Based on data from eMarketer, global retail sales are running at about $22 trillion dollars. Over 91% of sales are estimated to occur in retail locations, i.e., stores. While only $1.9 trillion of sales are estimated as the digital portion, the projected growth rate of ecommerce far exceeds the overall retail sales growth rate, so that digital retail will rise from an estimated 8.7% of global sales in 2016 to 14.6% in 2020. (“Worldwide Retail Ecommerce Sales: The eMarketer Forecast for 2016”)
Key Omni-Channel Marketing Lessons – In-Store
Omni-channel is a new reality, of relatively recent vintage. We’ve been reviewing some of the interesting advisory work on the subject.
A thoughtful study was issued by Mi9 Retail, a company that provides “enterprise retail merchandising, business intelligence, e-commerce and customer-centric software,” among other services. The study recommends 10 practices that are designed to weave together a comprehensive retail marketing strategy. (“Ten Best Practices for Omni-Channel Retail,” Mi9 Retail.)
A number of these points relate to what actually goes on within a retail location. An example is the need to provide a more immersive in-store experience to the shopper. This includes the “sensory” aspects, with Mi9 reminding retailers that despite the proliferation of ecommerce, the store is the only place where the customer can “touch, feel, try, smell, and experience products.’
Another in-store aspect is an enhanced role for sales associates. This includes having them be knowledgeable about online, as well as in-store, products, and being equipped with mobile devices.
Other items that involve the store include aspects of in-store fulfillment, such as the ability to pick up items at the store that were ordered online and to return items at the store.
Beyond The Store
However, a number of other key aspects of a comprehensive program reach far beyond the confines of the store. A number of these involve the back office of the retail business and the computing assets that are brought to bear. One strong recommendation by Mi9 is a centralized inventory system, that is maintained in “real time.”
Others concern gaining a more complete picture of the customer as an individual – tracking preferences revealed in social media contacts, (presumably with customer buy-in); giving personalized buying recommendations and notifications (for example, when merchandise is ready for pick up by the buyer); re-configuring supply chains to enable more “demand driven” inventory stocking; and finally, developing data driven analytical systems that create actionable reporting across the wide level of business touch points.
Analytics and Performance Levels
A recent study from research firm, Aberdeen Group, emphasizes the key role of advanced analytics in retailing. (“The Power of Real-Time Analytics On the Shelves: Drive Sales Through Data,” Aberdeen Group.) The thrust of this study is that retailers need to provide in-store personnel with mobile devices and the data collected from these devices must be transmitted to back office teams “in real time” to enable them to “better plan and manage future demand.”
The study contains findings from Aberdeen that companies that already have formal processes for demand planning and management achieve overwhelmingly better results than companies who lack these systems. These enhanced results include: a more than 100% higher average growth rate in revenues and in customer lifetime value; and vastly better growth rates in customer satisfaction, customer acquisition cost, inventory turnover and gross return on inventory investment.
“Unified Commerce” and The Single Shopping Cart
In some circles the phrase “unified commerce” is already supplanting “omni-channel marketing” as a key descriptor of the broad, underlying issue in retailing. A recent study from Boston Retail Partners (BRP), a specialized retail consulting firm, stated:
“Digital commerce is more than purchasing an item online – it is the convergence of the digital experience with the physical environment and today, customers carry their ability to shop anytime in their pocket or purse.” (“Digital Commerce Survey, 2016,” BRP)
One principal recommendation of the report is to develop the “single cart to shop across channels,” which enables the customer to “start anywhere, finish anywhere.” The study emphasizes that while retailers want shoppers to purchase in-store, mobile technology offers the bridge between digital and brick and mortar shopping. BRP cites a Google analysis that states that customers who shop across channels “have a 30% higher lifetime value than those who shop using only one channel.” (“Omni-Channel Shoppers: An Emerging Retail Reality,” Think with Google, citing an IDC study.)
Underlying this unified capability must be a single back office platform that consolidates “all transactions, inventory, pricing, order management, CRM, call center, etc.” This platform is integral to the concept of Unified Commerce. This platform provides the “single version of the truth across all channels,” and leads to what BRP describes as the “nirvana” that retailers are striving for.
Mobile Retail – Still a Long Way to Go
Just as mobile maturity for enterprises has been lagging, so the level of mobile experience and implementation in retail has been surprisingly slow. The BRP study revealed the following survey results of the status of implementation of various mobile capabilities by retailers.
|Capability||Working Well||Needs Improvement|
|In-store mobile sign-in||4%||14%|
|In-store mobile product location||4%||8%|
|Customer identifying technology in-store||0%||14%|
The table reveals that, aside from the area of mobile websites, the overwhelming percentage of retailers surveyed have not even begun to implement the capabilities.
We believe that most of the analysis coming from different surveys and studies has been very helpful in understanding the new phenomenon of the omni-channel customer, omni-channel marketing, unified commerce. Most of the prescriptions for improvement by retailers make sense.
Perhaps the biggest issue, however, is that what is being prescribed is likely to be viewed, initially at least, as imposing new costs on the business. For example, it is certainly desirable to enable sales associates to interact on a more personal basis with shoppers. But even after factoring the cost of the cloud and back office systems required to make the personal data instantly available, what about the cost of training sales associates to be able to absorb and employ the information, quickly, on their feet, in-store, at the moment?
As we noted in an earlier article:
“While BLS (Bureau of Labor Statistics) counts over 4 million retail sales workers, median annual salaries are not much over $20,000.” (“Apple–IBM: Powerful Economics Of The New Apps,” MCE.com 1/5/15)
How much cost would be required to upgrade large number of these associates to the performance levels implied in these studies?
Also, the concept that retailers could be staffed with back office resources capable of transmitting real time change data to the selling floor, raises questions of costs and resource requirements as well.