Beyond Technology: 5 New Areas of Focus for Omnichannel Readiness

7/1/2015
Omnichannel retailing, although a mission-critical business strategy, is still a struggle for many apparel brands challenged with how to align operations to support advancing business goals and meet consumer expectations. By establishing a more focused, collaborative environment internally, retailers will be primed to steer omnichannel operations and drive long-term successes.

Retailers are driving hard to create a true omnichannel retailing experience aimed to deliver an integrated, transparent shopping experience regardless of where shoppers begin or end their journey. The omnichannel business model often requires the adoption of in-store and digital customer touch points, with both virtual and physical tools. This allows apparel brands to interact with their shoppers on an intimate level during each step of browsing, product discovery, selection, and purchase of merchandise, and throughout post-sale service – and better appeal to them through product development and packaging. In fact, half of all U.S. consumers use between four and seven touch points when making a purchase, according to Nielsen.

It is the integration of these tools that enable retailers to drive more personalized customer engagement, a strategy that helps forge longer-term and deeper relationships with shoppers. And once these relationships are established, brands will benefit as omnichannel shoppers are 23 percent more profitable than those who only shop in one channel, according to research from RIS News and Edgell Knowledge Network (EKN).

However, consumers' expectations are ever-evolving. The slightest missed expectation from a retailer is all it takes to drive a shopper directly to a competitor. For too many brands, these snafus stem from the lack of a holistic view of their operations and how this maps to the customer journey. One of the top reasons causing the biggest struggles is focusing on a technology solution and not its full integration.

Too often, retailers invest in technology to support omnichannel strategies, yet still fail to offer a true omnichannel experience. In fact, a lack of tight integration between the systems that deliver an omnichannel experience will hinder a single view of items, orders, inventory and most importantly, a single view of the customer across channels, as summarized in RIS News' and EKN's report. This lack of integration accounts for up to 10 percent of lost sales, the report said.

What is frequently overlooked is making initial technology investments without shifting organizational structures. To support this new retailing model, retailers need to break down the silos that technology can create and guard against adding complexity as functionality increases.

To ensure omnichannel success and embark on long-term customer engagement, apparel retailers must revamp operational structures in addition to their technology landscape and supporting processes.

Here are five critical objectives and areas of focus that go beyond technology and deep into the heart of the business:

1. Define the organization's omnichannel strategy and goals. Too often, retailers approach omnichannel from an "experimental" piecemeal perspective versus adopting the retailing model as a mission-critical business operation. However, as more consumers continue to adopt personal digital devices and become accustomed to "always-on" retailing options, brands that fail to deliver a true omnichannel experience are doing more harm than good to their organization's industry reputation.

Apparel companies need to establish overall business goals, and develop a roadmap that revamps business operations and incorporates technology. The result: an omnichannel strategy that will meet customer expectations, improve service levels and drive sales.

2. Make the customer your omnichannel focal point. Gone are the days when a product-centric business model will drive sales. In this new era of retail, apparel brands must be agile when it comes to supporting customers' navigation, purchasing and fulfillment activities across a brand's channels. This requires a customer-centric strategy that focuses specifically on how consumer demand impacts inventory movement.

For apparel retailers, this requires a deep understanding of customer demographics. This insight enables brands to learn customer personas and journeys – from exploration through purchase, and even post-purchase activities such as customer service and returns – that can impact overall brand positioning and long-term strategy. For example, apparel retailers who operate multiple brands must map out specific customer journeys that reflect typical shopping and post-purchase behavior across each distinct brand in order to service each brand's customers effectively.

Adopting a customer-centric approach does not end with traditional retailers. Wholesalers must also keep customer needs and path-to-purchase in mind while developing their own omnichannel strategies, especially as they increasingly operate their own digital and brick-and-mortar storefronts in addition to selling their products through department store and specialty store partners. To customers, these channels are transparent, regardless of where they purchase product.

For example, if a wholesaler cannot fulfill a customer order from its e-commerce storefront, it could re-direct the customer to a partner retailer's Web site. The wholesaler might end up losing the sale, but not the customer mindshare, which is priceless to brand success.

3. Define the omnichannel organization. Forty-four percent of leading retailers mentioned that a lack of coordination between supply chain, merchandising and marketing divisions are key organizational inhibitors to omnichannel success, according to RSR Research.

Adopting a customer-centric omnichannel strategy requires realignment across various groups within the organization. This can take two paths. First, companies may choose to create an omnichannel executive position, such as a "Chief Omnichannel Officer" who will report directly to the CEO, and have collaborative relationships with the CIO, CMO, CDO and CSCO (Chief Supply Chain Officer) or SVP of Supply Chain.

Several leading omnichannel retailers, such as Macy's, Lowe's and The Finish Line, have created a Chief Omnichannel Officer executive position to oversee their omnichannel initiatives, while driving strategy, innovation and executive alignment across initiatives.

Another option is to transition senior management positions to omnichannel specific roles and titles. For example, Saks Fifth Avenue's SVP of merchandise planning has been re-branded as group SVP for merchandise planning, taking on additional responsibilities overseeing omnichannel operations.

It is clear that there is no single right answer to omnichannel ownership, but research shows that leading retailers believe that realigning the company's organizational structure to be less "channel-specific" is the key factor to overcome inhibitors, according to RSR's report.

4. Collaboration and alignment are key. Regardless of the path apparel retailers follow, executive alignment is paramount for omnichannel success. Traditionally apparel retailers have operated in silos when embarking on channel-specific initiatives. However, silos jeopardize any chance of sustaining an agile, customer-centric, omnichannel strategy. It is a very real challenge that more retailers are facing.

Apparel retailers' goals can only be achieved when all lines of business collaboratively develop overall goals. Organizations must adopt a broader scope of vision by assessing the impact of omnichannel on demand planning, store operations, merchandising and finance functions. For example, if an apparel retailer offers a buy online/pickup in-store service to its customers, the integration of order orchestration and store fulfillment systems is a must. It is also essential to assess the impact on merchandising and demand planning systems to ensure stock out scenarios are avoided, including planogram applications to account for staging and fulfillment areas in the store, and fulfillment and replenishment systems to manage transfer orders, if needed. By blending all operations toward a common goal, brands can ensure that initiatives align with the organization's overall omnichannel vision and objectives.

Neiman Marcus is a perfect example, as a few months back the company merged its online and store merchandising and planning teams into a single organization, each gaining omnichannel responsibilities.

5. Establish new key performance indicators (KPIs) and incentives. One of the biggest internal challenges to managing an omnichannel business model is how to allocate the sale. Traditionally, retailers have tracked financial information by channels to gauge performance and make key investment decisions, and many still do. As an example, for an offering such as buy online/pickup in-store or an online order placed in a store, some retailers choose to credit the online channel for the sale whereas others choose to credit the store.

With the lines between the physical and digital worlds blurring rapidly, retailers must do away with traditional accounting methods that attribute sales to specific channels. But accounting is only the first step. Next, stores should incentivize associates for originating transactions, as well as fulfilling cross-channel orders. This model will ensure that there is adequate motivation not just to sell products at a store, but also to fulfill orders that originated from a different source.

To ensure compensation is correct, apparel brands also need to revamp KPIs. While sales/channel, customer satisfaction and average margin measures are still valid, multi-channel retailers also need to consider customer lifetime value, recency, frequency, monetary value, and share of wallet, according to RIS News' and EKN's report. By revisiting KPIs, it may be easier to compensate engaged omni-channel associates.

Apparel retailers continue to strive for a true omnichannel retailing strategy, yet siloed operations hamper efforts. With a keen eye on internal collaboration, customer-centric operations and upgraded KPIs as well as associate incentives, apparel brands are better positioned for omnichannel success.


Sundip Naik is a vice president in the North America Supply Chain Technologies practice at Capgemini, a global provider of consulting, technology and outsourcing services. Balaji Ramnath Venkatesan is a senior manager in the North America Digital Commerce practice at Capgemini.

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