Some brick-and-mortar retailers “get” e-commerce and are holding their own against Web-only retailers. However, most merchants are still behind—even as customers race ahead of them in embracing “channel-blind shopping,” according to a new report by digital marketing think tank L2.
Merchants have to start thinking about their operations as a single channel, said L2 research associate Claude de Jocas, lead researcher for the “L2 Intelligence Report: Omnichannel Retail.” “That’s how consumers are thinking about their company,” she told CMO.com. “They’re not dividing the online channel from the store channel.”
Several challenges are holding back retailers’ omnichannel efforts, notably how to attribute sales by channels—whether in-store, Web-based, or mobile—tracking inventory across channels, and training store personnel, according to the report.
The survey studied data from 100 retailers across three areas: omnichannel sites, email, and their mobile and in-store experience. The retailers studied included big-box and department stores, such as Walmart and Sears; specialty retailers, such as Lululemon and Gap; and luxury stores, such as Tiffany & Co. and Chanel.
The report tagged Saks, Guess, Walgreens, and Walmart as “role models” for balancing investments and incentives for online and offline consumer behaviors. Other brands, such as Gap, Sephora, Coach, and Neiman Marcus, came close.
Among the findings, the annual survey reports that progress in building omnichannel capabilities has stalled, despite the leadership shown by department stores and big-box retailers. Only six out of 71 brands tracked in both the 2013 and 2014 reports launched in-store visibility for their online inventories, and another six launched in-store pickup of online orders.
Luxury retailers fared even worse: Of the 13 tracked in the study, only Gucci offers inventory visibility, despite 44 percent of sales being influenced by digital touchpoints.
Luxury players also have been slow to embrace in-store pickup, a big factor in omnichannel retail. While the percent of “aspirational” retailers—such as Banana Republic—that offer the option has doubled since last year to 24 percent, the rate of luxury retailers that do so—brands such as Burberry and Tiffany—remained unchanged at 15 percent and, as the study points out, limited to select locations.
Legacy systems are a big barrier to rolling out those functions, which are particularly important to boosting store traffic and sales, according to the report. It points out a recent Forrester survey that found 42 percent of multichannel shoppers were “very likely” to visit a store if they confirmed product availability online beforehand, but only 18 percent were “very likely” to go if they couldn’t check ahead.
But the L2 research found about 51 percent of retailers reported not being able to fulfill in-store pickup of orders because of inaccurate store inventory. A similar hurdle also affects ship-from-store efforts to fulfill online orders from physical stores; while one in three retailers offer the option, 52 percent said managing the inventory is a challenge. As the report points out, that can cause a serious brand damage by alienating consumers, who have, in some cases, already paid for the product before pickup.
“You miss the opportunity to deliver on the fundamental consumer expectation,” de Jocas said. Even beyond the inventory management piece, the training of store associates is “absolutely critical from the customer service perspective,” she added. L2’s researchers noted that a huge number of store associates are not aware of what their companies’ mobile apps do and how to use them while shopping in-store. “That’s huge disconnect for the consumer,” she said.
The good news is that the human-resources piece is cheaper and easier to implement than new technology, de Jocas said. For example, she noted Coach trains all store staff to capture customers’ email addresses, along with the SKU number of the items they purchase, so they can be emailed later, asking them to review the product online.
The report concludes that a decade of investment in features such as ship-to-store options, cross-channel inventory management, and mobile shopping solutions are paying off for the leaders in the segment that committed early and widely to building omnichannel capabilities. The study notes that during the first quarter of 2014, big-box retailers, including Home Depot, Costco, Macy’s, and Walmart, all grew their online sales at a faster clip than Amazon, the 10-ton gorilla of e-tail.
Consumers are increasingly agnostic about shopping, but this is now working on the omnichannel retailers’ behalf. According to the survey, showrooming is increasingly getting competition from “webrooming,” in which consumers who check out products online then buy after testing in-store. The report noted that more shoppers (78 percent) reported “webrooming” in a recent Accenture survey than those who reported showrooming behavior (72 percent). A store network, which was considered a liability in the early stages of omnichannel retail’s development, is now turning into an asset, the report said.
Technology challenges loom large for those retailers lagging in omnichannel; the L2 study notes that while the two top barriers mentioned by retailers were the limitations of their companies’ business models (50 percent) and lack of associate training (40 percent), most of the other top five were technology-related: difficulty integrating back-end technology across channels (40 percent), difficulty sharing customer data across channels (39 percent), and lacking digital commerce technology (35 percent).
Many retailers get bogged down trying to tackle technology, without realizing that those upgrades also need to be supported with staff training and realigning functions to enable real omnichannel operations, de Jocas said. Some companies have simply added a head of omnichannel operations, without realigning operations, which is not an effective solution, she added.
Some of those small, incremental improvements, such as realigning functions or training employees to use the store’s own apps more effectively, can yield results, even without major technological overhauls or investments, de Jocas said.
“We find that some brands are so far behind in the technology piece, they focus on that instead of the others,” she said. “There’s no excuse for ignoring the small tactical and organization components.”
The report recommends a three-pronged approach involving aligning technology, systems, and compensation incentives with well-trained in-store staff to execute a true omnichannel strategy.
“Omnichannel is not something that is three or five years down the line,” de Jocas said. “Omnichannel is now.”