customer experience expectations have changed, but have you? · never the less, the omni channel...
TRANSCRIPT
Retailers are witnessing the biggest shift in consumer behavior since retailing began, and the shift is entirely consumer led. They have come to expect a unified experience through every touch point with a retailer. Retailers must now restructure and replatform in order to support this new omnichannel paradigm.
This IDC Retail Insights White Paper explores the importance of providing a compelling customer experience in the competitive omnichannel retail environment of today. In partnership with HCL, this paper from IDC Retail Insightsdiscusses O3 — a framework defined by IDC Retail Insights — within which to develop such a strategy.
The Internet and the corresponding availability of large amounts of data have been pivotal to the biggest change to happen to retail for decades. Access to information has empowered consumers to make better purchasing decisions and find better deals. They can shop and receive items wherever and whenever they so please. They are much less tolerant when it comes to out-of-stocks and no longer blame themselves for arriving at the shop too late if the item they hadhoped to buy has sold out. Instead, consumers expect the retailer to use the data they have shared with them, from loyalty schemes, transaction data and other sources, to not only understand the general demand for the product (and stock enough to supply the demand), but to also know their personal product preferences and provide offers and promotionsbased on the information.
Before the Internet, the aforementioned out-of-stock situation would in most instances have ended with an unsatisfied customer and lost sales for the retailer. However today, using a PC, tablet, mobile phone, TV or other device, the consum-er can access the retailer's online store in order to find the item that was out of stock in store, buy it online and then chose to have it delivered to a location that is suitable for them, be it the nearest store, their home, their place of work, or even their local convenience store. Then they can leave a rating or review about the product, blog about their purchase, or share the details of their retail experience with their friends on social networks.
In actuality, the shopping journey can begin and end at a physical location or a digital location and can involve one or any number of devices over an undefined period of time, as outlined in Figure 1, and the list is growing all the time. In fact, a consumer will interact with an average of 10 touch points for every purchasing decision made.
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Customer Experience Expectations Have Changed,FOR GOOD...
Customer ExperienceExpectations HaveChanged, But Have You?
WHITE PAPer
The Omni Channel customer journeyFigure 1
Source: IDC Retail Insights, 2012
Daily dealsites
Blogs
Storeaisles
Brand sites Storeaisles
Storeaisles
Brand sites
Brand sites
In-sitereview
Click to chat
Reviewsites
Mobile app
Online store
Mobile app
Store kioskor POS
Couponsites
Loyalityscheme
Store kioskor POS
Storeassociates
Blogs
Brand sites
Reviewsites
In-sitereview
Mobile app
Online Store
Couponsites
Without even knowing it, consumers expect a seamless shopping experience, no matter the channel or touch point; indeed consumers have no concept of "channels" at all, they see only the retail brand. So as consumers move across these touch points interacting with the retailer, they expect the brand experience, customer service and product offering to be consistent
However, retailers are failing to keep up as the omnichannel consumer directs the new model for retail IT. IDC Retail Insights has identified three main reasons for this:
Organizational challenges: A major challenge is that the when the online channel was established for most retailers around nine years ago, there was little understanding of how channels might need to interact with one another. The online business was therefore set up in a silo with separate planners, fulfillment and so on to the physical store business. Bringing the channels into one business creates a sales ownership issue, as well as potential staffing problems around who should own which process; for example, when two disparate supply chain operations are brought into a single operation, only a single head of supply chain will be required. Because of these change management issues, retail heads are finding it difficult to get full buy-in from retail staff.
But legacy retail business find it difficult to respond
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Legacy system compatibility: Channels were not designed to interact with each other. Store systems will be either best-of-breed or designed in-house and may have been in place for decades. POS systems, for example, were devel-oped before the Internet age; they were not designed for omnichannel retailing practices. The idea of processing customer orders and supporting orders across a number of channels is counterintuitive to the legacy systems that are in place. However, consumer behavior is driving the need for data sharing across channels and so retailers must find a way to achieve this.
Cost versus budgets: Many retailers with a brick-and-mortar heritage have not recognized that capital expenditure may actually need to be precedent breaking, given the fact that pure-play online retailers typically spend a higher percentage of revenue on technology than brick-and-mortar competitors. Also, getting data from a transaction on the web to popu-lating systems with information about the customer, and then how quickly that information can go to marketing for that customer to be sent an offer — not only does this create a challenge in providing consistent brand experience, it's expensive to maintain and keep up. And these two examples are only just the tip of the iceberg. Investments are also required in omnichannel inventory, supply chain, CRM, order management… the list goes on. Most retailers arestruggling to be innovative with an IT budget of less than 2% of revenue, and this creates challenges.
Never the less, the omni channel customerexperience is vital for future growth
FUTURE OUTLOOKFocus on the customer experience is retail leaders key strategyfor business growth
Competition in the retail sector is at an all time high and sales growth is hard to achieve. Retailers must place the customer experience at the center of all business decisions if they are to retain their existing loyal customers and sustain and improve profitability. Competing on price alone is no longer enough of a draw; retailers must also differentiate themselves through meeting omnichannel customer expectations and offering a superior or unique customer experience. Is it worth the invest-ment, time and effort? For those retailers that have already started their omnichannel journeys, the results speak forthemselves. Omnichannel shoppers are, according to IDC Retail Insights estimates, the most valuable customers that retailers can target. They spend around 20% more than multichannel consumers, whose spending is 15%–30% higher than single-channel shoppers. Moreover, retailers that implement omnichannel inventory, order, and fulfillment applications often enjoy the following benefits (sourced from numerous surveys and anecdotal information):
Reduced stock outsHigher customer-retention ratesFewer lost sales (e.g., increased online conversion rates between 30% and 45%)5%–10% increase in loyalty customer profitability20%–60% reductions of inventory losses as a percentage of salesReduced order fulfillment costsStore sales influenced by online research are on average 3–5 times larger than total ecommerce salesLifestyle driven personalization of customer interactions drive sales up by 5%–20%
The bottom line is that omnichannel shoppers spend more. This makes the need for a common offer, feel, brand and experience across all channels essential.
The results from retailers creating omnichannel best practices are clear. Improvements in aligning with the requirements of omnichannel consumers will amount to both an increase in revenue and an increase in profit. Therefore it makes sense that both sales performance improvement and customer experience enhancement were the top 2 business priorities for Western European retailers in 2012.
Q: Using a scale ranging from 1 to 5, where 1 stands for 'Not at all important' and 5 stands for 'Most important', could you rank the following business initiatives in terms of how much they are leading your company's business agenda?
Sample: 240 respondentsSource: IDC Retail Insights, Western EuropeanRetail Survey, 2012
Business priorities in western european retailFigure 1
Sales performance improvement
Customer experience enhancement
Sensitive data protection
Product or services innovation
Reducing operational cost
Supply-chain efficiency
Marketing effectiveness improvement
IT organization contribution to business goals
Regulatory compliance
Multi-channel sales and distribution strategy
Green & Environmental sustainability
Organizational restructuring
1 2 3
(Mean Score)
4 5
To increase sales performance and improve the overall customer experience, retailers need to drive unique omnichannel strategies, restructure their organizations, and embark on technology transformations to ensure the needs of the omnichannel consumer are being met.
The concept of omnichannel retailing is still relatively new. No real infrastructure best practices exist and legacy platforms with ERP at the heart have been expensive investments for retail businesses.
Jack Welch, CEO, GE Nevertheless, retailers cannot afford to sit back and see change happen around them. Those that have chosen not to believe the new consumer touch points would last (CD and DVD retailers, gift card retailers andsuch like), have suffered severely at the hands of innovative competitors. Shopping across channels, whenever and wherever is the new normal and this should not be denied or ignored.
Retail process and IT strategy of the future needs to deliver value to the customer first. Creating a single virtual channel — omnichannel — to better serve customers is the ultimate goal. An omnichannel perspective enables a retailer to provide a consistent customer experience while reducing the cost to deliver optimal service levels. Therefore, the customer and the retailer are the beneficiaries of a single virtual channel, which in practice has the following characteristics:
Mature omnichannel starts with the architecture. All applications should be connected with an appropriate architecture in order to orchestrate processes. This means all processes and applications work off the same view of information so that merchandisers, replenishment teams, store staff, and marketers are all working from the same data and have a shared view of the business from the various dimensions. This is fundamental to omnichannel retailing and can be achievedusing the IDC Retail Insights framework, O3 — Omnichannel Optimization and Orchestration.
Real-time visibility to inventory availability, anywhere in the enterprise or among trading partnersBuy-anywhere capability for shoppers, with cost/service-balanced options for shipping or pickupFulfill from anywhere profitably, with seamless drop-ship, ship-tostore,and ship-to-customer capabilitiesCall center capabilities to add, modify, and/or return an orderIn-store save-the-sale and endless aisle capabilities, selling on mobile and/or kiosksReturn to anywhere with cost-effective reverse logisticsManage the order life cycle from anywhere in a single repository
In essence, omnichannel retailing puts the customer at the heart of allbusiness decisions and outputs.
Retailers Must Rethink Their Apporach - A New Model Dictated by the cunsumer is required
The new retail it model : Omnichannel optimization andorchestration
"When the rate of change outside is faster than the rate of changeinside the organization, then the end is near."
Business priorities in western european retailFigure 3
O3: Omnichannel Optimization and Orchestration
Source: IDC Retail Insights, 2013
As illustrated in Figure 3, the objective of the O3 technology investment aligns with customer-centric strategies as it puts the customer experience optimization at the center, be it individual shopping episodes or a longer term experience with the retail brand. Working from the outside in, the platform is enabled by foundational technologies that are maturing rapidly — big data, cloud, social, and mobility. The platform itself is a central repository for standard information/content management as well as operational processes. The real value from the platform will be harvested from the intelligencelayer, which will leverage the standard processes (and associated information) across functional domains to align with the customer needs and deliver on the brand promise. Those functional domains — product management, supply chain,merchandising, and customer experience — will come together under initiatives related to omnichannel excellence:
Omnichannel fulfillment. The customer-centric strategy is meaningless if the retailer can't execute.Omnichannel merchandising. The old assortment science no longer applies.Omnichannel marketing. Retailers must attract shoppers to their brand in the consumer's context, not to their store with promotional bait.Omnichannel commerce. As ecommerce gains more share (of both dollars and influence), mobile and social commerce is hitting a fast track. Unified commerce is the key.
Omnichannel orchestration and optimization platform
Content management
Process management
Customer life-cycle orchestration
Product life-cycle orchestration
Customer intelligence
Merchandise Intelligence
Customerexperienceoptimization
Omnichannelmerchandising
Omnichannelmarketing
Omnichannelfulfillment
Omnichannelcommerce
Cloud
Socialbusiness
Big data
Mobility
1. OmniInsights Solution: A set of solutions that help assess the current state of digital business and omnichannel maturity.
2. OmniCloud Solutions: Cloud-based end-to-end commerce and marketing solutions targeted at retailers with annual digital commerce revenues between $10 million and $100 million,which require low cost solutions. HCL's BlinkE Multichannel Commerce Platform is a cost-effective SaaS multichannel commerce platform built on open source technologies and can be deployed in 90 days or less. It is targeted at retailers looking to launch ecommerce operations, new products or brands in new markets (such as Asia Pacific).
OCEAN: IDC Retail Insights and HCL have worked in partnership to develop a tool by which retailers, as well as CPGand media and entertainment vendors are able to assess all areas of customer engagement business processes andtechnology aspects and provide current maturity against industry benchmarks. It has been developed for HCL customers that want to assess their current omnichannel customer experience maturity and set priorities.Multichannel Commerce Health Check: HCL's best practice ecommerce health check assessment tool.Digital User Interface Design Assessment: Helps assess gaps in current usability and UI design against best practice.
Investing in the omni channel customerexperience with hcl technologies
HCL Technologies is the global IT services arm of the $6 billion HCL Enterprise and a provider of business transformation, enterprise and custom applications, infrastructure management, business process outsourcing, and engineering services. Through a global network of offices in 31 countries, HCL provides service delivery in key industry verticals including financial services, manufacturing, consumer services, public services, and healthcare. HCL has been helping retailers across the globe to create omnichannel businesses since 2000, implementing ecommerce and managing IT and operations. To help transform retailers' business growth through digital technologies, HCL has a six step approach to help transform the omnichannel customer experience and revenue growth:
Know customers with the use of customer and web analytics. Attract customers with 1on1 marketing, social CRM, and experience management. Influence and Engage with technologies focused on the user experience, social media engagement, and loyalty management. Sell across channels through web, mobile and social, call center, and instore. Fulfill with supply chain technology and processes, such as distributed order management. Support through customer service and enabling customers to self help.
In order to do this, HCL Technologies works with global platform partners including IBM Smarter Commerce, hybris, Oracle Intershop, TIBCO, RedPrairie, JDA, Cybersource, and Bazaarvoice among others to provide tailored solutions to client needs.
HCL has invested in four categories of business/technology solutions to accelerate time to market for its customers' omnichannel transformation journey.
OmniCommerce in a Box: HCL has built industry-specific templates for fashion/department store and telco clientsneeding accelerated implementation of distributed order management (DOM) capabilities to enable omnichannelstrategies.OmniCommerce Test Center: A repository of test cases and test scripts that can be used to accelerate implementations of omnichannel technologies.OmniChannel Marketeer: For retailers looking to improve campaign effectiveness by delivering personalized, contextual,location- and event-based marketing campaigns in real time for digitally hyper-connected mobile customers.Omni-Integrate: To help reduce omnichannel integration efforts through the mapping of data between variousinterfacing applications. The preconfigured integration templates let solutions gather data from all applications fasterand convert it into a standard format (xml, csv).
3. OmniDominate: An end-to-end omnichannel solution that is based on best of breed ecommerce, distributed ordermanagement, digital marketing, social engaging, fulfillment, content and integration platform designed for companies with current or target revenues of over $1 billion in digital revenues.
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CONCLUSIONSActions to consider
Co p y r i g h t N o t i c e
As illustrated in Figure 3, the objective of the O3 technology investment aligns with customer-centric strategies as it puts the customer experience optimization at the center, be it individual shopping episodes or a longer term experience with the retail brand. Working from the outside in, the platform is enabled by foundational technologies that are maturing rapidly — big data, cloud, social, and mobility. The platform itself is a central repository for standard information/content management as well as operational processes. The real value from the platform will be harvested from the intelligencelayer, which will leverage the standard processes (and associated information) across functional domains to align with the customer needs and deliver on the brand promise. Those functional domains — product management, supply chain,merchandising, and customer experience — will come together under initiatives related to omnichannel excellence:
Omnichannel fulfillment. The customer-centric strategy is meaningless if the retailer can't execute.Omnichannel merchandising. The old assortment science no longer applies.Omnichannel marketing. Retailers must attract shoppers to their brand in the consumer's context, not to their store with promotional bait.Omnichannel commerce. As ecommerce gains more share (of both dollars and influence), mobile and social commerce is hitting a fast track. Unified commerce is the key.
The retail industry is in the midst of tremendous change, and with change comes opportunity. To benefit from the change, retailers need to start laying down the foundations — starting with a strategic roadmap while always keeping in mind that process and organizational changes need to lead the charge, but technology and services are increasingly critical to business success. Begin a program and define a long-term strategy for the development of an Omnichannel Orchestra-tion and Optimization (O3) platform to unify investment around customer-centricity. Using our O3 platform as an architectural reference point, understand what your future omnichannel organization and platform will look like. Be sure to take an honest assessment of the company's organizational, process, and technology capabilities. When looking at the processes and technologies, do not start with channels or devices. Define the first processes based on the ways inwhich the data is used. Then you have a set of business processes and data that you can expose to different windows — such as the store, or customer service center. By taking this approach, the management of order and customer data will not change as new devices or touch points are adopted by consumers. Make a clear evaluation of the potential partners to aid this process. Companies like HCL Technologies have experience in working with retail businesses across sectors and geographies, and so can bring a large amount of experience to the table.
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