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Allow an Omni-Channel Transformation to Blossom

By Leslie Hand, Research Director, IDC Retail Insights

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Leslie Hand, Research Director, IDC Retail Insights

Retail is in the midst of a  transformation unlike any  seen since the 1970's when  chain retail first got serious  about leveraging technology  to electronically tabulate sales,  automate reporting, and perform  sales analysis and business and  product planning. The former  technological shift was driven  both by consumer needs (suburban  sprawl) and the new  availability of technologies that  addressed the challenges that  hampered retail growth. Today's  retail shift is driven primarily by  three overriding factors - changing  consumer behavior, consumer  technologies and globalization. One  could argue that these factors have  forced retailers into a position where  they simply must leverage  the latest and greatest  technologies just  to stay in the  game, no less  keep and win  new customers  with attractive brands armed to satisfy  the customer.

“Commerce and fulfillment are two of the biggest technology investment areas forretailers today”  This new customer is omni-channel,  and follows a path to purchase that is more  complex than before, potentially shopping  online, mobile, catalog and store channels  in parallel. The consumer's purchase  decision is influenced by a variety of  digital technologies - mobile information  sources, social networks, email, text  messages, mobile enabled sales associates  and digital signs and billboards. The  consumer experience of a brand can all  be boiled down to three primary activities:  buying, receiving and using goods. All  of the marketing, merchandising, selling  and supply fulfillment processes that  a retailer shepherds all culminate in  these three touch points. From a retail  perspective every step along the way  from product conception through the post  sale experience is most effective and  efficient when it operates as an integrated  orchestrated part of the whole.

 Commerce and fulfillment are two of  the biggest technology investment areas  for retailers today. Establishing programs  and capabilities that enable customers to interact in as many potential  moments of influence as possible  is the first omni-channel order of  business, of course calibrated for  each business. In 2014 we will see  retailers continue to stretch the  boundaries of their interactions  with consumers, adding capabilities  such as location based marketing,  integrated mobile POS and virtual  instrumented shopping. Retailers  will explore and test location based  marketing schemes that are actually  synchronized with loyalty programs  with very transparent and clearly  communicated program benefits.

 The second order of business,  fulfilling customer needs, is  potentially even harder to  accomplish because it requires  optimizing and orchestrating  product availability and product  movements to align with customer  demand to receive goods anywhere  and anytime, while being ever  mindful of cost. An efficient and  effective supply chain will need to  address additional complexities  that omni-channel retail presents  including the following:

• How to factor online sales that are  picked up in store in forecast and  replenishment models • How to recognize sales that are  impacted by assets, people and  systems, in multiple channels–for  example   store and ecommerce  • How to ramp up for ship from  anywhere including same day  delivery without being crushed  by increased costs while  waiting for demand for these  services to scale  • What policies and processes need  to be created to manage the returns  flow of goods  • How to obtain a holistic and deep  understanding of the customer  that incorporates in aisle shopping  behaviors as well as those online  • How to measure and manage  marketing success, and optimize  budget to omni-channel programs  In 2014, retailers will evaluate  new ways to fulfill consumer need,  and we expect supply networks  and collaborative relationships to  significantly improve their ability  to do this profitably. Retailers will  need to maintain an omni-channel  war room, or at least an omnichannel  task force, in order to keep  pace with the strategic moves of the  competition.

 Underlying these needs is a need  to have common core customer and  product demand analysis among  channels. Analytics platforms can  now access more data and perform  analysis in a fraction of the time  required previously, essentially  making real time or at least closer  to real time analysis possible. This is  revolutionizing a retailers' ability to  integrate analytics into core processes  that directly impacts how well they  perform customer specific marketing,  assortment and supply planning, and  even brand development.

 We reached a tipping point in  2013 in "doing omni-channel", and  this has created higher demand for  prescriptive roadmap development  and packaged and/or tightly  integrated solutions. By that I mean  retailers, particularly those that are not  omni-channel leaders, progressed far  enough to realize that omni-channel is  not a matter of simply adding mobile  POS or enriching eCommerce. In  fact, serving omni-channel customers  requires that retailers not repeat  patterns of the past, but instead create  brands that integrate mobile, social  and analytics into everything they do.  The retailer of the future will allow  cloud, big data, mobile and social to  facilitate and enable a technological  transformation that is truly built for  these times.

  Retail organizations will also  change the way that they consume  IT services. New positions including  Chief Experience Officer, Chief  Omni-Channel Officer and Chief  Digital Officer, along with preexisting  Chief Operating Officers  and Chief Marketing Officers will  bridge the divide between IT and the  business. These individuals need to  work together to develop strategies  to serve the customers well, enabling  new levels of interaction. But these  leaders will also need to navigate  the new technologies and services  available, and in some cases, take  giant leaps forward in order to  succeed.

 The questions that arise and the  opportunities to improve everything  from brand perception to business  process and very specific tactical  decisions are seemingly unlimited  when retailers can get past the notions  of what worked in the past.