As retailers and brands continue to accelerate their digitalization strategies and make investments to improve their omnichannel retailing capabilities, Anil Patel, chief executive officer of HotWax Commerce, says they’re missing a key component to success: properly crediting and incentivizing physical stores at the unit level.
Here, Patel describes why it is important to consider the impact of omnichannel strategies on store-level associates and incentives, and why developing a store crediting framework policy can help boost conversions.
WWD: From the perspective of incentivization, what should merchants keep in mind when considering evolving their omnichannel retailing approach?
Anil Patel: The vast majority of retail brands out there are planning to adopt an omnichannel strategy in the near future, yet most of them are unprepared for the structural changes that these strategies require. Indeed, upon working with countless retailers, I’ve found that very few brands have considered changing their store crediting policies to incentivize a company-wide adoption of their omnichannel vision, starting at the associate level.
When rolling out any omnichannel initiative, it’s important for merchants to keep in mind how this new approach will impact their employees’ incentive structures. Associates may view online sales as a threat to their job security and will likely attempt to sabotage the company’s initiatives unless they are brought into the strategy. Instead of reacting to that reality, retailers should anticipate that tension and create frameworks to eliminate it.
WWD: What are some of the crediting and incentivizing metrics that should be considered when developing an impactful omnichannel strategy?
A.P.: That’s an interesting question, because most retailers aren’t deeply aware of their customer’s shopping journeys. That’s a problem within itself, because without the right technology in place, you won’t have the visibility into whether your online shoppers browsed in-store and vice versa. Most retailers don’t have omnichannel metrics they can point to in order to measure omnichannel success, so that’s the first issue.
Even when you don’t have omnichannel journeys like buy online, pick up in store or store fulfillment in place, studies show that brands tend to see an increase in online sales from regions where they’ve recently opened a physical location, which means your stores should be credited for participating in that revenue creation.
Stores and associates play an important role in online sales, and they are the face of your brand, so it’s important to shift your metrics to better reflect the reality on the ground. Setting sales quotas at the store level and measuring store success purely based on in-person purchases isn’t realistic, especially if your stores are being leveraged to fulfill online orders. This legacy viewpoint can lead you down the completely wrong path, causing you to shut down a store that’s critical to your success in that region.
Only 31 percent of businesses measure the contribution of digital touchpoints to sales in other channels, and vice versa. From a metrics perspective, I would recommend measuring incremental in-store sales from click-and-collect pickups and incremental online sales from in-store visits. Retailers will quickly realize that the success of omnichannel retailing relies heavily on incentive structures for store associates and managers.
WWD: What role do store associates play in this approach?
A.P.: Without a store crediting framework for omnichannel retailing, store associates may view online sales as a threat to their job security. Being on the front line of consumer interactions, this perception will negatively impact the in-store shopping experience for your customers.
For example, suppose a customer stops by one of your brick-and-mortar locations because they see a product in the window, but the item isn’t currently in-stock in their size at that location. Unless your company has set up appropriate store crediting frameworks, the store will not receive credit for any online sales if the customer chooses to purchase online. As a result, associates will likely suggest that the customer revisits the store when the item is back in stock so he or she can receive a commission.
However, if the brand did have a store crediting policy in place, the store associate would be motivated to ship the product directly to the consumer’s home in order to create the best, most seamless shopping experience.
WWD: What is a store crediting framework, and how does it work, and why is it important?
A.P.: Great question! A store crediting framework is a policy intended to reward stores and its associates for driving or assisting sales (whether online or in-store). In the past, store crediting frameworks have been very straightforward and based on the assumption that online shoppers shop online and offline shoppers shop in-store. As a result, associates simply received credit (generally in the form of a commission) when an order was placed and fulfilled at their store location.
However, shoppers are certainly no longer relegated to separate channels nowadays. It is very common for shoppers to browse in-store and then make a purchase online, and vice versa. Customers today have a holistic view of your brand and thus it is critically important to incentivize your store associates to participate in the omnichannel journey. As a result, we recommend creating a new store crediting framework that rewards associates for online sales in their area.
WWD: If a retailer is looking to adopt a store crediting framework, how do you start? What is needed?
A.P.: I would argue that the first step to achieving a truly omnichannel approach is to eliminate channel-based performance reporting. Shopping channels should be irrelevant to compensation because it is ultimately irrelevant to the customer. Your customer doesn’t care whether they bought from an associate or ordered online — it’s all the same brand to them, and they don’t think about your associates’ commissions.
Studies have shown that a majority of retailers still view different shopping channels as completely separate departments in their organization, with their own P&Ls. For many retailers, implementing an omnichannel solution requires a paradigm shift and significant organizational change to eliminate or bridge channel silos and unify all staff members around the customer. In our experience, this requires merging departments and creating cross-functional omnichannel leadership teams to steer the ship.
Retailers need to adopt an all-encompassing approach to crediting rather than a case-by-case one. Our [recent] whitepaper includes a couple of different crediting scenarios and how we would recommend tackling them. I recommend crediting stores for the online sales in their geographical region, regardless of their perceived involvement in the sales process. You want to create an environment where all employees at your organization are united by a common vision and see themselves as part of the same team.
Finally, you want to make sure you clearly communicate the new store crediting framework to your team. They should understand why you’ve decided to make the change and how the change benefits their paychecks, to ensure they’re fully bought in before you roll out the omnichannel initiative.