RETAiL 2016 - the race to reach the omnichannel finish line

Over the past 12 months, retailers have dodged numerous obstacles that could have put their productivity and overall fiscal health productivity at risk.

Consumer sentiment has undoubtedly improved, leading to a year-over-year increase in retail sales — especially during the holiday season. However, the global economy is still volatile, which is making shopping behaviors and retail sales moving targets. At the same time, retailers have had to keep pace with customer expectations, which are constantly shape-shifting with the emergence of new tools, apps and services.

Even disruptive organizations such as Netflix, Airbnb and Uber have raised the bar on customer experience. Although they are not retailers in the traditional sense, they are giving customers more control over their experiences, and are fueling their desire for personalized anytime, anywhere service.

As a result, retailers are tasked to create more seamless, relevant and tailored experiences, while tackling their own internal health challenges. For example, they are tasked to improve internal collaboration, optimize omnichannel operations and accelerate growth, all while pleasing their boards of directors.

Its time to take the temperature of today’s market and see how retailers are keeping pace with these new industry trends and business imperatives.

The retail / retailers are needed to address a wide array of hot buttons..

With all of these different elements at play — and new touch points constantly emerging — retailers need to ensure their businesses are running like well-oiled machines. To do so, they are collaborating across different business units on a weekly, or even daily basis. By breaking down these business boundaries, retailers are trying to get a better view of their strategies and tech investments and, in the end, make smarter decisions that lead to more delightful shopping experiences.

Retailers are thinking beyond store count to reach growth objectives

Bulk of the retailers projected growth between 10% and 50%. As a result, their top organizational priorities have revolved around supporting their corporate business goals and initiatives. That doesn’t mean retailers’ journey to growth and business success has been easy. In fact, 56% of retailers said their top organizational priority was better managing financial challenges.

Rather than spending more time and manpower on increasing their store count, most retailers realize they need to make smarter, more strategic decisions around optimizing their omnichannel experiences and operations.

Walmart, the world’s largest retailer, is streamlining its brick-and-mortar operations and reallocating resources towards e-Commerce and omnichannel practices. Shortly after CEO Doug McMillon said the company would review global operations and close underperforming stores, Walmart representatives revealed that the retailer would be shuttering its Walmart Express format, as well as 269 stores around the world.

Legendary department store chain Macy’s is also making changes to its business. Due to poor financial results in 2015, the retailer is closing 40 locations — 36 of which will be closed in early spring 2016. However, Macy’s representatives say the closures will lead to significant cost savings, allowing the retailer to further invest in omnichannel capabilities for both Macy’s and Bloomingdale’s.

Even Amazon has increased its fulfillment center count and experimented with different store formats to place a stake in omnichannel ground. For example, Amazon opened a pick-up and drop-off location on the campus of Purdue University in West Lafayette, Indiana. In the store, students can order textbooks, laptops and even groceries. The online giant has also opened a bookstore at University Village in Seattle, Washington. Although Amazon has kept mum,reports point to new job listings for Amazon Books, the division responsible for the Seattle location, which means more store locations may be on the way.

These developments confirm the store is not going away. If anything, retailers realize that to be successful, they need both a store network as well as a strong online presence. Omnichannel, or bricks-and-clicks, is the new reality, and retailers cannot meet their growth objectives unless they do business across all channels.

Retailers’ desire to make smarter omnichannel business decisions aligns with our survey results. While only 24% of retailers said they opened stores in new markets over the past year, nearly twice as many (41%) said they launched e-Commerce sites in new global markets. Launching internal e-Commerce sites is a powerful mechanism to expand into new markets, connect with global shoppers and increase brand awareness with minimal investment. Retailers can use performance data from these web sites to understand their impact on a global scale and refine their omnichannel strategies accordingly.

Over the next year, retailers plan to focus on expanding their operations globally and better connecting with shoppers around the world. At the end of 2018, sales totals are expected to reach $2.5 trillion.

There are other factors that also make e-Commerce an optimal expansion channel. For one, it takes less time, manpower and financial capital to develop international e-Commerce sites than to open a flagship store overseas. You can also tailor online shopping experiences, content and imagery based on local preferences and customs — in an efficient and scalable way. Better yet: retailers have access to a variety of digital tools and apps designed to help them improve their e-Commerce sites. They can track the products customers click on, the offers they redeem, and the number of pages they click to during each shopping visit. All of this data can be turned into valuable insight that will help retailers better understand the unique behaviors and preferences of their shoppers and improve their experiences.

It is clear that retailers want to expand their presence and customer base across all channels and countries. But at the same time, they realize that they need to be smart with their investments and should not dive headfirst into initiatives that they don’t know are profitable.

CVS Health, Hudson’s Bay, Kroger, Nordstrom and Walgreens, are among a slew of retailers that have expanded their businesses and improved their industry positioning by merging and/or acquiring retailers.

In some cases, retailers find value in acquiring or merging with competing retailers. A great example of this is CVS Health’s acquisition of Target’s pharmacy and clinic businesses. As part of the $1.9 billion transaction, CVS Health will operate Target’s 1,672 pharmacies through a store-within-a-store format. Additionally, Target’s clinic locations will be rebranded as Minute Clinic. The acquisition was announced in December 2015 and CVS Health hopes to complete the transition by August 2016.

Others however, will benefit from acquiring smaller brands that have cutting-edge business practices, strong brand positioning, innovative technology and a quality executive team that they can benefit from having on board. For example, Hudson’s Bay recently acquired Gilt Groupe for $250 million in cash. Gilt will be folded into Saks Fifth Avenue and will operate online as part of Saks OFF 5TH. There will also be Gilt store concepts included in Saks OFF 5TH locations, according to a company press release.

If retailers are thinking about absorbing another business, they need to think critically about whether the other company aligns with the core brand story and values, and if the deal will make sense to consumers. Technology and infrastructure are also important factors to consider. 

Attempting to merge systems and/or migrate information into an existing environment can be quite costly — especially if the two companies have large, complex infrastructures. Conversely, smaller brands are more likely to not have a lot of systems in place. Although it may be easier to integrate their operations, the acquired retailer may not have as much data, its infrastructure may not be as powerful, and they may not have as many team members to bring to the organization.

Retailers are realizing new growth opportunities and are researching their options for expansion but internal and external challenges remain. The most significant challenges come from an ever-present, yet invaluable source: the shopper.

Retailers rely on customers to survive but 58% said shifting shopper preferences and behaviors were plaguing their businesses. It is undeniable that consumer behaviors are constantly shifting, leaving retailers constantly tasked with “catching up” and refining strategies to meet demands and expectations.

When combined, all of these data points point to one hard truth: Consumers have money to spend, but not all retailers are creating great experiences that make them want to spend money with them. The key to winning customer attention, retention and loyalty is to appeal to customers across all channels.

It is clear that internal challenges and obstacles will always be present. But the top priority for retailers as they go through 2016 is to better understand shoppers and the types of products and shopping experiences they demand across all channels.

A variety of retailers, such as LUSH, TO MS and Microsoft, are committing to the greater good by investing in sustainability and charitable giving. How retailers approach their initiatives can vary significantly based on their category, target audience and other factors. However, it is clear that retailers are taking notice of these innovative brands and are investing in their own strategies.

Retailers are collecting more data than ever before. as they implement new technologies — such as mobile apps and beacons — their sea of data grows. Now they’re focusing on how to leverage that data effectively, making data collection and analysis retailers’ top strategic focus.            

Retailers are focusing more time, manpower and money on honing their marketing, promotions and sales strategies. These findings point to several possible implications. However, it’s time for the retailers to get back in the mode of “getting back to business basics.” When they focus on collecting and interpreting customer and business data, they can better understand their shoppers and, in turn, improve their marketing, promotions and customer service strategies.

For years, retailers have been able to collect valuable information about their customers through POS data, branded credit cards and customer loyalty accounts. But as retailers have expanded their businesses across channels, they have acquired even more data about their customers — from the products they buy, to the stores they visit, categories they shop on the e-Commerce site, the social accounts they follow, the social feedback they share, and so much more.

Despite having an abundance of data to work with, this information is still siloed in different systems and departments. As a result, retailers are struggling to aggregate this data in one central system, analyze it and use it to their advantage. These struggles show why only 19% of retailers say business intelligence and analytics play a key role in most, if not all, business decisions.

To truly become data-driven organizations, retailers need to break down organizational silos and aggregate all pertinent data in one readily accessible location. Most of all, they need to have the tools and systems in place to analyze this information, mine valuable insights, and respond quickly and efficiently.

Retailers’ increased focus on BI and analytics is confirmed by their current use of dashboards and scorecards — and their goals for the future. Most retailers have dashboards and scorecards, but they need to learn how to use them better. While collecting data and information is an important first step, there’s no point in having that data unless you identify and measure the most important metrics, and apply it to your business effectively. Retailers have spent a lot of time and money implementing the hottest tools and technologies but Big Data is still a looming issue that all retailers are still struggling to address.

In fact, 41% of retailers are currently using their dashboards and scorecards to look at key performance indicators and financial information. This shows that retailers are more reactive than proactive in their approach. True data-driven organizations don’t just look at information and make changes as soon as they can, sometimes within a few days, weeks or months. Rather, they use data to predict future outcomes, which allows them to be more effective in their marketing, merchandising and engagement strategies.

As retailers invest in new technologies and platforms, they are focusing more on finding unified solutions. These fully integrated technologies are more efficient and cost-effective than a series of solutions that they need to stitch together manually. Last year, 39% of retailers said they were seeking integrated solutions; this year, 47% said it was a focus.

 A key challenge with omnichannel fulfillment is that there are so many different ways to approach it. Of course, retailers’ investments will vary based on their product assortment, their target customer and their total number of stores, distribution centers and warehouses. It is a very complex topic and customer preferences are always changing, so it makes sense that retailers’ confidence is shaking.

Consumers’ decreased engagement with retailer loyalty problems is not necessarily due to the fact that they don’t want to engage. Rather, it’s the fact that retailers are leveraging the same old school tactics to try and keep them interested. In this new era of retail, consumers don’t respond favorably to batch-and-blast marketing messages, offers and coupons. They’re looking for relevant interactions and compelling deals and sales that align with their wants, needs and preferences.

These findings point to the increased importance of BI: Retailers can’t achieve this level of relevance unless they have a comprehensive view of customers and have the ability to turn these insights into great experiences.

The overall importance of buy online, pick up in-store has increased substantially between last year (52%) and this year (61%). It’s safe to say that this offering has become table stakes for retailers. Merchants are also emphasizing the importance of buying via an in-store kiosk and delivering to store (41% and 44%, respectively).

The key value of these fulfillment strategies is that they bring more shoppers into store locations. When consumers visit a location to pick up an order, they tend to roam around the store and purchase a few last-minute items. These options are also valuable for consumers because they’re usually free of shipping and service charges. This is a far more enticing option than having to pay for shipping.

However, retailers may be overlooking one very important fact: When consumers visit a store, they crave one-on-one interaction with store associates. According to research from Deloitte, 50% of consumers value in-person advice from associates while they’re browsing in aisles.

Retailers have the opportunity to capitalize on this opportunity by arming store associates with technology that allows them to show options, guide the purchase journey and even complete transactions. In the long run, investing in associate-facing technology may be more important than self-service technology because it presents more opportunities for cross-sells and up-sells.

Omnichannel has been a hot topic in the retail industry for years. While some organizations created new divisions and executive roles to show their stamina to keep pace with market trends, others focused on getting their operations in shape and investing in new customer engagement tools and tactics.

However, the industry is changing so rapidly that retailers must constantly shift their attention and dollars. While retailers seemed confident in their investments, they realize they still have a lot of work to do to ensure business health and wellness.

In 2016, only if we will see retailers work tirelessly to improve collaboration across teams and departments, break down organizational silos and create a 360-degree view of not only their businesses, but of their customers’. Only then will they be able to achieve the level of relevancy that consumers demand and reach the omnichannel finish line.