Pinterest boards, QR code walls, mobile couponing, pop-up shops, mobile apps, Tweet Mirror, Facebook walls and flash sales—it’s a digital jungle out there for retailers today. If you feel it’s all too much, here’s how to step back and navigate through the options and trends…
As consumers embrace new technologies and services, you might find it difficult to stay current and connected to your customers. It’s getting harder still to determine where and how to invest your budget. It’s all too tempting simply to jump on the next new thing (and the next and the next) that comes along, just in hopes of keeping up with the rest.
As a retailer, take a deep breath and a big step back. While many new technologies have merit, true digital transformation starts with the basics: a well-defined strategy rooted in a firm understanding of consumer needs, a clear competitive differentiation, and sound economics. Online-only retailers have built their businesses around digital (and increasingly around mobile) technologies, and have advantages over brick-and-mortar and click-and-mortar companies. But the click-and-mortar approach has its own ace to play—the power and reach of ‘omnichannel’ interaction… or lots of different ways of interacting.
The way consumers purchase is changing. The age old argument against selling online is that consumers are unable to touch, hold, try on or taste a product. The truth is, fewer people care. While the internet cannot provide the gratification of instant ownership, consumers in their busy day-to-day lives are content with knowing they will receive their goods purchased within days without having to leave the house or office. There are major opportunities for you to rethink category management—including promotion, pricing, distribution, advertising, and point of sale—for an omnichannel world. While every strategy is unique to the business it drives, we see a series of factors that all retailers need to consider. This article provides a roadmap for those looking to navigate the digital forest.
E-Influence Remakes the Consumer Purchasing Funnel
Purchasing has long been more journey than event. In today’s omnichannel world, the journey has more stages than ever, with the customer deciding not only where, when, and what to buy, but which channels to use and the role each will play. The way in which consumers purchase has morphed into a fluid and dynamic process as boundaries between marketing and selling online and offline blur—and often disappear entirely.
E-commerce statistics grab the headlines, but the biggest change may be the rise of “e-influence,” which takes many forms. Regardless of whether consumers place their orders online, they are using digital channels, not only to determine what to buy and where to make the purchase but also to monitor prices (in real time) while they look for the best deal and exchange opinions with friends often via social media.
Defining the Roles of Physical and Digital Channels
Achieving clarity about the roles that various channels play is crucial in creating an omnichannel experience that appears seamless from the customer’s point of view. This can be a complex challenge, though, especially for large retailers with multiple store types and a host of online points of customer interaction.
Clear business objectives cut through the complexity and determine which channels can be used most effectively toward different ends. Make a point of knowing your customers inside and out. Smart retailers analyze product inventories through an omnichannel lens, deciding, for example, whether the same assortments should be offered online and offline and customizing the right product mix for a marketplace presence. Overlap is also a very important concept for consideration.
Managing Economic Realities
Defining consumer purchasing habits and clarifying the strategic role of each channel are important parts of the equation; so, too, is separating the “need-to-haves” from the “nice-to-haves.” This means getting a solid grasp on the economic implications of cross-channel assortment and pricing decisions, options in customer relationship management, and various delivery scenarios.
Making your entire product line available through e-commerce might seem desirable, but it can undermine your profitability. Some products have advantaged distribution economics online while others are cheaper to sell in the store. Winning strategies optimize both. Analysis shows that it is difficult to make a profit selling online items with price tags of less than $20. Similarly, common items that consumers can purchase anywhere have no place in your online store.
The myriad of channels available to retailers today means they are able develop new customer-relationship-management, marketing, and promotion capabilities. With options ranging from Facebook, Instagram and YouTube campaigns to investing in sophisticated targeting and retargeting technologies, companies need to find out which channels work best for them.
Acquiring the Necessary Internal Enablers
The digital world demands new capabilities and skills—big-data analytics are one example, digital-marketing capabilities are another, and mobile capabilities are a third—as well as rethinking existing functions and programs. Supply chain management, organizational structure and incentives, and performance measurement are three areas especially deserving of near-term attention to avoid feeling overwhelmed.
Essentially, companies need to ensure that their current internal processes are equipped to handle an increase in sales from an online expansion or a physical one. New technologies and applications are coming to market too fast for companies to be able to assess and adopt each one of them. It is important that companies don’t feel pressured to adopt every new technology, but instead consult their growth strategy and ensure that a new process is appropriate at the time.
It Starts and Ends with Strategy
As we noted at the outset, it’s easy to lose sight of the forest from the sheer number of trees. But the task does not have to be forbidding. Change takes time, but almost inevitably there are quick wins to be scored while making progress against longer-term strategic goals. The real trick is to take that deep breath, approach the forest, and get started.