The face of retail has changed more profoundly in the past few years than at any point in history. A combination of brick-and-mortar stores, catalogs, e-commerce sites, m-commerce, and social media have turned tried-and-true marketing methods upside down and rendered conventional wisdom obsolete. “There is an incredible amount of disintermediation taking place, and it is altering the way people buy things and organizations sell them,” explains Brian Kilcourse, a managing partner at consulting and market analysis firm RSR Research.
To be sure, long-established business models are buckling as buying patterns and distribution models shift. CMOs, caught in the middle of it all, are struggling to keep up. It takes only a glance at the debris of once-mighty household brands, such as Kodak, Blockbuster, and Borders, to see how challenging it is to get things right and remain profitable. As Kilcourse puts it: “No retailer is exempt. Companies that can’t adapt risk everything.”
Amid proliferating touch points and sales channels, it’s imperative to break down the traditional silos and break away from conventional thinking, observes Alan Hecht, president of Multi-Channel Marketing, a Chapel Hill, N.C., consulting firm. “It’s important to understand and measure all the different channels, but create a level of integration that makes the sales process seamless and invisible to the consumer,” he says.
Adds Michael Klein, director of industry retail strategy for Adobe Systems: “Managing multiple channels is nothing new. What has changed is that the digital age has created a much bigger challenge.”
Transforming Bricks And Clicks
What makes today’s business environment so daunting for companies and CMOs is how much power consumers wield. In the past, when a consumer shopped for a product, he usually visited a store or two—or gravitated toward a sale based on a newspaper or television ad. It’s accurate to say that a consumer’s options were fairly limited.
But times have changed. Armed with mobile phones, price-comparison apps, social-media feeds, and other powerful tools, consumers can slice through pricing and instantly determine where to get the best deal. They can also share information—both good and bad—with family and friends. “Bar-code scanning apps for smartphones represent a paradigm shift,” Kilcourse points out. “Although it has been possible for some time to compare prices on the Internet, the difference is that the information now follows consumers around.”
In fact, the technology is leading to radical changes in shopping and buying behaviors. One of the most challenging trends centers on showrooming, which, as the name implies, transforms retailers, such as Best Buy, Target, Wal-Mart, and Sears, into “showrooms” for online retailers, such as Amazon. In fact, the online retailer has gone so far as to offer a scanning app and provide incentives for those who use it.
In addition, Kilcourse says that traditional retail analytics, which has relied on a “transaction-oriented model,” is becoming far less important in this emerging retail environment. It’s not unusual for a consumer to use two or three different marketing or sales channels before plunking down a credit card or cash. “There is a need for a different type of analytics that can determine when and where to provide incentives. . .and how to influence behavior and provide the right information and pricing in the right context,” Kilcourse says. He adds that this emerging model must also place decision-making at the “edge of the enterprise,” including with the store associate who is serving the customer.
The problem for many retailers—and one that spills into all aspects of the business—is the distributed nature of IT systems. Too often, associates in stores have less information than customers, online and store inventory systems aren’t in sync, and processes aren’t coordinated across channels. As a result, a customer might check on availability online, place an order, and then discover the item is out of stock or not available for pickup in a store. Or he learns it is not possible to buy online and return a product in the store, or vice versa. In some cases, a mobile app may not provide the necessary features to buy or return a product.
Too often, the end result is a disjointed approach that confounds and frustrates consumers and dings the brand. Marketers, caught in the middle of the chaos, send confusing and contradictory messages that don’t jibe with real-world processes. John Avallon, vice president and North America leader for CapGemini’s Consumer Products & Retail Division, says that “a failure to understand the dynamics between customers and touch points” translates into higher costs, decreased loyalty, and lost revenue opportunities.
Next Page: A new omnichannel order.
Navigating today’s multichannel—some describe it as an “omnichannel”—environment is easier said than done, particularly with tight budgets and limited resources. Avallon says it starts with an understanding that a retailer is a single company regardless of however many channels it relies on to sell and service products. It’s also critical to recognize that consumers now have the power. “People are mobile, they’re social, and they are a heck of a lot smarter than ever before,” he states.
Some retailers are looking to better integrate channels. For example, Moosjaw Mountaineering, the fourth largest U.S. retailer in the specialty outdoor niche, began handing sales associates iPod Touches last year. The devices provide product and inventory information, scan 2D bar codes, and include a credit-card reader. The retailer is using the approach to replace some fixed point-of-sale (POS) terminals in its stores. It operates nine brick-and-mortar stores in Michigan and Illinois, along with an Internet storefront.
“Mobile POS puts the entire enterprise in the palm of a sales associate,” says CEO Eoin Comerford. “It has allowed us to change our store layouts and use space more efficiently. It has changed the way we market and sell products. Customers can get answers instantly rather than waiting for the sales associate to call in or disappear behind the counter for a few minutes. They are right there on the floor, engaged with the customer, and ready to scan their items and swipe their credit card.” At the end of the transaction, Moosejaw can also e-mail the receipt.
Other retailers are adopting different strategies. Some, such as Wal-Mart and Best Buy, allow customers to order online and then pick the item up at a special express lane in the store. Others are sending out daily alerts and coupons through e-mail and text messages or storing receipts online for future reference. Lowe’s Home Improvement, for instance, has introduced MyLowe’s, which displays all past purchases at the company’s Web site. Still others, including Target, are pushing manufacturers to create unique items that aren’t available elsewhere. The approach is similar to the “exclusive products” that mobile service providers offer.
Avallon says that retailers must differentiate themselves in order to mitigate pricing pressures. In some cases, integration with loyalty rewards programs and personalized pricing alerts also pay dividends. Kilcourse says that retailers must begin to think more creatively. For example, “an associate might look through the available inventory, find the specific product a person wants, and then have it shipped directly to their home.” This one-on-one approach can foster cross-selling and upselling opportunities.
Best Buy is taking a different approach. In April, now former Best Buy CMO Barry Judge urged the company to create “the best showroom we can.” The electronics retailer is also reportedly exploring the idea of allowing product manufacturers to rent mini stores or kiosks inside its superstores. It already operates Apple stores inside many of its retail locations, and Judge had stated that the company earns more money from the likes of Sony, Samsung, HP, and other manufacturers vying for floor space than it does from consumers.
Kilcourse believes that retailers must ultimately adopt a business model that relies on more dynamic pricing and uses predictive analytics to gauge when to send promotions and coupons. Klein believes that advertising and marketing must become more personalized and relevant. Hecht argues that consistency and uniformity across channels is paramount. The closest any company has come to acing this approach is Apple. The end game is a level of integration that makes channels invisible to the consumer. “Everything just works, regardless of the device or approach,” Hecht says.
Ultimately, Klein says that retailers must view disruption as an opportunity rather than a challenge. Those that are agile and opportunistic can transcend the bounds of conventional marketing and retailing. They can transform the customer experience—and their companies. “There are powerful tools available,” he concludes. “It’s now up to companies to assemble them in ways that transform the customer experience.”