Omni-Channel Crimsonwing White Paper. August 2014

Transcription

1 Omni-Channel Crimsonwing White Paper August

2 Contents 03 Introduction 04 What is Omni-Channel Retail? 05 Challenging Pure-Play retailers 06 Examples of Omni-Channel Success 07 Omni-Channel is more than just offering Click & Collect 11 Barriers to Implementing Omni-Channel Retail 12 Infrastructure Issues 13 Inventory Visibility 14 Supply Chain & Logistical Challenges 15 Staff Training 16 Crimsonwing Omni-Channel Solution 17 Building Online Relationships with Consumers 18 Summary 19 Works Cited 20 About Crimsonwing 2

3 Introduction An online shopping revolution is taking place at the moment as consumers in the UK are showing their preference for retailers who offer Omni- Channel shopping. The internet had already revolutionised the world of retail. Now the take up of smart mobile devices and new customer friendly delivery options has created a new type of customer, the Omni-Channel consumer. Retailers who do not cater for this consumer will inevitably suffer. The Omni-Channel consumer expects to be able to shop from the device of their choice and to choose a delivery method that suits them, bringing seamlessly together the online resources and physical stores of the retailer. According to a research study commissioned by ebay Inc. earlier this year, 33% of consumers have recently made an Omni-Channel purchase. The Omni-Channel consumer is not abandoning the high street. These are consumers that see the online and offline retail experience as complementary. They are frequent shoppers and want to be able to complete their purchase anywhere they want. This is especially the case with high value purchases. The Omni- Channel consumer is more likely to complete their purchases using a mix of online and offline channels, Deloitte (2014). The Omni-Channel consumer is a more knowledgeable customer with information at their fingertips about products, prices and fulfilment options. This is a customer that is comparing your product and fulfilment options to other retailers, and expects to receive or collect their purchases anywhere they want. Fulfilment options play a key role for the Omni- Channel consumer. Omni-Channel fulfilment options such as Click & Collect have been offered by retailers such as Argos for many years, however the take up of such fulfilment practices by other retailers has been modest until recently. There used to be implied assumption that if I am buying online then my preference will be home delivery. However, recent results reported by the industry have shown that this is not always the case. According to Deloitte (2014), 1 in 5 shoppers do not like to wait for their delivery and this trend has seen the emergence of a range of fulfilment options involving the use of bricks and mortar stores for purchase collection or as delivery points. Some retailers offering Omni-Channel options have been reporting spectacular consumer take-up. In 2013 Argos and Boots reported that 31% and 59% of online sales were collected in store and a survey by Econsultancy (2013) found that 45% of UK online consumers chose store collection over Christmas to ensure they received their last minute Christmas shopping. This is a UK phenomenon and the take up is much lower in the US. These results show that UK online consumers have taken to store collection in a big way. The flexibility of order fulfilment options has become an important part of their decision making when deciding who to buy from online. Retailers are getting used to the idea of making service across all channels seamless and those that can make the most of the connection between the channels are the ones that will succeed. This evolution has put pressure on retailers that are solely online as they cannot offer the same fulfilment flexibility. Retailers with bricks and mortar stores that build a multi-channel proposition will have a notable advantage. 3

4 What is Omni-Channel Retail? When we refer to Omni-Channel we are talking about giving the customer the ability to combine all of the retailer s online and bricks & mortar resources to satisfy their shopping requirement from their device of choice (desktop, tablet or smartphone). This usually means offering the customer a rich variety of delivery options from which they can select the option best suited to their needs. These options can include: Finding the nearest store Checking product stock in the nearest store Ordering the product online Choosing home delivery, store collection or collection from a 3rd party Paying for my order online or at the store when I collect my goods Ability to return goods ordered online to a store nearby Shipment from store Major retailers have been quick to recognise the need to offer the additional flexibility demanded by consumers. Consequently most of the large multiple retailers such a Marks & Spencer, John Lewis, Curry s and Topshop have all implemented collect in store options. We ve seen retail giants like Asda & Tesco expanding their collection service to new locations such as petrol forecourts, tube stations and campuses whilst other retailers such as Selfridges have opened a drive-thru collection point in London. Even traditional ecommerce websites such as ebay and Amazon are experimenting with collect in store order fulfilment options. We are seeing ebay offering the Click and Collect option to select ebay sellers whereby items are collected from Argos, whilst Amazon have adopted delivery to Collect+ locations around the country. However, adoption is much lower among the mid-tier of UK retailers where our own research shows that among a representative group of 60 retailers (all ranked between 100 and 500) less than half have implemented any form of store collection options. The reason behind this trend is not simply that mid-market retailers are not seeing Omni-Channel maturity as important to their brand maturity. Quite the opposite in fact; retailers increasingly understand the importance of offering a seamless shopping experience to their customers. Nonetheless, it has been found that 94% of companies face significant barriers to becoming an integrated Omni-Channel company, Forrester Consulting (2014). The Omni-Channel ecommerce solution recently developed by Crimsonwing is designed to overcome many of these barriers. Collect+ is a parcel delivery service owned by PayPoint and Yodel in the UK based on a store network of over 5,500 newsagents, convenience stores, supermarkets and petrol stations. 4

5 Challenging Pure-Play Retailers When internet retail first started to gain traction it seemed that everything was stacked in favour of online only retailers (known as pure-play). New entrants such as Amazon, Play and Asos grew rapidly and for a time it seemed as though physical stores were more of a liability than an asset. Why have cash tied up in retail stores when you could exist without them and use the savings to offer aggressive prices, on lower margins, than traditional retailers? Whilst pure-play retailers will not be going away anytime soon, the last year has shown that provided a retailer runs an integrated business that deploys all of its resources to deliver excellent customer service, the battle is not lost. You only need to look at the upturn in online business that has been achieved by John Lewis, Argos and Boots to see what is possible. The secret to achieving these results is Omni-Channel and drawing bricks & mortar stores into an integrated online proposition that is mobile centric, catering for the real needs of the consumer. There are many consumers who still value the visit to a store but want to use their time productively researching in advance what product they want and knowing that it will be available when they arrive. A pure-play retailer will at best get a product to you tomorrow whilst an Omni-Channel retailer offers you the option of having it in your hand today with no risk of a wasted journey. 5

6 Examples of Omni-Channel Success There have been numerous recent announcements by major retailers reporting that Omni-Channel has led to substantial up-turns in online business. This data also confirms that the consumer values flexible delivery options and when they are offered uses them with surprising regularity. This seems to be something of a UK phenomenon since figures on take-up in other countries are not so positive. Recent announcements relating to 2013 performance include: Around 50% of John Lewis s Christmas orders Click & Collect Research conducted by Planet Retail suggest that the number of UK shoppers using Click and Collect is set to more than double in the next three years, the research also estimated that 35% of online shoppers in the UK currently buy online and collect from store IMRG/Capgemini report that 19% of online retail sales were Click & Collect IMRG report that mobile commerce delivers stronger growth for multichannel retailers than online-only merchants; 79% compared to 59% 25% of New Look s online order were Click and Collect 31% of Argos sales were Click and Collect 59% of Boots online sales were Click and Collect 6

7 Omni-Channel is more than just offering Click & Collect Our research shows that many smaller retailers have simply added the option to collect goods from their local store. Whilst this is progress there is much more to be done to achieve the full benefits of Omni-Channel. The weaknesses that we detect often are: You need to promote flexible delivery options as a key part of your online proposition. It is far too common for the consumer to go through the entire checkout process before they are made aware of flexible delivery options. The most successful retailers recognise that the buyer will often buy from a store based upon the availability of flexible delivery options so these options should be re-enforced as part of the retailer s key benefits that are displayed both at category and product level. The example below shows how John Lewis promotes awareness of Click & Collect at the earliest stages of catalogue browsing and allocates critical space on the page to this message. 7

8 Omni-Channel is more than just offering Click & Collect The flexible delivery options need to be explained simply and clearly. Many sites offer the functionality for flexible delivery options but whilst the functionality exists little effort has been made to ensure that the consumer is aware of the options and how to use them. It is all too common for the options to be outlined in the FAQ in some very brief text that has not been crafted as a key marketing message. The example pictured left shows how Boots do this effectively. 8

9 Omni-Channel is more than just offering Click & Collect The consumer should be given visibility of local store inventory. It is wrong to assume that all consumers simply want Click & Collect. Their preference may be to understand whether an item is in stock locally and then simply visit the store to a make a purchase with the option to reserve the item (but not pay in advance). The example below from Halfords shows the ability to check on the availability of a specific product in a chosen store and then reserve it for purchase within an hour. 9

10 Omni-Channel is more than just offering Click & Collect The online shop needs to work well on mobile. The point about Omni-Channel is that it is about offering the consumer the ability to buy products how they want and from the device of their choosing. It is critical that a site works well on a mobile. Even consumers who do not buy from a mobile will often browse and research products from their phone. Marks & Spencer s recently developed site works superbly on a mobile (even though they have chosen to break from current convention and not develop a responsive design). 10

11 Barriers to Implementing Omni-Channel Retail It is usual for innovation to be driven by smaller companies. This is then adopted much later by larger companies who find it takes much longer to change direction and react. However, this has not been the case with Omni-Channel where innovation has been driven by the leading high street retailers. In our opinion there is a number of potential reasons why mid-market retailers have been slow to react: 1. ecommerce is treated as an independent business unit and the organisation does not have an integrated digital strategy that aims to optimise overall business effectiveness 2. The business is not aware of consumer enthusiasm for Omni-Channel 3. They have fewer outlets and less geographic coverage so they fear they will not achieve similar results 4. The cost of updating the functionality of the ecommerce solution is considered prohibitive 5. The existing logistics and supply chain infrastructure is not able to support timely transfer of stock to store 6. The existing IT infrastructure is not able to give online visibility of store inventory Whilst the Crimsonwing Omni-Channel B2C solution cannot address all of these issues, it goes a long way towards making implementation quicker and cheaper for the determined retailer. There are three fundamentally different approaches to providing online ordering with collection in store: Satisfy all orders with central inventory and ship to store for customer collection Satisfy all orders from local inventory and do not allow orders if item is not available locally Satisfy orders from local inventory and replenish from central inventory but on a longer lead time The approach that suits your business will depend upon the frequency of deliveries from central inventory to store and the depth of stock held in store. All of these approaches are supported by our solution. 11

12 Infrastructure Issues Having an ecommerce system with the ability to deliver Omni-Channel functionality is one thing. But it can only deliver that functionality if the IT infrastructure and availability of data within the retailer can support that functionality. These potential constraints reside within the ERP system, EPOS systems and data network that exist within the retailer. Whilst these issues are outside the scope of the ecommerce system itself, they remain issues that Crimsonwing is well placed to help a retailer to resolve through our ERP solutions division. 12

13 Inventory Visibility Providing an ecommerce system with access to real-time stock visibility at both warehouse and store level can be a challenge for many retailers. However it is an important element of Omni- Channel which aims to provide a clear picture of inventory across the enterprise. According to Forrester Consulting (2014), 40% of retailers report difficulties in integrating back office technologies across all their channels in order to provide a consolidated and accurate real-time inventory view across all stores and distribution centres. This transparency is crucial as customers are increasingly demanding access to physical store stock. According to the same study, 70% of customers expect to see store inventory online and 50% expect to have the ability to buy online and pick up in store. When inventory is not visible throughout the business the retailer is forced to make conservative commitments to buyers (e.g. collect in store 48 hours later) in order to give time for the logistics system to move inventory to the store in time. For most consumers this is simply not good enough and they are often seeking collection later that day or at worst the next day. 13

14 Supply Chain & Logistical Challenges Many retailers run their online retail as what is effectively a separate business with its own warehouse and logistics. At the outset this was a pragmatic way to quickly implement online sales and respond to the threat from internet only entrants. Many retailers supply chains are channel specific and channel specific distribution centres are responsible for maintaining the respective inventories, Baird N (2011). Omni-Channel challenges a retailer to re-think this model and re-craft their business so that in-store and online activities work together to deliver the best customer service possible, deploying all of the inventory locations within the business. Retailers are exploring new business models to offer consumers innovative new retail experiences. We are seeing showrooming where stores with no stock demonstrate products which only can be ordered online in-store for home delivery. Argos is offering the ability to provide Collect in Store options for other retailers. Some retailers are using stores as shipping locations to offer same day delivery to customers. Ultimately the consumer will determine which of these models offer a compelling proposition. Some retailers are re-thinking the role of the store and treating them as advanced warehouses with flexible systems that can deploy that inventory exactly as the consumer requires, Brown (2014). 14

15 Staff Training Omni-Channel leads to customers arriving in store with high expectations. They are expecting to leave promptly with the product they are seeking. It is important that their experience in store lives up to their expectations. It is clear from looking at social media and online feedback that some retailers have been very successful at driving Click & Collect, but then let the customer down when they arrive at the store. Complaints are common that the store is not prepared for the transaction, the goods turn out to be un-available and worst of all, the staff fail to deal with these problems in an effective and sensitive way. This comes down to training and the implementation of standard processes and procedures. It is no different to business as usual, except that culturally an online customer is often not seen by store staff to be as valued as a traditional in-store customer. Retailers leading in Omni-Channel are more likely to provide formal multi-channel customer engagement training to their staff, Aberdeen Group (2013). 15

16 Crimsonwing Omni-Channel Solution Crimsonwing Omni-Channel ecommerce offers retail businesses the ability to implement a comprehensive range of Omni-Channel functionality quickly and affordably. Our out-ofthe-box solution includes all of the conventional B2C retail ecommerce functionality combined with: Webpages that work superbly with desktop, tablet and mobile Finding the nearest store Checking product stock in the nearest store Ordering the product online Choosing home delivery, store collection or collection from a 3rd party Paying for my order online, or at the store when I collect my goods The solution is designed to be integrated with your existing ERP and EPOS solutions, making implementation quick and efficient. We have priced the Omni-Channel solution in order to make it feasible for many retailers to fully implement a sophisticated B2C online retail store with Omni-Channel functionality with a budget of less than 100,000. We believe that this will make it feasible for mid-market retailers to implement solutions similar to those found in high street retailers but at a fraction of the cost. 16

17 Building Online Relationships with Consumers Omni-Channel is all about developing a closer relationship with consumers and responding flexibly to their individual needs. Whilst the online shopping experience can build loyalty from the customer, it cannot match the loyalty that comes from having an intelligent online relationship with the customer. This elevates the relationship to one where you know the specific interests and needs of the customer, and have a dialogue with them that involves content that is directly related to those interests and needs. The consumer will buy a product from you, but their real interest lies in the activity that created the need for that product. This might, for example, be fashion, health or sport. Once you have established what their interest is then you have the basis for a valued, ongoing dialogue with them that informs and educates them about that subject. their awareness of other products that may be of interest to them. We believe that profiling customers and delivering targeted campaigns as part of an online relationship is an important part of developing your online business. The Crimsonwing Omni-Channel solution is fully integrated with a product called Bronto that provides the tools and functionality to deliver intelligent, targeted campaigns that respond to consumer s online behaviour. Once you have correctly identified the customer s underlying interest it is possible to have an online dialogue with then using that provides then with relevant, interesting content that subtly raises 17

18 Summary This document has dealt with a number of important messages: 1. UK consumers respond positively to Omni-Channel as proven by a significant amount of hard evidence 2. Adoption is much higher among the largest high street retailers 3. Mid-tier retailers are lagging behind and need to catch up 4. The Crimsonwing Omni-Channel solution makes this simpler and more affordable 5. Omni-Channel is not just Click & Collect, it is a mind-set change for a retailer and impacts the entire business 18

19 Works Cited Aberdeen Group. (2013). Omni-Channel Workforce Management: A New Retail Reality - Analyst Insight. Aberdeen Group. Baird N, K. B. (2011). Omni-Channel Fulfilment and the Future of Retail Supply Chain; Benchmark Report. Retail Systems Research. Brown, E. (2014, February 27). MIT Industrial Liason Program. Retrieved July 14, 2014, from MIT News : Deloitte. (2014). The omnichannel opportunity; Unlocking the power of the connected consumer. ebay Inc. Econsultancy. (2013). Christmas 2012 Online Shopping Survey Report. Econsultancy. Forrester Consulting. (2014). Customer Desires Vs. Retailer Capabilities; Miniding The Omni-Channel Commerce Gap. Forrester Consulting. 19

20 About Crimsonwing Crimsonwing is an international IT solutions provider. We offer various software packages, custom development and professional services to clients in Europe, notably in the UK, The Netherlands, and Malta. We have implemented numerous truly global solutions for many of our clients. We focus on 3 main areas around which we provide a number of additional services. This allows for an end-to-end solution and saves from needing to deal with numerous suppliers. ecommerce: Helping our clients to develop profitable and successful online businesses, so they can deliver optimal online shopping experiences for their customers. ERP: Implementing backend and business management systems to streamline your business process, letting you focus on what really matters. This also includes Business Intelligence, Database and Collaboration solutions. Custom development and integration: making different platforms talk to each other, merging everything into a seamless experience and making it truly your solution. Crimsonwing Limited 31 Union Street London SE1 1SD +44 (0)