Post-Omnichannel Retail: the Seamless Customer Experience

RISRIS THOUGHT Thought LEADERSHIP SERIES LeadershipXxx Xxx Series

Post-Omnichannel Retail: The Seamless Customer Experience

The majority of shoppers moved past the concept of separate retail “channels” quite a while ago. Today, they simply shop when, where and how it’s most convenient for them – at a store, online, through a mobile device or while interacting with their social networks. It’s retailers who have remained wedded to multi-channel concepts and structures, even as they have worked hard to make omnichannel retailing a reality for their customers. Now, retailers are seeking the flexibility of oper- INSIDE:

ating in a post-omnichannel world, by creating the foundational in- 2 Omnichannel is the New Normal frastructure to deliver truly seamless shopping experiences. When this 4 Crucial Role of Data foundation is secure and back-end systems and databases have been Management centralized, retailers will be able to provide attractive functionalities 6 Analytics Support such as same-day pickup of online orders; cost-effectively use stores as Seamless Experience fulfillment centers; and create localized, personalized, relevant offers 8 Align IT and Marketing to Optimize Omnichannel for customers.

Sponsored by RIS THOUGHT LEADERSHIP SERIES Post-Omnichannel Retail: The Seamless Customer Experience

What’s at Stake for Retailers The most recent Cisco Internet Business Solutions Group (IBSG) For the past several years, retailers have been facing up – some report, which surveyed the behavior of 1,000 U.S. consumers, grudgingly, some enthusiastically – to an unavoidable fact: for confirmed just how digitally influenced all retailing has become. the majority of shoppers, the concept of separate retail “chan- Nearly two-thirds (65%) of shoppers perform research online nels” has little or no relevance. Some basic physical and time prior to making store purchases, up from 57% who did so in last constraints notwithstanding, today’s customers shop when, year’s survey. (see Figure 1, page 3.) where and how it’s most convenient for them to do so. Among the entire group of shoppers, nearly eight in 10 (78%) The shopping can take place at a brick-and-mortar store but it use the Internet to research and purchase products and services can just as easily occur online, through a mobile device, or while at one time or another. There are also the one in 10 “uber digital” the consumer is interacting with one of their social networks. It consumers, who never shop without some kind of technology. can also happen at almost any location with a convergence of This group of digitally dependent consumers is likely to grow as consumer need and foot traffic. the first and second generations of digital natives age into their prime consumption years. Channel Conflict TAKEAWAY Consumers have effectively moved past channels; in general, it’s retailers who have remained wedded to multi-channel concepts Omnichannel is the New Normal: and structures, even as they have worked hard to make omnichannel retailing a reality for their customers. This disconnect Nearly two-thirds of shoppers now has not been simply nostalgia or organizational inertia: retailers, research online prior to making particularly large companies, have invested considerable capital, time and manpower resources, real estate and technology into a store purchase, and 78% use the Web building and maintaining distinct, separate sales channels.

to buy products and services. For those retailers that were operating at the dawn of the multi- channel era, this strategy made good business sense. When selling products online consisted primarily of filling individual orders for drop shipment directly to customers, while store sales consisted of moving truckloads of carefully managed inventory to For example, last fall Internet grocer Peapod, following the lead hundreds of retail locations, it was logical to maintain separate of several international retailers, launched virtual grocery stores supply chains, inventory streams, merchandising, order manage- at more than 100 commuter train stations in the Northeast and ment and transactional systems for each separate channel. Chicago, featuring interactive displays of products bearing QR and barcodes that can be read by consumers’ smart mobile de- By the time multi-channel evolved into cross-channel, with in- vices. Customers download an app to do their virtual grocery creasing numbers of consumers researching products online but shopping while waiting for their train, with the order waiting for eventually purchasing them in-store (and occasionally vice versa), them at home by the time they arrive. integration of key back-end systems like order management and inventory seemed a logical way to bridge the channel gap. After In addition, Sears and Kmart have deployed mobile shopping walls all, it was the rare retail organization with e-commerce sales that with QR codes that allow customers to purchase items while they amounted to more than 10% of total sales. Digital channels, while are walking through airports, malls and movie theaters, and Kohl’s increasingly important, were still small and manageable enough has placed interactive kiosks in public places including airports. for retailers to build strategic interfaces, with the longer-term goal of integrating them more fully into enterprise-wide systems. Even when the shopping journey does culminate in a purchase taking place the “old-fashioned” way (i.e. with a trip to the store Today, cross-channel has evolved yet again, into omnichannel, or to buy an item off the shelf), it’s more than likely that said as some term it, “channel-agnostic” retailing. In fact, the industry journey began with virtual trips to another channel or channels. may be well on its way to a post-omnichannel era, when even

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the most traditional retailers stop structuring their organizations around “channels” and instead structure them around “customers.” TAKEAWAY

“Today’s retailers want the flexibility of operating in a post-omnichannel world,” says Joe Skorupa, group editor-in-chief, RIS Offer Attractive Functionalities: News. “Right now they are playing ‘catch-up’ as they create the Buy online/pick up in-store, same-day foundational infrastructure to deliver truly seamless cross-channel shopping experiences. delivery and more personalized marketing

“When this foundation is secure, retailers will be able to offer offers are easier to manage with a post- services such as same-day pickup of orders placed online, cost- omnichannel organization. effectively use their stores as a network of fulfillment centers, and create far more localized, personalized offers to their customers,” Skorupa adds.

Omnichannel’s Functional Impacts doesn’t mean retailers will need to abandon price optimiza- In order to create the truly seamless shopping experiences that tion altogether; rather, they should take a more targeted ap- customers will not only want but will soon come to expect, re- proach to pricing, gauging price sensitivity among specific tailers will need to examine how they handle a number of differ- customer groups and for particular product categories. The ent customer-facing functionalities. Some key areas will include: blunt instrument of channel-wide discounts will need to be replaced with more subtle, less visible adjustments. • Pricing: While retailers will be understandably reluctant to give up the benefits of channel-specific pricing and the op- • Loyalty and CRM programs: Shoppers’ patience with loyalty timization opportunities it provides, the rise of mobile tech- programs that don’t operate seamlessly across channels and nology, price comparison apps and showrooming are already touchpoints is already wearing thin. Customers will quickly making such tactics more difficult to use effectively. This come to expect that loyalty program points earned via their

Figure 1 How Consumers Shop Today

57% Search on a PC before shopping in a store 65%

24% Search on mobile before purchasing in store 29%

38% Search in a store before purchasing online 40%

2011 2012

Source: Cisco IBSG “Catch and Keep Digital Shoppers” Study, January 2013 Nearly eight in 10 U.S. shoppers use the Internet to purchase products and services, and the percentage of all shoppers using digital devices as part of multi-point shopping journeys has continued to rise.

RIS Thought Leadership Series I February 2013 I 3 Industry Insight Effective Data Management Critical to Creating Seamless Customer Experiences Upen Varanasi, CEO, Riversand Technologies

Q: As retailers move into a “post-omnichannel” operat- These challenges mean that retailers struggle to create the most ing environment, how important are centralized, enter- accurate, rich and relevant information for seamless customer ex- prise-wide databases in creating a seamless customer periences. It is quite important for retailers to visualize not only experience? product information supply and demand chains but also ways to optimize the flow and management of product information across Upen Varanasi: To provide a seamless customer experience, these chains. PIM systems play a critical role in the enablement all enterprise systems need to follow a consistent definition of and management of Product Information across the supply and the key data elements such as Customer, Product, Inventory, etc. demand chains. They are very critical for providing the customer Having a consistent understanding of who you sell to and what with rich, relevant, consistent information across the various you are selling is the basis for better business intelligence. While channels, thus enabling a seamless customer experience. it is important to customize certain marketing elements of product data for each channel, most of the data regarding products Q: What are some of the biggest challenges that the needs to be consistent across channels. lack of an omnichannel-focused PIM system creates for a retailer? Given this landscape, it is quite important to have centralized, enterprise-wide databases. It is also important to have consoli- Varanasi: Lack of a PIM system can create multiple chal- dated business processes and not have channel specific silos. lenges, such as: Master Data Management systems are key drivers for enabling • Inconsistent information across channels leading to customer this centralization of data. dissatisfaction, errors in orders, etc. • Lack of rich information leading to poor SEO and conversion in “In the new world, information and data is online channels • Challenges establishing a consistent brand voice across channels becoming more critical in driving consumer • Increased time to market for introducing new products buying patterns. Retailers need to adapt to • Challenges with quickly expanding product assortments this landscape and focus on creating an • Inefficiencies in Vendor Direct to Consumer Models organization that can meet this need, as well Q: What are some key best practices retailers can use as adopt more collaborative processes across to move more quickly into a “post-omnichannel” operat- key stakeholders for effective management of ing model? data that drives consumer behavior.” —Upen Varanasi, CEO, Riversand Technologies Varanasi: In the new world, information and data is becoming more critical in driving consumer buying patterns. Retailers need to adapt to this landscape and focus on creating an organi- Q: What are some of the key benefits an enterprise-wide zation that can meet this need, as well as adopt more collabora- Product Information Management system brings to the tive processes across key stakeholders for effective management creation of a truly seamless customer experience? of data that drives consumer behavior. Retailers would be well served to create a Data Management Organization (DMO) for the Varanasi: Many enterprises still handle product data-related governance and stewardship issues relating to Data Management. processes in silos across various channels. In many retail organizations, there is a distinct lack of collaboration between buyers, It is also important to align IT and business to meet the objec- merchandisers and marketing folks in the management of product tives of the retail organization. From a technology landscape, information. A lack of coordination across various channels such implementing a master data management philosophy will be a as print and Web can also be seen quite often. key first step in managing the data.

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e-commerce, m-commerce or social commerce activities be reflected organization-wide, in real time. In this case, the TAKEAWAY benefits flow both ways: retailers that are able to truly synchronize their CRM solutions will have a much more com- Sharpen Price Optimization: plete picture of each customer’s activity and value to the organization, along with a sharper portrait of the trends, Channel-specific pricing is already tastes and promotional responsiveness of the groups the customer belongs to. endangered by mobile technology’s price transparency; use less blunt, more • Cross-channel customer services: Buy online/pick up in store is moving rapidly from point of differentiation to a targeted pricing strategies. “table stakes” business basic. The RIS 2012 Cross Chan- nel Tech Trends study reveals that over one-third (35%) of retailers provide such pickups at the brick-and-mortar store a customer chooses (see Figure 2). As traditional re- This follows multi-retailer same-day delivery programs fa- tailers seek to compete with the rapid delivery and broad cilitated by eBay in San Francisco and New York City’s Man- selection offered by Amazon and other pure-play competi- hattan that involve some of the biggest names in retailing: tors, some are piloting same-day delivery programs, most Target, Best Buy, Toys “R” Us, Macy’s, Nordstrom, Crate & recently Sears’ Chicago deployment of its Mygofer Express. Barrel and Walgreens.

Figure 2

Where are Items Purchased Online Picked Up?

35% 41% Store of Do not customer choice currently oer

12% 10% Ful llment 2% Distribution Center Retailer designated store Center

Source: RIS/EKN 2012 Cross-Channel Tech Trends Study Nearly four in 10 retailers are making use of their brick-and-mortar stores as fulfillment centers for digital orders.

RIS Thought Leadership Series I February 2013 I 5 Industry Insight Powerful Analytics Plus Personalization Support Seamless Omnichannel Experience Tim Simmons, Vice President Global Industry Marketing for Retail, Teradata

Q: As retailers strive to provide a seamless customer context similar to Hadoop. It can show market basket analysis experience, how does their understanding of the con- looking back over 10 years to see what a consumer was buying sumer need to evolve? at any moment in time throughout that history. The retailer can compare all this behavior to that of the shopper’s demographic Tim Simmons: The consumer already shops all of the retail group and ask, ‘What is the group buying that she’s not buying?’ enterprise’s touchpoints and channels. She knows what she’s do- So if you have a shopper coming to your store twice a week but ing; the difference is that now the retailer needs to know as never buying meat from you, unless she’s a vegetarian, she’s buy- well. Retail is now trying frantically to catch up to the banking ing meat somewhere else. If you make a specific offer relevant industry. Whether you bank online, via mobile, at an ATM, on the to fresh meat, it will probably have a pretty good response and phone, or at a branch, it always shows you the same balance, conversion rate. These types of promotions are both respectful updated in real time. The consumer expects the same thing in and relevant to the consumer. retail, but the industry isn’t there yet. Q: What are some ways retailers can control their costs while raising service levels as they move toward “The common denominator with forecasting the seamless ideal? tools is that retailers are no longer constrained Simmons: Activity-based costing (ABC) is an old idea that by the need to work with averages. There’s no today’s technology is now able to support. ABC helps retailers longer an excuse not to work down to the level understand the unique carrying costs of an item. For a retailer of the SKU, the location, the specific time and that wants to transfer slow-moving merchandise from one store the individual consumer when trying to to another to avoid markdowns, using ABC as part of the analysis can help set rules about which items are ‘eligible’ to be understand demand.” moved versus others where shipping costs would erode margins —Tim Simmons, Vice President Global Industry too much. Running a large, complex organization like a mod- Marketing for Retail, Teradata ern retail company means you can’t make a decision on each item; you have to operate with rules and deal with exceptions as they arise. One thing specific to retail is the need to integrate shoppers’ browsing behavior along with their buying behavior. Understand- The common denominator with forecasting tools is that retailing aspirations and the points where shoppers abandon their ers are no longer constrained by the need to work with aver- baskets must precede promotional efforts. If you want to be rel- ages. There’s no longer an excuse not to work down to the level evant about reaching a consumer with an offer, you need to know of the SKU, the location, the specific time, and the individual what she’s up to first. consumer when trying to understand demand. If you have the ability to manage to the consumer, market, or item of one, you Q: What roles are the new generation of analytical might as well finish the job. This ability to move from averages tools playing? to ‘eaches’ coincides with the retailer’s desperate need to per- sonalize the store. You can’t treat the store as an average, you Simmons: Big roles. One of our clients is a huge grocer using have to treat it as an individual, because it’s what you have our Aster database tool, which uses SQL driven MapReduce code, that Amazon doesn’t have.

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The Power of One These and many other customer-oriented capabilities can’t be TAKEAWAY accomplished cost-effectively without retailers first creating: Centralize Inventories and Databases: • A single, enterprise-wide inventory rather than multiple linked inventories, with granular visibility down to the Successful omnichannel operations require shelf and item levels; a single view of products, customers and • A single view of the customer, with real-time updates on her activities in all channels and including not just actual key retail systems. transactions but the research, browsing and bargaining that lead to a transaction – or that stops short of an actual purchase; • A single, comprehensive database connecting all key retail IT systems, particularly those with a direct impact on the Establishing single enterprise-wide databases for customer and customer experience. product information must be accompanied by strong data man-

Figure 3

Key Facilitators of CIO and CMO Collaboration

76% 73% 69% 64% 63% 59%

38% 36% 34% 28% 26%

10%

Established security Marketing has Standardize customer Marketing campaign Content marketing is Tailored reporting protocols to protect visibility of customer data across the results are evaluated managed as a strategic of marketing campaign customer satisfaction data stored across organization with key CEM measures enterprise-level initiative results by role enterprise systems

Companies with CIO & CMO Alignment All Others

Source: Aberdeen Group, December 2012 IT and marketing collaboration can be facilitated at multiple points within a retail organization, and it offers strong support for the ef- fort to create enhanced, seamless shopper experiences.

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agement and governance. Many retailers today are grappling with Big Data, i.e. databases with volume, variety and velocity well TAKEAWAY beyond the capabilities of traditional data management and analytics tools. Align the Internal Organization:

Retailers are incorporating new data sources, ranging from social Bringing key departments such as IT media postings to sophisticated video analytics showing customer movements within stores as well as interactions with products, and marketing into closer cooperation associates and interactive signage and kiosks. RFID technology is critical to creating an enhanced used at the item level is producing strong results in the areas of inventory accuracy and real-time product location, but it’s also customer experience. contributing mountains of additional data that retailers should incorporate into their supply chain and store operations in order to get the most from their technology investment. is through greater alignment of IT and the newly empowered Successfully creating a seamless customer experience therefore marketing departments in retail. involves a number of actions under the heading of Master Data Management (MDM). A key step is Customer Data Integration, “Today’s customer experience management (CEM) programs re- which is necessary because the multitude of channels and quire the involvement and collaboration of all the key stakehold- touchpoints that have been developed often creates multiple ers within the enterprise. Two of these stakeholders are the CIO “personas” for a single shopper. and the CMO,” according to the recent Aberdeen Group report “En- hancing Customer Experience through CIO and CMO Alignment.” She might be known as Jane Smith to the retailer’s loyalty program, since that’s the name she used to apply for membership, Companies that are able to achieve CIO/CMO alignment achieve but the credit cards she uses for online purchases IDs her as far greater annual growth in return on marketing investments Jane Q. Smith. While this isn’t as dangerous a set of dual (ROMI), defined as incremental sales uplift associated with mar- identities as those of Batman and Bruce Wayne, it’s precisely keting campaigns: +4.5% compared to -0.8%, according to a the kind of multi-channel confusion that throws roadblocks December 2012 Aberdeen Group survey. Customer retention for into a seamless customer experience – unless retailers build a aligned companies is also nearly twice as high as it is for others, framework for shoppers’ “multiple identities” into their overall 10.1% compared to 5.6%. Alignment also creates higher levels of data management. external positive social traffic, 12.6% compared to 2.3%.

Retailers can also benefit from the use of a logical data model In addition to identifying the benefits of CIO/CMO alignment in designed to be easy for internal analysts and line-of-business enhancing the customer experience, the report also identifies a executives to use. Such a data model would show Jane Smith’s number of key organizational facilitators of this type of collabo- purchases of all kinds of, for example, tennis equipment – from ration. (see Figure 3, page 7.) rackets to apparel to footwear to tennis balls to lessons – in one location, stretching back to Jane’s initial interest in the sport The retail industry’s movement from multi-channel to cross-chan- and updated in real time. Logical data models provide users with nel to omnichannel and post-omnichannel has been uneven but a comprehensive, comprehensible “story” about each customer, inexorable, in large part because its endpoint represents what making it possible to more accurately target communications the customer wants: the ability to shop when, where and how he and promotions that will be highly relevant to each of the Jane or she pleases. Creating a seamless customer experience is more Smiths of the world. than a nice-sounding goal or a marketing slogan; it’s in tune with the way customers already shop – or the way they would Organizational Alignment like to shop. Retailers unable to consistently provide this kind of All these actions and initiatives boil down to enhancing the shopping experience are likely to find themselves not only post- customer experience. One of the most effective ways to do this omnichannel but post-mortem. •

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About Riversand Technologies Riversand Technologies Inc. is a leading provider of Product Information Management (PIM) solutions for retailers. Industry lead- ers such as Nordstrom, Overstock.com, VF Corporation, and Bluestem Brands leverage Riversand solutions to efficiently manage and synchronize timely, accurate product data from the supply chain to the customer. Benefits of Riversand’s solutions include acceler- ated time-to-market, increased sales, improved order accuracy, reduced costs, attribute rich content and enhanced customer service. Riversand is recognized by many industry analysts as a proven provider of visionary PIM and MDM solutions that will empower your business to easily centralize, connect and control complex product content. For more information please contact Riversand at (713) 934-8899 or visit www.riversand.com.

About Teradata Teradata products and services provide retailers with the ability to analyze, predict, and act quickly on big decisions related to market conditions or a variety of little decisions – the kind sales associates encounter with customers daily. Built on the powerful foundation of a Teradata® Database, Teradata provides insight into: 1. Supply and demand patterns so you can quickly respond to out of stock or overstock situations 2. Customer segments so you can better understand who they are and which ones are valuable to your business 3. Promotions and offers so you can optimize for higher redemption and response 4. Assortments so you can localize for different markets and customer segments 5. Big data analytics and data discovery management For more information, visit Teradata.com/retail.

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