Everyone wants to be an omnichannel retailer.
This story first appeared in the May 6, 2015 issue of WWD. Subscribe Today.
But the term itself is misleading, suggesting that companies need to broaden their approach and do a little bit of everything. Instead, what they really need to do is to take a laser-like approach, not a flashlight — focusing their attention solely on the consumer and connecting with individual shoppers wherever they want to meet.
To truly bring online and offline operations together, companies can’t separate their businesses in terms of Web, mobile and in-store. They have to get to a place where it doesn’t matter where the transaction happens, as long as the customer is finding what they want and buying.
Some retailers are well on their way to taking the focused approach to omnichannel, learning from their mistakes and then iterating — Sephora, Target Corp., Wal-Mart Stores Inc. and Macy’s Inc. among them.
But a gap is quickly forming. There are retailers that aren’t equipped to handle even the omnichannel basics: in-store pick up for online orders or having a mobile point of sale in brick-and-mortar doors. And some slowpokes don’t have e-commerce sites at all — something they should fix, and fast.
“People are trying to make it seem like that’s omnichannel, if they can order online and then drive to the store to pick up. It’s worse than basic,” said Mike Moriarty, a partner at A.T. Kearney’s consumer and retail practice, calling “bricks and clicks” a red herring.
He said the first step to becoming an omnichannel player is making sure the customer can express their demands wherever they want — online, in-store or over the phone — and then be able to deliver that order however the shopper desires. That can mean fulfilling online orders in stores, offering same-day delivery or more.
There could still be time for slower-moving retailers to catch up, if they start planning and spending money now to transform their operations.
A WWD study of the annual reports from 15 top U.S. fashion firms found that the group expects to boost their capital expenditures this year by as much as $1.9 billion, a 9.3 percent increase. While a lot of that money is still being used to maintain the store base, omnichannel initiatives are getting big play at some companies. Wal-Mart, for instance, reported it is “striving to seamlessly integrate the digital and physical shopping experience” and will this year invest “$1.2 billion to $1.5 billion in e-commerce Web sites and mobile commerce applications that will include technology, infrastructure and other areas.”
Sucharita Mulpuru, vice president and principal analyst at Forrester Research, said forward-thinking retailers are in many cases still “way ahead of the customer for now.”
But they can’t sit on the laurels. And the rest of the pack has to be investing more in the future. Mulpuru is worried that technology is not a significant “line item” or differentiator for most brick and mortar retailers.
“Digital roles are still such a small part of the organization,” she said. “[The business] is still driven by merchants and store operations teams. A lot of them aren’t that digitally savvy and that’s where we find ourselves in the digital [era right now].”
Forrester’s Customer Experience Index, which ranked the customer experience of 299 brands across 18 industries, showed that e-tailers had an edge over their traditional brick and mortar counterparts.
Online-only retailers were ranked the number one industry for customer experience. Retail had been in the top spot since the index launched in 2007, but this year the category was split into two subsets: brands with online and in-store presences and those that just live online. Because of this, traditional retailers fell behind, coming in at 12th place.
Of the top 15 retailers in the study, six were pureplays: QVC, Amazon, Newegg, Zappos, HSN and Etsy.
“The takeaway is that great digital execution can have a significant impact on overall brand,” Mulpuru said. “[Pureplay brands] can almost get away with not having a store presence and in some ways, physical retailers are burdened by their inability to execute consistently as a physical store because of maintenance and labor costs.”
A successful omnichannel strategy can start with some relatively simple first steps, such as making sure that gift cards work online and in stores.
According to Mark Willis, head of technology and innovation at Stored Value Solutions, ensuring that gift cards, e-coupons and promotions follow the customer through their journey is key. “Consumers choose where they want to shop and retailers have to support this,” Willis said.
If someone uses a gift card in-store, they will expect to log into the retailer’s app or site and see accurate, up-to-date balances – as well as the same branding and artwork, whether plastic, sent through e-mail or a push notification from an app.
Things get a little more complicated as those with omni aspirations move from the basic to the intermediate level.
Mark Kirschner, chief marketing officer of eBay Enterprise, said good omnichannel brands establish a single order management and inventory system that allows employees and customers to check on the status of an order or real-time product availability on a desktop, at the warehouse and in-store on a mobile device.
“There is a race to implement omnichannel technology in order to differentiate that [customer] experience,” Kirschner said.
While figuring out fulfillment is vital, omni retailers also have to make sure they get their marketing right, especially given the mounting evidence that online ads drive shoppers into stores. Google’s AdWords program tracked consumers who agreed to share location information from their handheld devices to see if users who saw a retailer’s online ad would visit the store afterward. Google found that consumers spent four times more at retailers that had reached them with an online ad and that every dollar Macy’s spent on Local Inventory ads online resulted in $6 spent inside a Macy’s store.
At the advanced end of the spectrum, there are retailers such as Nordstrom and Rebecca Minkoff, which both tapped eBay at the end of last year to help them create one of the most immersive in-store shopping experiences to date, the Connected Fitting Room.
Kinect sensors inside the room track every item brought inside through an RFID chip, and an interactive mirror lets consumers request additional sizes and colors. Sales associates are notified on their mobile devices and bring over requested items so the customers doesn’t have to leave the space. With a few clicks on the mirror, shoppers can also text themselves the items they tried on so they could buy at a later date.
The technology allows a consumer to continue their shopping experience on other channels, such as a smartphone.
Taking this more integrated, less linear path to purchase is a prime opportunity for retailers.
Hemang Gadhia, chief executive officer and cofounder of Revmetrix, is working to follow the consumer and understand their shopping patterns with the data platform that he launched in January.
It’s a big challenge.
If a shopper saw an item on their desktop at work, popped into the store to see it in person on their walk home and then completed the purchase while on their iPad that evening, many merchants would see each session as a separate experience.
“Every retailer in the past year [that I spoke to] sees a single customer experience across multiple channels as three different journeys,” Gadhia said. “How can they possibly understand that person engaging in store is the same person that’s engaging on their tablet?”
Gadhia’s company monitors different shopping channels and uses a probabilistic identification model to make very educated guesses about who’s who online. This data can be combined with information stores gather from point of sales systems and elsewhere and used to identify and track a large set of customers. Brands can then target shoppers based on highly specific metrics – including average order value – and deploy the proper marketing campaign.
It’s a technology that’s still in its infancy, but one that gets at retailers’ yearning to understand how consumers are shopping today, to better connect and stay relevant.
And understanding customers today and serving them on their terms is what all this omnichannel business is all about.