support click-and-collect initiatives, but there was a generally high adoption rates across all territories. There was a slightly lower adoption of store-to-online integration to enable customers to order products that are unavailable at the store via online channels, which can then be delivered to their homes. Retailers in the Benelux and Nordic regions lead the way in this area, with 75% already having this integration in place, compared to 55% in Italy. 17

18 4. Omnichannel: Drivers, Goals & Measures of Success 18

19 Omnichannel Drivers Q. What are the primary drivers behind your omnichannel investments? Improve customer satisfaction Customers are demanding it To drive savings and operational efficiency Our competitors are doing it 89% 85% 70% 49% The customer is clearly at the heart of what is driving investment in omnichannel initiatives at European retailers. Improving customer satisfaction is a major factor behind the omnichannel investment of Nordic and French retailers, with a massive 95% naming it as primary driver. Meanwhile, more than 90% of French and Benelux retailers state that their investment is being driven by customer demand. Perhaps most interestingly, it is in those markets that are seen as the most mature in their adoption of omnichannel strategies, where achieving cost savings and operational efficiency is cited as primary factor. Some 83% of UK and 80% of Nordic retailers cite this as a major driver, versus just 55% in Germany, which suggests that those retailers that have already made their initial wave of investment in technology and process transformation are now in a better position to look to drive efficiency through deeper channel integration. 19

20 Measuring Omnichannel Success Q. How do you measure the success of your omnichannel strategy? Increased Customer Retention Increased New Customer Acquisition Reduction in Customer Effort Increase in Brand Reach Increase in Net Promoter Score 86% 84% 73% 67% 66% Retailers are committing major funds to omnichannel initiatives, but how do they plan to measure the success of their investment? As we have already seen, most retailers see customer demand or the need to provide a better customer experience at the core of the omnichannel initiatives, and this is reflected in the measures of success on which they are focusing. Increased customer retention and new customer acquisition are the two most common measures of success, with 100% of Benelux retailers citing the former as an important gauge. Net promoter scores clearly carry more weight in some markets than others, with 70% of UK retailers tracking increases in NPS as a key measure, compared to 56% in Italy. UK retailers (83%) also lead the way in looking at a reduction in customer effort to test the effectiveness of their omnichannel strategies. 20

21 Teamwork is Crucial in Omnichannel Q. Who in your organization is the driving force behind the omnichannel strategy? CEO 25% Marketing Department Sales Department IT Department Specific Omnichannel Unit 45% 21% 5% 4% Omnichannel is clearly viewed by European retailers as a business, rather than simply a technological challenge, and this is reflected by the individuals and departments within the business that are driving strategy in this area. More than 90% stated that their omnichannel strategy is led by either the CEO, or the sales and marketing leadership teams, with just 5% naming the IT department as the prime mover. This is broadly the trend across all the major European territories, but there are some interesting differences, notably in southern Europe. Some 40% of Italian retailers named the CEO as the principal player behind their omnichannel strategy, while 50% of Spanish retailers said that their sales organization was leading the way. Only 4% of the retailers that particpated in the study stated that they had a specific omnichannel unit in place, which highlights the importance of collaboration between the business units in order to ensure that the different moving parts of the business are working towards the same goals. 21

22 The Key Challenges of Omnichannel Q. What do you see as the biggest challenges for your omnichannel strategy? Developing a long-term channel integration strategy Making changes to the organizational structure Understanding client activity across different channels A single customer retention system across channels Uniform customer services (loyalty, basket etc) Uniform price system across all channels Real-time access to POS information Flexibility of supply chain for returns management Cross-channel inventory management Re-alignment of existing ERP systems Integration of payment procsses across channels Ability to support mobile payments Uniform cashless payment methods Management of external and internal data It is business rather than technology issues that European retailers see as the biggest challenge to their omnichannel strategies. Developing a long-term strategy is such a challenge due to the rapid pace of change in the retail sector. Customer buying behavior and internal management priorities change on a quarterly basis, while the sheer scale of the challenge of integrating multiple channels often across different brands and geographies, makes it very difficult to pin down a three- or five-year plan. The biggest regional differences were in the responses from German and UK retailers. The development of a long-term strategy is a huge concern for the former (cited by 73% as a major challenge), as was the need to make changes to the organizational structure (68%). But UK retailers are much more sanguine on long-term strategy planning (38% see it as a major challenge), and instead are much more concerned about understanding customer activity across multiple channels (43% vs 15% in Germany). Major Challenge Clear Challenge Low/No Challenge 22

23 5. Omnichannel & the Impact on IT Strategy 23

24 Is Omnichannel Driving IT Investment? Q. Is your company planning IT investment in the short/medium term to support omnichannel? Yes! In the next 2 years Yes! In the next 2-5 years No 45% 38% 18% IT plays a crucial role in enabling omnichannel retail, and the large majority of European organizations (83%) plan to increase spending in IT to support omnichannel programs in the short or medium term. German retailers are taking a longer-term approach to omnichannel-related IT investment, with just one third planning significant spending in this area in the next two years, but 55% expecting to ramp it up between 2017 and In contrast, more than half of French retailers plan an investment drive inside the next two years, with 40% expecting to accelerate in the medium term. Some 20% of retailers in the UK and Nordics have no short- or medium-terms plans to invest in IT to support omnichannel, which reflects the maturity of both of these markets, where front-running retailers are already 2-3 years into their omnichannel transformation programs. 24

25 Omnichannel Investment Priorities (1) Q. In which areas do you plan to invest as part of your omnichannel strategy? Cross- Channel Integration Solutions Webshop Solutions Mobile Shopping Apps for Smartphones/ Tablets Customer Relationship Management Data Analytics & Big Data In-Memory Solutions for Big Data Online Payment Solutions Yes 22% 67% 43% 54% 27% 29% 62% In Next 2 Years 38% 11% 18% 19% 26% 25% 12% In Next 2-5 Years 19% 10% 13% 14% 29% 29% 7% Already Invested 6% 3% 3% 1% 7% 6% 6% None Planned 13% 8% 20% 10% 10% 11% 11% Not a Priority 3% 2% 4% 3% 2% 1% 3% Very few European retailers have deployed cross-channel integration solutions (6%), with the Nordic retailers (15%) leading the way. The biggest short-term surge in adoption will be in France, where 45% of retailers plan to roll out integration platforms in the next two years. There has been a lot of discussion about the potential that data analytics & big data holds for retailers in helping them better understand customer behaviour and operational performance. Only 7% of European retailers have an analytics solution in place, but it will be a major growth area with 51% planning to invest in this area in the next five years. There has been a low adoption of in-memory solutions for big data at a European level, but there will be a sharp increase in Spain and France in the next five years with 75% and 65% of retailers planning to invest in solutions such as SAP Hana. 25

26 Omnichannel Investment Priorities (2) Q. In which areas do you plan to invest as part of your omnichannel strategy? Mobile Payment Systems Tablet-based Payment Terminals Management/ Marketing Tools Self-Service Branch Technology Branch Infrastructure Solutions Clienteling Solutions Yes 35% 32% 33% 20% 28% 12% In Next 2 Years 24% 23% 17% 19% 18% 18% In Next 2-5 Years 13% 17% 20% 9% 15% 17% Already Invested 4% 4% 4% 6% 13% 3% None Planned 22% 23% 25% 40% 18% 44% Not a Priority 3% 2% 2% 7% 9% 7% Mobile payments are a hot topic in the retail sector, following the launch of Apple Pay in the UK in European retailers have made limited investment in this area to date (4%), but 37% plan to deploy in the next five years, with Germany (35%) and the Netherlands as notable hot-spots. The adoption of self-service branch technology has been patchy across Europe, but it is interesting to see that 25% of German retailers, which have been particularly cautious in this past, plan to invest in selfservice solutions in the next two years. The study also assessed retailers appetite for clienteling solutions systems to manage customer engagement processes for bringing customers into the store, and found that 35% plan to deploy in the next five years, with retailers in the UK (43%) and the Benelux region (40%) planning to be the most active. 26

27 The Role of Cloud in Omnichannel Q. Will the use of cloud computing facilitate the technical implementation of an omnichannel strategy? Yes! No! 34% 30% (Agree or agree wholeheartedly) (Disagree or strongly disagree) There remains a lot of uncertainty among European retailers over the role that cloud computing delivery models can play in supporting their omnichannel strategies. More than one third sit on the fence, neither agreeing or disagreeing that cloud can play a positive role. Retailers in the UK (48%) and the Nordics (40%) are the most enthusiastic in their views on cloud as an enabler for omnichannel, which reflects the maturity of cloud adoption in these markets, in relation to the rest of Europe. The strongest reluctance towards cloud comes from retailers in Italy (55% strongly disagree or disagree that cloud can support the technical implementation of omnichannel) and Germany (33%), where lingering concerns over data privacy issues continue to deter many organizations in retail and beyond from moving towards the cloud. PAC expects these concerns to subside over time, with many retailers already using cloud platforms to support activities such as testing and development and for point solutions in areas such as human resources or salesforce management. 27

28 Analytics & the Cross-Channel Customer View Q. Will the use of big data & in-memory technology make it easier to get a cross-channel customer view? Yes! No! 36% 30% (Agree or agree wholeheartedly) (Disagree or strongly disagree) The adoption of big data and in-memory technology is in its early stages in the European retail sector, but there is a growing appreciation of the value it can bring in terms of helping them to enable their omnichannel strategies. One of the biggest challenges posed by omnichannel is the need for retailers to provide consistent product and pricing information across multiple channels, and to ensure that data is exchanged between these channels in real-time to ensure that it is in-line with the latest market changes and marketing requirements. More than one third of European retailers believe that big data and in-memory technology can help them to get a cross-channel customer view, with those in the UK (48% agree of wholeheartedly agree) and the Benelux region (50%) the strongest advocates. PAC believes that many retailers are waiting to see more evidence in the field of the benefits that can be delivered from big data and in-memory technology before making major deployments, but the high level of pilot projects taking place suggests that the tipping point is not far away. 28

29 Are Retailers Flying Solo with Omnichannel? Q. Do you need assistance from external providers to implement your omnichannel strategy? Yes! No! 38% 26% (Agree or agree wholeheartedly) (Disagree or strongly disagree) European retailers have a strong track record of engaging with external partners to support major transformational projects, whether it is integrating major mergers and acquisitions overhauling their digital presence or modernizing core technology platforms. According to PAC s latest figures, retailers will spend more than 17bn on external IT services and software in In the area of omnichannel, considerably more European retailers (38%) believe that external providers have an important role to play, than those that want to do it alone (26%). There may be some considerable challenges for those retailers that do not look to external support on their omnichannel initiatives, and particularly for the vast majority of organizations that do not have a single organization within their business driving omnichannel, and who may well benefit from having some assistance in coordinating omnichannel implementation across different departments. 29

30 Smoothing Omnichannel Integration Q. Do you need assistance from external providers to implement & integrate omnichannel solutions? Yes! No! 57% 17% (Agree or agree wholeheartedly) (Disagree or strongly disagree) One area where European retailers are very keen to receive external support is in implementing and integrating omnichannel solutions. As we have seen, there is growing interest in emerging technologies such as big data and in-memory technology, and omnichannel integration platforms, but many retailers lack the technical skills and bandwidth to be able to test, deploy and integrate them using their internal IT teams. It is not surprising to see that 57% of European retailers say they need assistance from external suppliers around the technical aspects of omnichannel, while only 17% believe they can tackle them themselves. The appetite for external help is greatest among German (70%) and UK (65%) retail organizations. 30

31 6. Conclusions 31

32 Analyst conclusion Nick Mayes Research Director, PAC Omnichannel presents both a huge opportunity and a challenge to European retailers and many of the findings of the study suggest that they are tackling it in the right way. It is seen as a business rather than a technology issue, and is generally being led by senior business stakeholders rather than the IT function. There is also a clear appreciation that the physical store will remain a crucial element of the channel strategies of European retailers, despite their aggressive plans to invest in enhancing their digital presence. Many retailers are already ensuring that their stores are able to support their customers digital activities through click-and-collect and returning an exchanging online orders. The maturity and adoption of omnichannel retail is moving at different speeds across key European markets. Based on the findings of the study, the UK and the Nordic and Benelux regions stand out as the most advanced in their use of mobile channels, cross-channel integration platforms and advanced data analytics. They also take a more proactive approach to tracking NPS and customer effort as a way to measure the impact of their omnichannel initiatives. However, other countries are catching up fast, with retailers in France and Germany planning to invest in omnichannel-related IT in both the short and medium term. With many planning to deploy solutions in areas such as big data analytics, self-service technology, mobile payments and clienteling solutions, it is also encouraging to see a high proportion of retailers looking to work with external suppliers to help them tackle the often complex integration and implementation challenges. 32

33 8. Appendix 33

34 Disclaimer, usage rights, independence and data protection This study was compiled in multi-client mode under the sponsorship of HP, Fujitsu, GK Software and SAP For more information, please visit Disclaimer The contents of this study were compiled with the greatest possible care. However, no liability for their accuracy can be assumed. Analyses and evaluations reflect the state of our knowledge in September 2015 and may change at any time. This applies in particular, but not exclusively, to statements made about the future. Names and designations that appear in this study may be registered trademarks. Usage rights This study is protected by copyright. Any reproduction or dissemination to third parties, including in part, requires the prior explicit authorization of the sponsors. The publication or dissemination of tables, graphics etc. in other publications also requires prior authorization. Independence and data protection This study was produced solely by Pierre Audoin Consultants (PAC). The sponsors had no influence over the analysis of the data and the production of the study. The participants in the study were assured that the information they provided would be treated confidentially. No statement enables conclusions to be drawn about individual companies, and no individual survey data was passed to the sponsors or other third parties. All participants in the study were selected at random. There is no connection between the production of the study and any commercial relationship between the respondents and the sponsors of this study. 34

35 Contact Founded in 1976, Pierre Audoin Consultants (PAC) is part of CXP Group, the leading independent European research and consulting firm for the software, IT services and digital transformation industry. CXP Group offers its customers comprehensive support services for the evaluation, selection and optimization of their software solutions and for the evaluation and selection of IT services providers, and accompanies them in optimizing their sourcing and investment strategies. As such, CXP Group supports ICT decision makers in their digital transformation journey. Nick Mayes Principal Analyst +44 (0) Further, CXP Group assists software and IT services providers in optimizing their strategies and go-to-market approaches with quantitative and qualitative analyses as well as consulting services. Public organizations and institutions equally base the development of their IT policies on our reports. Capitalizing on 40 years of experience, based in 8 countries (with 17 offices worldwide) and with 140 employees, CXP Group provides its expertise every year to more than 1,500 ICT decision makers and the operational divisions of large enterprises as well as mid-market companies and their providers. CXP Group consists of three branches: Le CXP, BARC (Business Application Research Center) and Pierre Audoin Consultants (PAC). For more information please visit: PAC s latest news: Follow us on