Choice: The new currency of commerce

Transcription

1 Choice: The new currency of commerce Services Omnichannel will redefine retailers relationship with consumers Customers are more demanding, and more fickle, than ever Using co-channelling to embed customer loyalty Promoting choice to drive sales The balance of retail power is shifting. The internet has revolutionised the relationship between customers and brands and recast the classic retail model in a new, dynamic, digital light. The old world of retailers selling to customers via physical stores no longer exists in isolation. Today there are numerous channels for consumers to purchase products and services on their own terms Consumer buying decisions have become fickle and are now driven by price, recommendation, convenience and loyalty, often in that order. Choice is the new currency of commerce. Customers now increasingly demand the availability of goods and services 24/7, all year round. They expect delivery to their door or preferred place and at their chosen time. They presume that retailers stock every item in every channel all the time and have few qualms about switching their business, and ultimately allegiance, to a brand that best satisfies their desire for convenience. Maintaining a competitive advantage in the modern marketplace is a challenge now framed by data not just about product but increasingly about the purchasing habits of the consumer too. The insights that brands obtain from this data will determine how much they truly understand about their customers and how much advantage over their competition they can build through smart selling. This new omnichannel world where the customer is again king has redefined traditional retail models. Brands now have to rethink the way they approach everything from inventory control and supply chain management, to the customer experience and multi-channel marketing. At the heart of this are enabling and delivery technologies and the way businesses use IT to shape the customer journey from interest to purchase.

2 Retail evolution From web browsing to social media, customers today are more informed, more empowered and more connected than ever before 1 Deloitte Research, State of the Media Democracy (UK), 2011 It wasn t so long ago that retailers had three main channels to speak to their customers the classic trinity of print media, TV and radio. However, with the advent of digital communications, this suite of channels has expanded rapidly as consumers have become more connected. From web browsing to social media, customers today are more informed, more empowered and more connected than ever before. It is another consumer evolution in the making. Buying decisions are evolving in line with this explosion in access to information. Deloitte estimates that up to 75% of consumers research products both online and in store before purchasing 1. Identifying and utilising the channels available to them now allows consumers to inform and shape their purchases, as well as their opinion of a brand. When coupled with customers expectations of roundthe-clock product availability, this dramatically changes how retailers treat and interact with consumers. Multichannel retailing used to capture part of this new world order. It went some way to defining how retail operations now enable transactions across a variety of connected channels such as physical stores, online shops, apps and mobile. However, omnichannel more effectively defines how brands today are overhauling their entire supply chain both in- and out-bound to meet these new demands, working towards providing customers with the most seamless buying experience possible. Omnichannel can therefore be described as the creation of processes and a service culture that is supported by truly integrated systems that together create a single view of a retailer s brand for a consumer.

3 Omnichannel challenges Brands that are wholly omnichannel will make the purchasing process so seamless that the consumer journey will be just as fulfilling regardless of the channel they choose Retailers today can be loosely grouped into three distinct categories. There are those, such as big utilities, where efficiency and costs feature heavily in customer satisfaction rather than day-to-day interaction. Then there are those multichannel retailers, such as large non-food companies, that have recognised the value of convenience and retention, but are still able to effectively mine the intimacy of their customer contact. Finally, there are those large, omnipotent consumer brands that place customers at the centre of everything they do, from supply chain management to marketing. This latter group is typically made up of retailers, such as large grocery brands, and a few stand out general merchandisers. These companies have become, and will continue to be, experts at knowing their customers and recognising each consumer as an individual. Habits, preferences, likes, dislikes, sources of influence and their social network will be the constant goal that informs and enhances the subtle, personal selling experience. In a true omnichannel environment the consumer sees the retailer as a brand for supply. Arguably the customer will still differentiate between mail order and store experiences, for example. However, brands that are wholly omnichannel will make the purchasing process so seamless that the consumer journey will be just as fulfilling regardless of the channel they choose as their route to purchase. For their part, omnichannel retailers have to see their customers as a single entity, regardless of the point of contact. This allows them to effectively leverage the data from each consumer s behaviours in ways previously not possible. This tactic has now become essential to knowing the customer and tailoring capabilities to offer convenience and generate loyalty. However, as businesses address the unification of their channels to market, there are significant effects on the supply chain. Historically consumer dwell time in a physical retail environment was considered the ultimate retail goal. It allows brands to physically interact with and sell to a customer, while also allowing customers to complete a purchase decision and leave with their item in hand. However, when the search for items moves from premises to online stores, consumer focus changes.

4 When the search for items moves from premises to online stores, consumer focus changes Omnichannel challenges Key considerations are not only the location of stock, but the transfer between all the points of potential fulfilment and its customers. There are two main fulfilment cases which, perhaps unexpectedly, are driven by the expectation of lead time to acquire the desired stock: from instant demand satisfaction at point of sale to assumed lead time from indirect supply. Alongside this there are hundreds of variant options for how stock is obtained by the consumer. Strategically omnichannel brands will turn the whole retail business into a coherent, integrated but distributed organisation, satisfying the maximum customer demand it possibly can. Consumer loyalty in a world of multiple channels and increasingly competitive brand noise is something that is ever more difficult to not only win, but also sustain. Every consumer will seek a different emotional fulfilment from a brand and even if that need is fulfilled they are still informed by the opinions and views within their social sphere. In fact, digital relationships on sites such as Facebook, Twitter and Pinterest often act as the most influential secondary touchpoint between brands and consumers. If retailers can successfully navigate and utilise this new landscape, they can start to understand what consumers want from a brand and ultimately shape their buying experience and buying volume accordingly.

5 Introducing co-channelling While multichannel is no longer solely enough for brands looking to remain competitive in the retail world, true omnichannel retailing can be both complex and expensive. Enter the concept of co-channelling : the orchestrated alignment of two or more channels to work together seamlessly to deliver a unique offering via one or more routes. Co-channelling is the tactical solution that can take retailers down the road towards omnichannel s distant horizon. At its simplest it combines current and near-term technology with process and culture change to add value to the customer experience and drive better sales and cost of sales. Most importantly, co-channelling delivers much of what omnichannel s philosophy promises in a faster time to value way. Co-channelling delivers much of what omnichannel s philosophy promises in a faster time to value way Choosing which channels to align is the first step in the prioritisation process. By selecting the correct channels and creating intent to purchase between stakeholders, the most practical way to proceed can then be determined. Co-channelling can also be used as a key component of a retailer s long-term value realisation, but let no one be fooled: omni- or co-channelling efforts are about making more money from the same and new customer base. Redesigned work flows, inventory management, digital and traditional channel marketing, customer service and retail operations can all be aligned into a more coherent way of facing and servicing the customer. Each situation is unique and every retailer will need a bespoke solution for their products, market and customers. However, the underlying theme is one of unifying the customer experience through the innovation of inbound and outbound supply chains. This incremental transformation will eventually form the bedrock of a coherent corporate change process that ultimately hands power in the purchasing decision making process back to the consumer. It will give far better confidence in the retailer s ability to keep or capture an available sale for themselves, not their competitors. Reshaping a business to realise strategic business goals is a multi-functional, multi-disciplined activity with alignment to all stakeholder interests. No matter how IT-dependent a business is, technology provisions, supports and enables retail while marketing, buying, the supply chain and operations are every bit as crucial in driving change and success. Creating a single view of the customer as a goal can be a reality only if information architecture is driven by true business need rather than emerging through the purchasing decisions for various IT systems.

6 Business change at this level cannot be achieved by software alone. Businesses that are truly determined to shift to a customer-centric model that reimagines how retail interacts with consumers need a suite of solutions that are both flexible and scalable. Above all, any new retail view needs to be underpinned by a cloud-centric philosophy which enables retailers to service their customers always-on lives. Any new retail view needs to be underpinned by a cloud-centric philosophy which enables retailers to service their customers always-on lives One of the great benefits of moving towards a cloud-based information architecture such as this, as well as infrastructure and platform as a service adoption, will be the creation of accessible synchronised real-time data, provisioned by IT, but manipulated and exploited autonomously by business functions. This will propagate and enable new one-view enterprises that can adapt to the challenges associated with inventory availability as much as customer experience. The challenge for business rests in the historic way in which IT has evolved within organisations. Traditionally, silos of power and responsibility have led to systems that support the vertical functions of a business rather than work cohesively across the business. Even major ERP-based organisations tend to have a plethora of ancillary systems and databases that are rarely completely synchronised or aligned. Moving from even a well-managed multi-channel proposition to a truly omnichannel environment is not a question of incremental upgrades, but more of a reimagining and metamorphosis of the whole organisation. For most businesses the road to omnichannel will be small, integrating steps, but the retailers who succeed will be those who direct these steps towards a future that places the customer in the centre of their retail proposition. Technology is crucial as an enabler of omnichannel, but it cannot deliver the value on offer alone. Marketers, buyers, supply chain, retail operations, finance, HR and IT all need to be aligned in terms of retail goals and customer satisfaction in order to support a genuine co-channel and omnichannel experience.

7 Conclusion The vast majority of inventory-based retailers today who are focused on remaining profitable and competitive will benefit from starting to think in an omnichannel way Omnichannel is a major business strategic approach to address consumer needs and enterprise cost efficiency. Achieving the cultural and process changes necessary are not easy, but neither are they impossible. Many large retailers are already close to achieving the perception across their customer base that they are a unified brand regardless of channel. However, few currently come close to delivering the efficiencies that a true omnichannel enterprise could achieve in terms of its inventory management and underlying IT and supply chain cost of delivery. The omnichannel retail model may not be suitable for every single business, but the vast majority of inventory-based retailers today who are focused on remaining profitable and competitive will benefit from starting to think in an omnichannel way. It needn t take much to start engaging the leadership team and the creation of an omnichannel strategy that has clear goals, realisable identified value and a road map for achieving the value plan is the most effective startpoint. So what is the way forward? By working with industry experienced experts, retailers can use the breadth of architectural vision and the depth of individual functional understanding to create a roadmap to vision and new retail performance. This will involve significant process, cultural and organisational challenges, but those that successfully change their business to one that fundamentally focuses on offering customers choice at every stage of the buying process will win, and win profitably.

8 About Microsoft Services Microsoft Services delivers leading-edge technical consulting and support to help you gain maximum value from your investment in Microsoft technology. We help you save money, increase productivity and realise your business vision sooner than you thought possible. We have many strengths: the knowledge and experience in our team of experts; our close connection to the groups who develop our vast range of products; and the broad network of partners with whom we share our early understanding of best practice. About the author Stephen Agar-Hutty is an Enterprise Strategist specialising in the retail and consumer goods sectors. His experience over the last 25 years includes senior executive positions in international roles in distribution, retail and services as CTO, CIO and CEO. Stephen has a business before technology focus that combines an award-winning talent for innovation with an empathy for the customer to convert blue sky technology opportunities into retail realities Microsoft This document is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.