Four Big Cross-Channel Questions
Last week I fielded an inquiry about the biggest questions retailers are asking in cross-channel right now, and I figured the answer was worth sharing. So here are the top questions that I hear retailers currently asking about their omni-channel strategies and/or operations. These are the "big" questions, mind you, not the tactics.
Question 1: What is the future of the store and how do we make it relevant in an increasingly digital shopping experience?
I've been saying since 2010 that the store is in trouble, and that hasn't changed much in the intervening years. The store simply is not keeping up with the standards for a customer shopping experience that are continually being raised online. Between personalization, rich product content, and access to other shoppers with similar needs and experiences, online delivers a far more effective experience than the store.
The challenge in tackling this question comes from two different directions. One, stores seem to mostly work okay right now. Sure, online and digital channels continue to grow, but it takes massive experimentation on the scale of JCPenney to kill store comps to a degree that threatens the store's existence. But my theory is that the economic model of traditional stores falls apart somewhere around the time that digital channel sales reach about a third of total sales. The retailers who operate "balanced retail" - business equally distributed between online, store, and direct/catalog - tend to have a different store strategy from retailers who depend heavily on stores for revenue. They operate more of a "flagship" or concept store environment - store as entertainment, store as services, store as brand destination. Think Cabela's and Bass Pro, or Nike or Under Armor.
The other side of the challenge is the technology side - all of the things that retailers have at their disposal to bring more of the digital experience in stores has already been done in one form or another. Yes it's true that the cost model has changed significantly, and with smartphones the opportunity to offer bring-your-own-device deployments radically changes the model. But retailers still struggle with the same-old same-old. You want to put a kiosk at the front of the store to offer a more personalized interaction at the beginning of the shopping experience? You'd better be prepared to provision that, either with wifi or hard-wired internet connections, and power - and the training for store staff to maintain it and serve as level 1 help desk for lost consumers. Even if you move that kind of functionality into a smartphone app, store employees better know what it's all about, and there better be in-store public wifi to ensure the customer has access to the experience you're trying to deploy.
Question 2: What role should social data play in generating
On a completely different note, we're seeing increased interest in starting to use all of that social customer data that has been collected over the last year or two in order to make better operational decisions. There are some intriguing questions that could be asked and theoretically answered by social data. Questions like, does a high product rating translate into increased demand? Or conversely, does a low-rated product see a drop in demand? Can the comments and reviews about products be mined to make decisions about which channels should carry products (Will it do better online than in stores? Should an online-only product be extended to store inventory?)? And finally, can customer sentiment be used to predict purchasing behavior, the holy grail of social data?
Alongside these questions, retailers are faced with some tough challenges - finding the resources who have the skill sets to ask and answer these questions. For an industry that has struggled with promotion optimization, simply because more of the basics of customer data have been difficult to come by and maintain over time, taking on social insights is fairly ambitious.
Question 3: Who should run all this omni-channel stuff internally?
If I could develop an org chart that lays out what an integrated/converged channel retailer looked like, I think I'd have enough consulting work to last the rest of my life. Everyone, from grocers to luxury retailers and in between, are trying to figure out three main organizational questions: one, who should be the owner of the customer experience? Marketing? A new "customer experience executive"? And what is the true span of control for that executive - does it reach into stores?
The second question: Who should drive the retailer's brand strategy, marketing or merchandising? Can the organizational successfully transition from a product-driven company to a customer-driven company? And does this mean that merchandising no longer drives the brand promise, but merely acts on it?
The third question: As marketing reaches more deeply into the customer experience, how do we get marketing and IT to better work together?
None of them are easy questions to answer.
Question 4: How do we better leverage inventory to meet demand that could come from anywhere at any time?
My favorite question. This is the one that promises, actually, to have the most impact on the retail enterprise in the next three years or so, I believe. Yes, even more so than the other three questions. Here's why. Retailers have spent the last 5-10 years integrating the selling side of their business so that they can at least fake one face to the customer, even if the reality of the behind the scenes is the worst sausage-making factory in the world. But the volume of cross-channel, integrated selling business has grown to the point that retailers can't hide the baling wire and gumworks in the back. The strain is starting to show, and the cost of maintaining it increases as the volume grows.
Up to this point, retailers have done a good job isolating their supply chains from all the changes happening in their selling channels, but as soon as you start raising questions like "How would ship from store work?" you can no longer maintain that isolation. The supply chain also has to become more sophisticated - and integrated with the cross-channel selling that is already happening today. Saving the Tough Questions for Last
Questions 1-3 above require long-term change - a sustained change management effort that must fight against the status quo. Like all good procrastinators, retailers will leave these hard questions for later. First, it's time to bring supply chain along to meet the new demand sources and shifts that cross-channel selling is creating. Along the way, however, retailers might just get a better sense for how to solve the other three.