By Nikki Baird, Managing Partner
9/23/08
Last week I had the privilege of attending the inaugural meeting of the Cross-Channel Consortium, a group of industry thought leaders put together through the efforts of Jim Bengier at Sterling Commerce and Kasey Lobaugh at Deloitte Consulting. The companies represented at the table (besides Sterling and Deloitte) included IBM, AT&T, Virtucom, Shop.org, Best Buy, Borders, Limited, and Target. The focus: to identify best practices, challenges, and ways to overcome challenges as the retail industry navigates changing over from a “multiple channel” orientation to a “cross-channel” one.
We ended up having a highly engaging discussion during the session, and came to the conclusion that moving to a cross-channel strategy means fundamentally “rewiring retail” – with wide-ranging impacts that span channel operations, organization design (with a heavy emphasis on IT and merchandising), technology infrastructure, and even assortment strategies. I presented on the top five things that RSR has learned about cross-channel over the last year. Hear are a sample, with some highlights from the discussion:
#1: Multi-channel is a retail paradox. At RSR, we talk about retail paradoxes all the time (thus the name of our weekly newsletter). Well, multi-channel is a paradox all on its own: it is nearly impossible to focus on establishing a new channel, while simultaneously focusing on building cross-channel processes. As a channel, eCommerce is still a grade-school kid compared to the venerable and well-established chain store, so even though it’s been around a long time as part of the internet age, it still needs focus of its own. Only the strongest companies are going to be good at managing the friction that comes from growing a single channel, while developing synergies across channels. Participants agreed – there was a very long discussion about all of the challenges that fall out of this friction, everything from finding resources to focus on eCommerce as more processes get pulled back into the main organization, to what mobile commerce will mean for this friction in the future.
#2: Fulfillment is a differentiator. For now, I would add. Infrastructure and inventory challenges hold retailers back from a truly flexible fulfillment capability – the whole “buy anywhere, fulfill anywhere” paradigm. The first retailers to pull that off will succeed in defining customer expectations for how that will work for all retailers. But European retailers, because of the space challenges that force them to manage their inventories more carefully, are better positioned to break through this challenge sooner than their US counterparts.
#4: Following online pure-plays won’t get you there. One of the most interesting findings from our recent research on eCommerce was that online pure-plays are working to actively differentiate themselves from multi-channel retailers. They are focused on building such fantastic online experiences that consumers never miss the store. Winning multi-channel retailers recognize this, and are focused on building powerful cross-channel capabilities (in effect, putting the fact that they have stores as front and center to the customer relationship). Unfortunately, lagging multi-channel retailers haven’t cottoned on to this distinction – they are blindly following online pure-plays’ innovations in the hopes of building their online channels, while ignoring one of their greatest strengths – stores. While this doesn’t seem to be much of an “ah-ha” on the surface, consortium participants did agree that competition between pure-plays and multi-channel retailers appears to be intensifying – Amazon was mentioned several times – which only underscored the need to develop strong cross-channel capabilities sooner rather than later.
The biggest thing that I took away from the day was that going “cross-channel” is so much more than bringing those “online renegades” back in-house. If a retailer is truly going to be cross-channel, it’s not enough to fold online merchants into the merchandising organization, for example. A complete re-think of product strategy is needed. Kasey Lobaugh summed up the example nicely: a true cross-channel retailer will think about all the potential products it can sell, identify which of those play in all channels, and which play in specific channels – and how products might transition from one category to another. That’s a far different assortment strategy and process than an online group running out and adding new products to its online assortment independent of stores, or one that forces a subset of what is carried in stores into the online channel.
A re-wiring indeed.
|
