Modern retailing and omnichannel challenge
Thursday August 14 2014
Retailers must fight harder than ever for competitive advantage and customer loyalty. This requires a fundamental strategic shift in thinking supported by strong technology enablement reports Alison Ebbage
Talking to retailers like John Lewis and Argos, this special report focuses on what it takes to operate multiple retail sales channels seamlessly in an omnichannel world
Omnichannel retailing brings about numerous IT and software challenges. Channel neutrality at the front end needs support from the underlying infrastructure to make sure the customer is visible throughout the sales process. At the back end, systems need to ensure product is where it is supposed to be, at the right time and right price.
Canny retailers know this; Andy Street, John Lewis managing director, was quoted in the Financial Times as saying that investments are all now behind the scenes and that IT is what it is all about.
Another UK High Street retailer, Argos, is in the early stages of a five year £300-million transformation plan to reinvent the business as a ‘digital retail leader’. Much of the infrastructure behind the plans is heavily reliant on IT and an ambitious systems agenda to connect the customer’s shopping experience across channels together, according to Mike Sackman, IT director at Argos.
Integrating business operations
Indeed connection and visibility is king. Many retailers are now turning to a single integrated platform that can connect to all facets of the business to allow for functional precision as well as front end and supply chain visibility.
Julian Burnett, head of IT architecture at John Lewis, commented: “With huge developments in the internet and the emergence of mobile technology, we need to offer a wide range of services that are not only user-friendly, but also flexible. Customers have come to expect this – they want to be able to shop not only instore but online, on their mobiles and tablet devices. They also want our services to be consistent, convenient and flexible.”
By way of example, for the five weeks to 28 December 2013, online sales for John Lewis were 22.6% up on last year, with johnlewis.com accounting for 31.8% of the total John Lewis business during this period. ‘Click & collect’ orders were also 61.8% up on last year.
At Argos meanwhile, sales originating online have increased significantly over the past few years, now accounting for 46% of total sales. Mobile sales for the traditionally catalogue and store-based retailer now represent some 20% of total sales.
But that does not mean however that the days of the store are numbered – in fact the store is an integral part of one of the most popular emergent shopping services spanning multiple sales channels: click & collect.
Sackman commented on the advantages for Argos: “Check and reserve, which allows customers to check stock availability online and reserve for immediate collection at their local store, now accounts for 35% of total sales, up from 32% the year before. And despite the growth in digital sales, 90% of all transactions still currently touch a store and having a physical presence through traditional channels – our stores – is key to our strategy.”
Changing customer interactions
As well as the actual point of sale (PoS), interactions with customers have changed. It is now normal for a customer to interact with a retailer through multiple channels in the course of one purchase cycle, which complicates issues further.
Pepjin Richter, director of enterprise resource planning (ERP) product marketing at Microsoft, said: “The IT systems of most retailers are quite fragmented and they have tended to custom build their own systems over the whole vertical; from the supply chain right up to the front end. This is then crossed with the various channels and the end result is something that is very hard to read. This is only made harder when customers can cross channels within a single order cycle. Visibility is challenging.”
Product visibility is also important. Sackman added: “What’s become very clear to us is the need for channels to be underpinned by a single platform, which offers one central understanding of our stock position and availability, and can be presented to the customer irrespective of the channel they use.”
Integrating both operational systems and data then becomes a key requirement of omnichannel retailing, so that both customers and products can both be identified and seen no matter where they are within the retailer’s systems.
In practice this means bringing data out of silos and sitting it on a single platform where it can be seen by all – from the front end right through to the back office. It can then be taken and used appropriately by the various operational components of the retailer. But the important thing is that everyone is seeing the same thing and has one single version of the truth.
Promoting cross-channel brand loyalty
Having an integrated and transparent system also means that the customer experience can be enhanced and enriched – not merely supported. For example, customers tend to go into the store much later in the sales process than ever before – if a sales rep can see a copy of what they have been looking at online, what preferences they have, what is on their wishlist, and then tailor service provision using so much more detail. It is not only a counter strategy to pureplay online stores, but it also helps to promote brand loyalty across channels though better customer service.
Burnett commented: “Coupling new technology, which is also evolving, with insight into the ways in which our customers choose to shop, we can better identify what customers want, when they want it and where they want it. Providing our partners with this insight helps strengthen the relationships they build with our customers and better serve their personal needs.”
Enhancing the customer experience was one of the main reasons for US-based Ashley Furniture to upgrade its systems to a single scalable platform, due to go live in 2015. The single platform aims to shorten the sales process and facilitate an omnichannel experience. Jeff Paynter, vice president of omnichannel retail systems for Ashley Furniture, commented: “We can create a shopping cart in one channel and then migrate it to whatever channel the customer happens to be using at that moment.”
Future plans are to create a mobile app, which will draw on the customer’s account information and create wishlists to direct customers to specific items within the retail stores, or use proximity awareness to push out coupons for nearby items.
Getting IT integration right also applies as much to the back end as it does to the front: inventory, supply chain management, marketing, getting the right product to the right place at the right time. Without all of these components working to support the omnichannel experience, it all falls down.
Sophisticated inventory management
Sarah Taylor, Oracle Retail senior industry director, said: “Investing in planning applications and inventory management is essential. For example although click & collect is great for the customer, it requires sophisticated inventory management.”
Sackman cited the same capabilities at Argos: “We are able to see exactly what stock is where at any one point in time. We also have a view of the stock position further up the supply chain, as we can see what’s on order with suppliers and potentially make product available to customers before it arrives in our distribution centres. Having such a complete view, which goes beyond the Argos systems and leverages our trust in suppliers, means we have true stock visibility and can use this for the customer’s benefit.”
Amouage, a luxury fragrance house, is another example of a successful transformation to a single platform. The company was using multiple IT systems that could not easily extract data such as inventory and financial consolidation figures from its retail outlets.
“If I had to generate a report it was done manually which was very time consuming,” said Sethu Gopalakrishna Pillai, Amouage IT manager. “We also had challenges in developing appropriate sales strategies because we could not capture customer data in our legacy system.”
Indeed, marketing is another area to benefit from greater IT integration. Better and informed decision making as regards pricing, campaigns and customer segments can be made if the retailer can see what the customer does instore, online or in other channels and when.
Again this comes back to holding data centrally so that there is a single version of operational data for use by all business functions. Integration can also enable better product hierarchies, which makes life easier at both front and back end.
Sackman continued: “Better organisation of product at a central point holds many advantages, such as the ability to expand our ranges and introduce new ones more quickly, dynamically trade business online and change pricing and not be tied to six-monthly catalogue cycles.
“For the customer, better organisation means they can search or browse our ranges based on hierarchies or categories and events they understand. For example, back to school or birthdays. For a business that was traditionally catalogue-led, digital channels offer much greater flexibility in organising products.”
Moving with the times
But with such demands on any single platform, is outsourcing the solution? Certainly managing systems so inherently complex and in a constant state of evolution is not traditionally a core activity for most retailers. In addition, the consequences of system failure or data inaccuracies could be serious.
Amouage is one company to have taken the decision to outsource. And John Lewis is one of the few UK high profile retailers to have gone public in this particular conundrum. It grew its IT capability with an in-house bespoke system before realising that some outsourcing was the best option for the company. But for others, retaining control is key – although outsourcing is an option it is far from the only solution.
What is clear though is that without increasingly interconnected systems and the visibility and flexibility that it brings, operating in an omnichannel retail world is testing even the biggest retailers.
Sackman concluded: “We need to grasp this challenge and become as digitally connected as our customers to give them a consistent experience through their journey, from product research to purchase, delivery and beyond. IT also plays a very important role as the interface across the different business departments – marketing, trading, digital, stores – to match future ambitions with our practical capabilities,” he said.
CASE STUDY — PIZZA HUT
Pizza Hut is working with marketing and technology consultancy Amaze to refine its offering by connecting its customer relationship management (CRM) strategy with its digital marketing execution.
After a private equity group acquired the 330-strong franchise restaurant chain of Pizza Hut UK in 2012, the business embarked on a major programme of modernisation across all of its customer-facing channels, including its menu, restaurants and digital channels. Victoria Simpson-Clarke, head of marketing for digital and CRM at Pizza Hut UK, told Retail Technology that the company undertook the project in order to “put the customer at the heart of everything”.
Simpson-Clarke said the website development was intended to not only provide standard features, such as ordering information and a restaurant locator, but to also offer new ways to engage with the brand. “We work with lots of licensed products, so wanted to highlight these in places like a kid’s area,” she said. “We also wanted to facilitate a two-way conversation with customers through social networking interaction and local deals and menu offers. So it had to be intuitive, based on the locality of anyone visiting the site.”
Amaze handled the technical aspects of the brief. The subsequent website redesign refreshed its look and feel to reflect a local presence that was also in line with its global brand.
The legacy Pizza Hut brochureware site was replaced with Microsoft .NET-based EPiServer web content management systems that offer more sophisticated data mining capabilities and enable the new website to integrate with existing CRM functionality for more personalised customer engagement.
Integrated messaging communications
“Customers are encouraged to sign up to loyalty schemes and email offers,” continued Simpson-Clarke. “But we wanted to tie CRM more closely to the site. It is important to know where site visits is coming from, in terms of affiliates, devices etc., and about a guest’s preferences, like if they have children for instance. “This also allows us to push out our messaging in an integrated way, where people don’t want mass marketing communications.”
The integration work has also benefitted customers visiting the company’s restaurants, as a link into its electronic point-of-sale (EPoS) systems enables it to use the website to recommend nearby sites based on capacity according to real- time sales figures. “There’s nothing more frustrating than a queue at the door,” she added. “The benefits are there for the business by maximising capacity, but also for the customer in maximising service levels.”
Going live with a newly integrated digital presence last summer, the company saw a 75% increase in pages seen per visit and 49% via mobile, as well as a 25% increase in visit duration and 17% on mobile. Bounce rates dropped by 48% overall and 38% on mobile, while online restaurant bookings grew by 32%.
CASE STUDY — EAST
Fashion retailer East is overhauling its supply chain systems as part of a strategic move to support an omnichannel business strategy.
With over over 100 stores and concessions, plus an international e-commerce presence, the company already operates successfully across multiple channels.
Alison Lippiatt, East trading director, told Retail Technology the overhaul was prompted by the impending end of its current supply chain system contract.
“The legacy system has been used successfully for some time,” she said. “But the end of contract encouraged us to look at a review rather than renewal. “The company has significant growth plans, where we were already collecting customer transaction data for example, but we weren’t using the legacy system to full capacity.”
Lippiatt also said that the supply chain overhaul would provide a catalyst for change in embracing an omnichannel approach.
“We talk about having ‘one view’ of the customer, so we get a transactional view no matter where the transaction was conducted,” she explained. “We also want to make sure the customer also has one, consistent view of East and that their experience is always a positive one. A really powerful part of that is having one view of stock.”
Satisfying different functional needs
The retailer chose to implement the Merret integrated retail merchandising and warehousing supply chain system from Retail Assist. Lippiatt said the system was able to satisfy a number of different functional needs, across its web, store and distribution channels.
“In the warehouse, we no longer need to have split stock locations,” she said. The merchandising team was also given an integrated view into product information, while the cloud-based nature of the Merret system, hosted through its infrastructure partner Blue Chip, means the IT team were freed up to focus on adding strategic value.
At the same time, a networking partnership with specialist supplier Vodat is enabling new connectivity and disaster recovery (DR) assurance across the business, offering new levels of monitoring capabilities and resilience. The new system has also enabled the roll out Triquestra UK’s Infinity electronic point-of-sale (EPoS) system, which will develop East’s ability
to collect customer transactional data and further develop its click & collect functionality through its integration with Merret.
“We already offered click & collect and our customers could order directly from the website in the store via a separate terminal,” added Lippiatt. “Now we’ll be able to do these transactions on the till. And the supply chain system looks for the best place to source that stock.”
With the deployment due to go live this summer, Merret will enable East to provide a consistent consumer experience its across multiple channels regardless of geographical location due to its central stock pool, making it easier for East customers to shop anytime and anywhere. “These changes are allowing us to fully embrace omnichannel retailing,” Lippiatt concluded.
Tagged as: Multichannel | click & collect | Argos | John Lewis |