OMNIPOTENT

OMNIPOTENT

We discussed the concept of omnichannels in the text in various chapters. This has become a very “hot” topic since the book was published in 2015. I thought it might be relevant to revisit the topic and consider any further research or comments that might have emerged in the literature since then.

Let us recap what this term means.

Essentially companies have to address the changing behaviour of customers (both B2B and B2C) in the market-place. Yet again technology and data have combined to materially influence the way in which customers in all sectors engage in the purchasing decision-making and buying process. This is particularly so in the case of the retail sector. Traditionally shoppers visited the physical, “bricks and mortar” store to make get advice, browse, compare different brands and make a purchase.

Online channels and developments in mobile technology (for instance mobile apps) and social media have revolutionised the way in which customers engage with retailers across all points in the buying process: problem recognition, search, evaluation of alternative options, and the decision on which item to buy, purchase and post-purchase considerations.

Put simply, shoppers “duck in and out of” different channels during this purchasing process. For instance social media platforms may stimulate me to consider buying a new TV set, I may visit some blogs and discussion forums to pick up some “pearls of wisdom” from people who have experienced some  of the brands out there such as Samsung and LG. I may then visit an electrical retailer such as Curry’s. I may finally make that final purchase online. Post-purchase if I have any queries I may ring a call centre to get advice or guidance. In this case I have used a number of different channels.

Initially during the late noughties and the early part of this decade, some of the experts in the retail sector were predicting the eclipse of physical stores and that shoppers would sublimely migrate to the new channels. However evidence suggests that this is not happening to the extent highlighted in various reports. Physical, “bricks and mortar” stores play a significant role for many of us. Indeed retailers in general have responded by redefining what a physical store should deliver in terms of the shopping experience.

The challenge for the retailer is to ensure that I, as a customer, should enjoy an integrated and seamless experience across all of the channels every time I engage with the retailer.

In theory this sounds perfect in terms of managing customer’s expectations and improving the experience.

In practice however it is a challenge.

The following quotation is from a recent article published by McKinsey Consultants *

“Mapping its customers’ journeys confirmed the suspicions.   Four out of five potential loan customers visited the bank’s website, but from there, their paths diverged as they sought different ways to have their questions answered. About 20 percent stayed online, another 20 percent phoned a call center, and 15 percent visited a branch, with the remainder leaving the process.

The channels’ differing performance pointed to specific problems. Ultimately, more than one-fifth of customers who visited a branch ended up getting loans. But in the online channel, less than 1 percent got a loan after almost 80 percent dropped out rather than fill in a registration form. Finally, in call centers, a mere one-tenth of 1 percent of customers received a loan—perhaps not surprising, since only 2 percent even requested an offer

To integrate digital and traditional channels more effectively, the bank had to become more agile, with the understanding that its one-size-fits-most processes would no longer work. Complex registration forms were simplified and tailored to different types of customers. Revised policies clarified which channel took the lead when customers moved between channels. And new links between the website and the call centers enabled agents to follow up when online customers left a form incomplete. Together, these types of changes helped increase sales of current-account and personal-loan products by more than 25 percent across all channels.” (Full reference at end of this blog)

This lengthy quotation (apologies) serves to highlight the practical problems that a retail bank faces in terms of implementing an omnichannel strategy. Existing processes and procedures have had to be adapted or changed in order to ensure that customers and the bank benefited from the concept.

Building digital capabilities is key to the ultimate success of the omnichannel experience. It is not simply a case of adding on extra digital channels, for instance a new and improved app. In order to understand customer preferences retailers have to invest the time and energy in mapping out the journeys that individual shoppers take when engaging with it during the buying process.

In the book I discussed some typical obstacles to implementing an omnichannel strategy. This included variation with respect to inventory across the different channels e.g. an item being available in some, but not all stores, while at the same time not being available at all on its online channel. This in turn damages the reputation and brand equity of the retailer. It also can result in disgruntled shoppers taking their business elsewhere.

Further obstacles identified in the McKinsey article include the following.

  1. A bias toward bigness. Part of the reason is a misplaced belief that omnichannel’s massive implications require equally massive actions, such as an entirely new IT platform or organization structure to bring all channels together. Too often that “silver bullet” mentality leads only to a massive misallocation of resources.
  2. Disregarding diversity. In our experience, most companies tend to build their digital and omnichannel experience believing that most customers have basically the same needs and follow basically the same journeys. In reality, customers are far more diverse, not only in their needs but also in how they want to meet those needs.
  3. Curbing cooperation. But the need for greater flexibility usually bumps into a hardened reality. Despite decades of discussion about conflicting channels, many companies still operate each channel as a separate organization, expecting it to optimize its own performance and service model while showing its own results. Incentives ostensibly designed to encourage performance unintentionally reinforce the channels’ isolation—such as revenue-generation targets that push each channel to increase its own sales volume regardless of any impact on sister channels.

Most of these obstacles actually tend to emerge because companies have pre-conceived notions of how shoppers behave. In order to address them senior management needs to adopt a change in mind-set and get back to basics.

In the next blog I consider some of the practical ways in which companies can employ to overcome these obstacles and help to ensure that a smoother path to omnipotent success is achieved.

Reference.

Bianchi, Rafaella, Cermak, Michael and Duskek, Ondrej (2016) “Omnichannel not omnishambles”. McKinsey Quarterly, December.

Advertisements

PRETENTIOUS MOI?

Are there no limits to the expansion and developments plans of Amazon? This company has been rightly hailed as one of the major “game-changers” of the past fifty years or so. It arguably has made the most significant contribution to changing the way in which businesses engage with customers, anticipate and shape their demands and expectations and come up with a value proposition that addresses the needs of many of us.

Five years ago if you carried out a vox pop with people on the typical “high street” and asked them what do they associate with Amazon, the vast majority would respond by mentioning terms such as “books” and “CD’s”. Clearly both Amazon and the perceptions that people hold about them have moved on considerably since then.

I was forced to revisit the case of Amazon (a company that features extensively in previous blogs of mine) recently when I learned about their move into the area of fashion, specifically womenswear and menswear.

While this has not necessarily surprised me (when will Amazon move into the challenge of getting people to planet Mars?), I thought initially that might be a step too far. Why? Well its success has been built on selling products that are not involved in the “emotional” space in the mind of the shopper. Buying books and electronic items does not have the same emotional resonance as buying fashion items. To use an analogy, if Manchester United set up a basketball team to compete in the European Basketball league, people might raise doubts in their minds about the credibility of such a move. However on a deeper appraisal, many would come around to the conclusion that their financial resources would enable them to develop a capable team reasonably quickly.

The same possibly applies to Amazon. With their considerable financial reserves and muscles is it not reasonably to expect that they can become a major player in the fashion clothing sector?

Let us examine their entry into this space more fully.

In September 2017 Amazon announced its move into fashion by launching a concerted marketing communications campaign via billboard advertising, digital marketing and on its own webpage across the United Kingdom, Germany, Spain France and Italy.

This campaign was built around its new own-label fashion brand Find.

Its basic value proposition is based on the principle that it will offer around five hundred womenswear and menswear items that are “trend-developed” i.ee that closely follow current fashion trends and “street styling”. A red, floral wrap dress and hot pink sock boots featured prominently in its initial “visuals” in its communications strategy.

Prior to the major launch in September it launched some basic and cheap items in April to allow them to put the “toe in the water”.

Jeff Bezos, the founder of Amazon sees the September launch as a “learning process” in the company’s quest to generate overall revenue of over $200 million from the fashion sector in due course/

This is no idle boast or threat. As indication of the intent of Amazon, it recently acquired Europe’s biggest photography studio in London with the specific aim of being able to produce state-of-the-art “visuals” of its fashion collection on its websites and digital communications platforms.

Earlier this year Amazon launched Amazon Echo Look, the first AI (artificial intelligence) fashion assistant. This device captures pictures and videos of clothing and provides advice to the shopper about their suitability and compatibility. The pictures and videos are “fed into” a “lookbook” and this device generates the “advice”.

In addition to the Find brand it launched another one called “Iris & Lily, which focuses on lingerie items.

In the North American market it has been much more active in the past couple of years: launching seven own labels including: Goodthreads, Amazon Essentials, Paris Sunday, Mae, Elle Moon, Buttered Down and Lark & Ro. All of these brand are targeted at their Amazon Prime customers. As discussed in an earlier blog, such customers pay a monthly subscription and receive a number of benefits included free delivery of selected items.

Who is it targeting?

In the online fashion retail space its main protagonists would appear to be Asos, Boohoo, Missguided, Yoox and Zalando.

In the case of Manchester-based Boohoo it has generated much success recently, recording a 97% increase in profits as of March 2017 of £30.9 million, with overall sales rising from £100 million to 294.6 million. It also recorded an increase of 20% on its active customer base (5.2 million users).

Missguided also experienced an increase in sales of 75% to £206 million in 2017. Interestingly, in a genuflection to the concept of omni-channels, it opened a flagship store in Stratford (21,000 square feet).

In the context of “bricks and mortar” retailers, Amazon is positioned somewhere between Primark, H&M, Topshop and Dorothy Perkins, with its prices ranging from £8 to £64.

On what basis therefore is it reasonable to assume that Amazon can make a serious dent in the fashion sector?

Firstly it has arguably a captive initial market in its Prime customers. Same-day free deliveries provide an incentive to buy own brands such as Find from Amazon.

It has a very strong footprint in the areas of customer service and delivery and thus has strong credibility in the all-important challenge of delivering value to shoppers.

Brand credibility in the fashion sector is arguably more problematic. While it is one thing to sell books, food and electronic products, selling fashion requires something else.

It also runs the risk of antagonising key fashion brands such as Ted Baker who use Amazon to sell their products. Over 350 branded collections make use of the Amazon channel to engage with and sell to their customers. If it starts to undercut some of these brands on price, it runs the risk of them pulling away from using Amazon. Can it run the risk of using its own channel to promote its brands, thereby disadvantaging other brands? It risks losing the commissions it earns from these sales.

International supply chains are in some cases suffering from pricing issues, shortages and delays. Amazon has a strong ability to control its own production, design and marketing. This leaves it in a strong position.

Online fashion retailing continues to grow. Many sceptics initially felt that it would be too difficult to overcome the need that many shopper have to touch, feel and try on items. One-quarter of all sales takes place via online channels. Arguably rises in inflation may also encourage shoppers to consider online shopping in order to potentially benefit from lower prices.

Amazon is not selling clothing items at the “cheap and cheerful” end of the market. As stated earlier it is launching “trend-led”, fashionable items.

As a further sign of its intent in this space Amazon was awarded a patent in the USA in 2017 for an on-demand automated clothing factory. This would enable it to create custom-made garments to the exact fit and specification of an individual shopper. The patent extends to textile printers, pattern cutters and assembly lines.

Let’s see how this foray into fashion pans out for Amazon. I am not betting against it failing to succeed! Is it a pretentious strategy? Not in my view.