Multi-channel retailing point of viewEveryones jumping on the
web bandwagon, but how does it contribute to your bottomline? The
trend in larger retail markets such as the US and UK is to
implement multi-channel strategy to induce growth in traditional
stores, reduce cost-to-serve and improve customer satisfaction.
Australian retailers can learn from global experience to leapfrog
the growing pains.
Multi-channel retailing boosts growth for retailers
We are in an era dominated by the proliferation of channels that
are enabled by advances in technology. Online stores, kiosks,
eCommerce and SMS are the new channels in the retailers toolkit to
interact with their customers. Especially with online purchasing
growing by 31% from 2004-2005 to 2006-2007 period1 in Australia,
the online channel is quickly gaining traction and will surpass
many channels as the dominant path to consumers.
Retailers need to develop a multi-channel approach to complement
their traditional storefronts, catalogues and offline media
advertising to spearhead company growth because:
multi-channel touchpoints can capture the lucrative customers.
Research shows that consumers who use at least three channels when
shopping spend up to ten times more than a single channel customer,
generating 25% 50% more profit2
cross channel integration brings additional revenue for retail
stores. For every $1 spent online, consumers spend another $6
offline2. The evidence suggests that the web supplements and grows
retail profitability rather than cannibalising it
improves customer satisfaction by allowing customers to choose
the channel that best match their needs. From being inspired by
products in a catalogue, conveniently researching product
information and prices online, to testing products in-store, the
customer can utilise the strengths of each channel to improve their
interaction with the retailer
playing to the channels economics can reduce the retailers
cost-to-serve. Pushing low value customers to low cost-to-serve
channels (e.g. Sears/Nordstrom) and reducing floor space cost by
offering in-stores kiosks to access online catalogue (e.g. REI) are
some of the multi-channel strategies employed by global retailers
to reduce cost-to-serve.
Global retailers are going multi-channel
Most global retailers have multi-channel capabilities and an
online presence since the launch of the internet and the dawn of
e-commerce.
Australian retailers shun multi-channel initiatives
The three biggest retailers in Australia, Myer, David Jones and
Harvey Norman have very limited online channel functionality,
forcing customers to visit stores to make purchases. David Jones
abandoned their online shopping functionality in a revamp in 2003.
Coles and Woolworths similarly have limited geographic coverage of
their online-shopping order fulfilment.
Major Australian retailers state the stagnation of market growth
and lack of foreseeable return from large capital investments as
factors in the lack of footprint and online channel abandonment.
This can be attributed to:
Australian consumers online shopping concerns include the
retailers return policy (47%) and logistics (delays, expense,
non-delivery and inconvenient timing, 32%)6. An integrated presence
to accept returns in store and managing order fulfilment processes
will alleviate these concerns. The internet giant eBay is driving
this change in attitude and perspective, with four out of five of
Australian online transactions done through their website7. Their
online channel model has addressed the concerns of consumers;
validated by the traffic on their website
Sears/Nordstrom3
pushes customers to low cost-to-serve channels
justify floor space and web channel according to the demand of
product (abandon or develop decision)
cross-channel selling customers carry out research or purchase
online and picks up goods/brings website print-outs to store to
purchase
real time inventory management.
Macys4
use multi-channels to appeal to different customer segments
narrows range online with customer intelligence to appeal to
their online demographic and managing expectations of other
customers
different entities, but still integrated operations (e.g. bought
online, exchanged in store).
REI5
endless aisle uses online channel to increase breadth of
products on offer
consolidated channels that enable customers to order online and
pick up in store.
1 Australian Bureau of Statistics 2005-2006, 2006-2007
2 ACRS Multi-channel retailing August 2007
3 Playing to strengths, February 2005,
www.internetretailing.com
4 Retailers take multi faceted approach to multi-channel
success, December 2005, www.ladlass.com
5 Retailers take multi faceted approach to multi-channel
success, December 2005, www.ladlass.com
siloed behaviour of the different channels leading to internal
competition and sales cannibalisation. This can be attributed to
the lack of strategic perspective in executing the different market
channels to support each other in a coherent manner. As a result,
many consumers are disappointed to learn that there is a clear
dividing line between store and online operations. Breaching this
line will most likely be the principal online challenge for
successful retailers in the coming years8.
Making it happen underpinning the growth platform
Multi-channel initiatives are about making strategic decisions
and subsiquently building functional areas and capabilities to meet
them.
Retailers are faced with five decisions:
1. Which channels should be part of the platform?
2. Which products or services should be offered within each
channel?
3. Which customers should be targeted by each channel?
4. Which partnerships should be established?
5. To what degree should the channels be integrated?
Once the strategy is set, there are 16 functional areas the
business needs to build to support the strategic objectives. Each
functional area has a set of capabilities or high-level
requirements.
Not all capabilities are necessary for each retailer.
Capabilities should match the business strategy. Additional
capabilities can be developed and deployed over time once the core
capabilities are in place.
Deloittes Director to Consumer (DTC) Capability Map defines 16
functional areas to support multi-channel retailers. The map can be
drilled down to identify the capabilities required to create the
functional area.
Lessons learnt from global multi-channel retailers
The path to multi-channel retailing requires a great deal of
planning. Many traditionally separate business areas (e.g.
eCommerce, call-centre operations, IT, marketing, and store
operations) must now come together to deliver a truly integrated
business platform. Strong executive sponsorship is often required
to break through organisational silos.
In addition, a shared vision and mission can be necessary to
overcome the potential in-fighting, as well as jockeying for
control and resources.
Unlike initiatives of the past, no one system can deliver the
universe of required multi-channel retail capabilities. Integrating
technology across multiple vendor products and interconnecting
middleware is now necessary.
Identifying the right opportunities and right approach to
support each individual retailer can be challenging. The effort
required to transform the retail organisation to capitalise on this
opportunity can be significant but manageable. Defining the
appropriate strategy upfront and using an incremental approach to
developing the business capabilities are key to successful retail
transformation.
eCommerce
Promotionsmanagement
Digital assetmanagement
Fulfilment &warehouse
management
Sales Pricing
Master datamanagementMerchandising
Marketing
Analytics
Customerservices
Demandmanagement
Cataloguemanagement
Inventorymanagement
Ordermanagement
Transportationmanagement
Katherine Milesi Mobile: + 61 (0) 416 194 071e-mail:
[email protected]
Jenny Wilson Mobile: + 61 (0) 417 145 312e-mail:
[email protected]
Peter Bars Mobile: + 61 (0) 410 457 294e-mail:
[email protected]
Kasey Lobaugh e-mail: [email protected]
Katherine Milesi is a Partner in Eclipse with 17 years
experience. Her expertise lies in online strategy and integrated
marketing.
Jenny Wilson is the lead Partner for Eclipses Sydney practice.
Her expertise lies in digital and online strategy consulting.
Peter Bars is a Partner in Deloitte with over 20 years
experience in Technology strategy and large scale IT enabled change
programs.
Kasey Lobaugh leads Deloittes US multi-channel practice. He is a
thought leader in the areas of multi-channel retail and
direct-to-consumer operations and led large transformation
initiatives for major retailers.
This brochure is provided as general information only and does
not consider your specific objectives, situation or needs. You
should not rely on the information in this brochure or disclose it
or refer to it in any document . We accept no duty of care or
liability to you or anyone else regarding this brochure and we are
not responsible to you or anyone else for any loss suffered in
connection with the use of this brochure or any of its content.
About eclipse
Eclipse refers to Eclipse Group Pty Limited a wholly owned
subsidiary of Deloitte Australia. Eclipse is a specialist online
design, development and consulting firm. We work with a wide range
of clients, from blue chip corporations to innovative start ups,
helping them adapt and harness new media and technology.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a
Swiss Verein, and its network of member firms, each of which is a
legally separate and independent entity. Please see
www.deloitte.com.au/about for a detailed description of the legal
structure of Deloitte Touche Tohmatsu and its member firms.
About Deloitte Australia
Deloitte Australia refers to the Australian partnership of
Deloitte Touche Tohmatsu and its subsidiaries. Deloitte, one of
Australias leading professional services firms with 12 offices and
over 4,500 people, provides audit, tax, consulting, and financial
advisory services to public and private clients across the country.
Known as an employer of choice for innovative human resources
programs, we are dedicated to helping our clients and our people
excel. Deloittes professionals are dedicated to strengthening
corporate responsibility, building public trust, and making a
positive impact in their communities.
For more information, please visit Deloittes web site at
www.deloitte.com.au.
Eclipse Group Pty Limited, May 2007. All rights reserved.
AM_Mel_05/08_034789
6 Australian retailers are losing out on e-tail sales: The
Leading Edge, April 2008
7 Australian Bureau of Statistics 2006-2007
8 2008 Global powers of retailing, Deloitte LLC 2008
