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Multi-channel
retailing has evolved from rudimentary ‘home
shopping’ to a fundamental retail phenomenon
in its own right. This revolution has spawned a new
generation of board director: a hybrid of sales and
marketing manager with a shot of DNA from IT and operations
thrown in. In charge of the highest growth potential
in retail, this person also has to contend with the
least amount of budgetary spend, thus putting them
in an almost impossible position.
“Like a mouse trying to survive in a cage full
of elephants.” says Chris Barling, CEO of Actinic.
“They get starved of capital because their sales
are relatively low, meaning they have less internal
clout, yet they have the greatest growth potential.”
Retailers must begin to see the true value in multi-channel
retailing. It is worth £80 billion per annum
according to industry watchdog IMRG. Apparently £30
billion of current retail spending is online with
a further £30 billion of offline retail spending
impacted by internet information, research or stimuli.
E-retail sales have grown 2,000 per cent in the last
six years alone.
It is encouraging to see that retailers are at least
adopting the approach that, to make it viable, a multi
channel strategy requires specialist expertise incorporating
sales, marketing, operations and technology; insight
that has so far been the missing ingredient in the
recipe for success.
A decade ago, retailers rushed into creating a web
presence by building proprietary or highly customised
packaged applications, which were cobbled together
from bespoke programming, bolt-ons or a combination
thereof. They failed to meet demand and became cumbersome,
inflexible and unable to integrate with other applications
and back office solutions. Consumers’ experience
of these systems was less than satisfactory and many
retailers were forced to implement damage limitation
to protect the brand from the backlash.
“You end up with islands of information and
no link between,” says Sam Jackson, managing
director of Prologic. “There is middleware but
the cost and complexity of going this route is prohibitive.”
Gaining
experience
The aim of multi channel retailing is to make products
available to as wide a market as possible so that
as many customers as possible can access them; reaching
out beyond the confines of the store. The purpose
is to create a virtual shopping experience, addressing
customer needs alongside promoting brand awareness
and selling products. The most difficult area to get
right – and one that many retailers have struggled
with in the past – is the shopping experience.
Rigid technology has served only to dish up a frustrating
and at best unsatisfactory experience for customers
but that is now being replaced with specialist ‘e’
and ‘m’ commerce solutions designed specifically
for the purpose.
The channels used by most retailers are web, stores,
call centre and catalogues but those are being added
to by interactive TV (iTV), mobile phone commerce
and in-store kiosks. The latter three are still maturing
but, research reveals, 30 per cent of retailers are
planning m-commerce strategies, while 18 per cent
are working on kiosks and 15 per cent on iTV.
A
consistent offering
Retail consultant Charteris recently published its
UK Multi-Channel Retailing Research Report, which
found that although multi channel retailing is becoming
big business, for the average retailer the levels
of sophistication and integration are not as high
as the industry would have us believe. Most retailers
appear to be operating separate processes for their
stores and other channels.
This is not such a bad thing as the sensible approach
now seems to be ‘sweating the small stuff’
in one channel before opening up others. This is an
approach shared by luxury online chocolate gift box
provider, HotelChocolat. The company started out selling
luxury, personalised gifts through a mail order catalogue.
A few years later an online business was established
and after eight years of healthy growth, the company
opened its first store in 2005. It now has a chain
of stores across the country running alongside the
catalogue and online business.
Angus Thirlwell, co-founder and managing director
of Hotel Chocolat, explains his approach: “Half
the population have not bought our products online
and we wanted to be able to offer them through another
channel. Additionally, chocolate is an impulse purchase;
you want to touch it, smell it and taste it in quick
ksuccession. With an online purchase you have to delay
gratification by waiting for it to be delivered.”
Initially, the company’s product range was limited
which meant it was easy to sell through the catalogue.
It shares a manufacturing facility with another chocolate
provider and this has achieved greater efficiency.
For the past four years HotelChocolat has relied on
an integrated package, Elucid from K3, to run its
multi channel operation. The catalogue and online
order-taking are fully integrated as is CRM and the
website.
“You cannot rely on technology to serve the
customers,” explains Thirwell. “It’s
a cultural thing; as you grow you can invest in technology
to take the drudgery out but there is always the danger
that serving the customer can become diluted in the
administration. If you have a good product you should
be able to sell it through any channel.”
When considering technology in retail, integration
is a thorny issue. “It’s what customers
expect,” says Actinic’s Barling. “They
want to be able to return goods they purchased online
through a store and to use loyalty cards, store cards
and gift vouchers in any channel. They want consistent
pricing across all. Above all they want the retailer
to know who they are no matter how they make contact.”
Prologic’s Jackson thinks that integration issues
differ from sector to sector. “In fashion retailing,
it’s nice to have a single view of the customer
but it is essential to have a single view of stock,”
he says. “The virtual store then becomes a centralised
place for stock which can then be pulled through to
other channels.”
Fashion and lifestyle are two sectors of retail that
have lagged behind in embracing multi-channel retailing.
That is now changing as consumers’ are broadening
their attitudes towards other channels. Men’s
clothing in particular is leading the way with guys
more inclined to shop online.
Dave Lomax, founder of menswear retailer, Bagga Menswear
took a risky but brave decision in 2004 to halve his
business by selling his most successful shop in Bexleyheath.
He used the capital to fund an e-commerce operation.
The gamble paid off and in 2004 turnover from the
online business alone was £600k, 75 per cent
of total business turnover. The move also enabled
the company to slash overheads by £130k.
Actinic’s Chris Barling is not surprised by
this success: “The online channel is having
an effect on high-street performance with cheaper
broadband prices and a wider acceptance by consumers
of online shopping. Retailers who continue to ignore
it run the risk of damaging their business. Increasing
sales in any channel will lead to greater efficiencies
overall.” It comes with a warning, however,
as Barling explains: “It’s crucial to
replicate brand values and the proper level of service.
Problems in one channel will equally damage the others.”
The
small screen
After years of hype, interactive television could
be on the brink of a revolution. In April 2006, Sky
TV launched the SkyNet TV platform. With 8.2 million
UK subscribers, SkyNet brings popular web content
to television sets via a standard set-top box. Viewers
use the remote control to navigate a directory, search
engine and favourites menus. The service addresses
the 40 per cent of UK households that do not have
PC internet access. For retailers it’s really
only currently a branding and marketing channel but
provider, Glue4 Technologies, is working with leading
brands, such as John Lewis, to develop transactional
options, promotional mechanisms, location-based services
and bespoke content.
Multi channel retailing represents one of the most
exciting opportunities for development in the future.
Technology has matured and enablers such as broadband
are now ubiquitous; time for the new breed of e-commerce
or online business director to take the lead. This
person really is a rare breed indeed but they can
certainly lay claim to being pioneers of the future
as far as retailing is concerned.
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