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Managing Multiple Channels Still a Challenge for Department Stores

More than a decade after the emergence of e-commerce threatened brick-and-mortar retailers, department stores globally are still struggling.

SINGAPORE — More than a decade after the emergence of e-commerce threatened brick-and-mortar retailers, department stores globally are still struggling to effectively incorporate a digital channel into their operations.

Leading industry players have had varying degrees of success creating an integrated omnichannel offering that comprises both physical and virtual stores, industry executives heard at the Global Department Store Summit here.

“It has been a painful journey for some of us, and we have the scars to prove it,” said Paul Delaoutre, president of Dubai-based Al Futtaim Retail, which has a network of retailers in the Middle East.

In particular, participants at a roundtable session pointed to the difficulty of integrating their online and physical operations.

“Each core [business] has its own idiosyncrasies, has its own boss and its own feelings. How are you going to say ‘You are going to hold hands and work together’? It is not easy,” said Douglas Tong, chairman and chief executive officer of Taiwan’s Far Eastern Group, and chairman of the group’s listed retail arm, Far Eastern Department Stores.

The growth of online shopping in Asia is expected to outstrip that of major Western markets in the near future. Forrester Research Inc. predicts that online retail sales in five of the largest markets in the Asia-Pacific region — China, Japan, South Korea, India and Australia — will reach $768 billion in 2017, compared with the $658 billion expected for the U.S., Canada and Western Europe combined.

To deal with the challenges, Britain’s Marks & Spencer, like many other retailers worldwide, is adopting a “bricks and clicks” model that would provide a seamless journey for consumers. Shoppers can browse for products online and test them out at the store, or make virtual purchases before picking them up at a physical outlet. Indeed, around 65 percent of M&S’ online pickups are made at its stores.

“The store becomes a showroom, a sample room and a pickup place. We want to take the customer on a journey that is full circle,” M&S ceo Marc Bolland told delegates during his keynote address.

Since 2010, the retailer has launched an e-commerce platform tweaked for local markets, put in place in-store technology like tablets for services such as virtual makeovers and developed a new e-commerce distribution center to service the U.K.

To implement the strategy, Bolland said he needed to put the right people in place. After taking over as ceo in 2010, he hired talent that had the requisite skills to compete in a global, multichannel environment. This involved hiring senior executives with global experience from outside the organization, as well as promoting younger talent from within.

“How can we be a multichannel retailer when we didn’t have the talent internationally? If you want to play this game, you have to play to win and not just to be in it, so we had to have best-in-class talent,” he said.

Meanwhile, Singapore’s Tangs department store is putting its flagship on the premium shopping belt of Orchard Road through a three-year makeover that aims to provide its shoppers with a rich lifestyle experience. Tangs ceo Tiang Sooi Foo said, “Experience stores can be a counter movement to online shopping.”

“If we have immersive experiences and capture the imagination and attention of the consumer, there is a chance,” he said. He noted that even online retailers are investing in physical locations.

In the U.S., online sellers like Warby Parker, Bonobos and Frank & Oak have launched full-service brick-and-mortar stores in recent years, while eBay and Etsy rolled out smaller spaces in 2013 aimed to create a bridge between virtual and physical marketplaces.

Echoing this sentiment, Delaoutre said the business was no longer about opening stores to sell products, and that department stores had to reinvent themselves as brands.

“The Internet is making it very important to look at yourself as brands, achieving something for your customers. You need to be very clear what you do for them, and be able to distill that throughout your organization,” he said.

Industry executives like Paul Kelly, managing director of Selfridges Group in the U.K., also touted good leadership as a critical ingredient to thriving in an environment of changing consumer tastes and shopping habits.

“People talk about omnichannel like it’s slow death coming to retail, [but] I believe that the skills of the leader are timeless. It’s recognizing that things may need to change, having the courage to make changes and the humility to say that I don’t know everything,” he said.