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Innovate or die: cautionary retail tales

By Retail Technology | Tuesday May 28 2013

Retail ICT industry watcher Adam Simon highlights recent retail business mistakes from across Europe, discussing what lessons can be learned

One of the most oft-repeated mantras in retail today is the need to create a cohesive cross-channel or omnichannel business. Customers are increasingly demanding that they be able to do things like order online and pick up instore, or buy online and take returns back to the store.

Adam Simon, global retail business managing director at information communications technology (ICT) channel sales and price tracking organisation Context, said retailers need to work out how to meet these expectations in a seamless and transparent manner. If done successfully, it can reap benefits for revenue generation and customer loyalty,he told Retail Technology.

Joining up retail channels

“The problem is that retailers are frequently failing to provide good enough multichannel synergies,” he explained. “Camera shop Jessops, which recently called in the administrators, tried to counter competition from cheaper online rivals by emphasising the importance of customers trying products instore, getting hands-on advice and help in person from its staff of supposed experts. However, it committed the cardinal sin of setting different prices for the same products according to which channel they were sold in. Staff in stores effectively had to pretend the customer in front of them was shopping online to offer them the lower price – not an ideal way to keep punters happy and encourage customer loyalty.”

Simon cited another example: In France, supermarket chain Leclerc spent plenty of money advertising its new multichannel strategy, but shoppers who logging on to the firms website in January werent even able to get past the store locator. In the rush to jump on the multichannel bandwagon, he said many retailers are advertising capabilities before they are really ready, when the sensible option is to wait a bit longer to hone strategies and test that the underlying platform actually works. In March the link finally worked! he added.

Connected experiences win out

“At a recent industry conference I came across some new research from consultancy Kiki Lab, illustrating just how connected stores are with the web,” Simon continued. “The US perhaps unsurprisingly came top, with 81% of its retailers having capabilities to let online customers view the availability of products in store. The number dropped to half that – 40% – for UK retailers. Another capability, allowing customers instore to access the digital channel to check prices, was available in 37% of US retailers but just a quarter of UK ones.”

He warned that, if nothing else, these kinds of statistics show just how far UK retailers still have to go in their multichannel strategies. Part of the problem is a lack of innovation,he explained. Dixons Group, which has a market share in the UK of around 75% is doing fantastically well, with a share price that spiked around 20% the other week. However, at the same time it has been forced to close 12 internet sites and shutter all of its Pixmania stores across Europe because it cant make them work.

Simon compared this to what one Polish electronics retailer is doing. “In a highly competitive domestic market, the firm conducted its research and found that over half of visitors to its bricks-and-mortar stores came after researching products online. In response, it made efforts to create stronger links between its on- and offline channels by offering these savvy shoppers a tablet each instore to help them shop and research as they go along.

“The same retailer is opening up a huge 2000-square-metre store in Warsaw, which will house a specialised gaming area and various zones devoted to specific vendors. This is a retailer that is laser-focused on its customers, creating a shopping experience which is innovative, exciting and relevant.”

Cracking the multichannel process

Many retailers talk about click and collect, but the real winners of the future will be those who crack the click, collect and return process. The M&S [Marks and Spencer] experience in this domain is good you choose online, pick up at the store of your choice and then benefit from the full organisational support of the M&S returns procedure in case you dont like the product, he explained.

But Simon also admitted that there are, of course, many potential pitfalls associated with multichannel retailing. “Customers expect online prices to be lower than the High Street but, in reality, the logistics of picking, packing and shipping as well as website development and maintenance are all burdensome costs, which economically speaking, should mean retailers charge higher prices,” he said. “So, not only do retailers risk taking a profit hit online by being forced to adjust prices down in line with customer expectations, but brick- and-mortar stores then come under pressure to align with online pricing.”

He warned that those firms that typically have different structures and profit centres for each will find it even harder to integrate their channels and provide a seamless shopping experience for their customers, concluding: “The lessons from Europe have taught us that this industry is still relatively immature, but the key for those looking to get ahead and stay ahead of the pack is to keep thinking creatively and stay focused on the customer.”