Strategies, Challenges & Measuring Success€¦ · as key measure of omnichannel success Germany - 85% believe physical branch will become more important - 73% see long-term strategy

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Omnichannel Retail in Europe

EXECUTIVE SUMMARY Strategies, Challenges & Measuring Success

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2015 2 Omnichannel Retail in Europe - Strategies, Challenges & Measuring Success - Executive Summary

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Introduction

The European retail sector is undergoing a period of unprecedented transformation. Retailers have emerged from the financial downturn at the start of the decade to find that the purchasing behavior and demands of their customers have been radically changed by both economic conditions and the impact of digital technology, most notably mobile and social media. Established giants such as Tesco are battling a new wave of competition from fast-growing discount players, while sectors such as fashion and electronics retailing are being shaken up by the challenges and opportunities that online channels present. But perhaps the biggest battle facing European retailers is to meet the increasingly high level of expectation of their customers. The likes of Amazon and Google are raising the bar for product delivery from next-day to same-day, while forward-thinking brands such as John Lewis have invested heavily to provide a seamless experience across their different points of engagement, to ensure that the customer receives the same level of service, promotions and pricing. Good and bad news travels faster than ever in the age of social media, which is putting brand loyalty under growing pressure. Retailers need to work harder than ever to ensure that they keep their customers happy and continue to stay on course with the competition in order to survive.

2015

Against this background PAC conducted a survey among 200 CxOs in European retail companies (France, Germany, Italy, the Netherlands, the Nordic region, Spain and the UK) each with more than 500 employees.

The study explores the following questions:

•  How will physical and digital channels change in strategic importance in the next 3-5 years?

•  What are the main goals of retailers’ omnichannel strategies? Who is leading it within the organization, and how will they measure its success?

•  How far advanced are European retailers in integrating physical and online channels? How many are able to offer click-and-collect or in-store online ordering?

•  What impact is the omnichannel strategy having on IT investment? What are the areas of their IT landscape that European retailers expect to enhance or modernize in order to drive improved channel integration, more streamlined operating models or a better customer experience?

•  How will retailers execute their omnichannel strategies? Will they look to work with external partners, and in what areas will they look for support?

3 Omnichannel Retail in Europe - Strategies, Challenges & Measuring Success - Executive Summary

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Survey of Retail CxOs in Europe

4 2015

200 survey respondents in Western Europe

70% business respondents

30% IT respondents

FR Survey conducted in May 2015

All respondents had over 500 employees

Fashion 19%

DE UK

> 20% 20% 20%

10%

Nordic ES

J F M A M 10% 10% 10%

IT BEN

Electronics 18% Furniture 15% Food 14% Household 8%

7% Pharmacy 5% Office

Other 14%

Omnichannel Retail in Europe - Strategies, Challenges & Measuring Success - Executive Summary

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Key Findings

2015

The physical store will become MORE important! Perhaps the most surprising finding is that European retailers believe that the physical store will become more strategically important in the coming years. The majority of participants also stated that they expect mobile and online channels to become more important in the future, which highlights how the issue of managing and integrating multiple channels has become a hugely important success factor for modern retail organizations.

Support from third-party service providers is welcomed: The majority of European retailers (57%) believe that they would benefit from external support in implementing and integrating omnichannel solutions. This reflects how stretched many internal IT organizations at retailers have become in 2015, and shows that retailers have an appreciation of how difficult it can be to drive channel integration – not just in terms of technology, but also in transforming and optimizing business processes.

The customer is driving omnichannel: Omnichannel has become such a buzzword in the industry that it is easy to lose sight of why it is so important – it is because it is what the customer wants. The survey found that 85% of European retailers stated that their omnichannel retail strategy is in place because customers are demanding it, while 89% said that their omnichannel initiatives are being driven by a need to improve the customer experience.

Non-tech challenges are biggest omnichannel headaches: The study found that it is business rather than IT leaders that are generally leading omnichannel programs. This is good news, as retailers also perceive their biggest challenges to be business rather than IT ones. More than 80% said that the development of a long-term channel integration strategy was either a major or clear challenge, while three quarters named transforming internal organization structures as a pressing concern.


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The European Picture

2015 6

UK - Only 23% believe physical store will remain as number one channel - 70% see NPS as key measure of omnichannel success

Nordics - 66% already sell through mobile channels - 75% have store-to-online integration in place

Spain - 50% have omnichannel strategy driven by sales organization - 90% have click-and-collect in place at physical stores

Italy - Less than 25% see mobile as important channel - 40% have omnichannel strategy driven by CEO

France - 95% say customer satisfaction is main driver for omnichannel - Over 50% plan omnichannel IT investment in next 2-5 years.

Benelux - 90% believe branch is of high strategic importance - 100% see increased customer retention as key measure of omnichannel success

Germany - 85% believe physical branch will become more important - 73% see long-term strategy planning as major barrier to omnichannel


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How do European Retailers Sell Today?

7 2015

Physical Branch

Online/Web Shop

Mobile Catalogue Social Media

87% 82%

45% 38%

Q. Which of the following channels does your business currently sell through?

34%

All of the retailers that participated in the study sold through more than one channel, with the majority (54%) selling through three or more. Some 15% of the retailers sold through all five major channels. The two biggest adopters of mobile channels are retailers in the Nordic region (66%) and in the UK (60%). This puts them well ahead of 43%of mobile channel adoption in Germany and just 25% in Spain. It is a similar picture in terms of the use of social media as a sales channel, with 60% in the Nordics and 43% in the UK using services such as Twitter to sell and promote products and services, compared to a level of just 20% in Spain. Both Spanish and Italian retailers have a higher-than-average usage of catalogues with 40% of respondents in each country citing it as a major channel.


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Q. Which channels will become more or less strategically important in the next 5 years?

European retailers expect digital channels to become more strategically important in the next five years, but not at the expense of the store. Some 85% of German retailers and 80% of their French peers believe that the physical branch will become more strategically important by 2020, compared to 62% of retailers in the UK. Retailers in the Benelux (85%) and Nordic regions (90%) clearly expect their online/webshop channels to become more important in the medium term. It is again retailers in the Nordic region that expect mobile to rise in importance as a channel (75%) and while Spanish retailers currently lag in their use of mobile channels, some 55% expect them to gain importance.

Physical Branch

Future Channel Evolution

Online/Web Shop

Mobile

Catalogue

Social Media

Less Important

Stays the Same

More Important

73% 20% 4%

69% 26% 4%

50% 33% 12%

13% 52% 21%

27% 46% 15%

2020


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I Do Not Agree I Wholeheartedly Agree

Digital Priorities

The study found a largely positive response on the question of where the ‚digital‘ issue ranks among the most pressing concerns for European retailers. Some 30% of retailers in France, Italy, Spain and the Netherlands stated that they wholeheartedly agreed that the expansion of their digital presence was their top priority for the short to medium term. The impact of digital continues to reach new levels across the European retail sector in recent quarters. In the UK, visits to retail websites via mobile devices overtook desktop traffic for the first time in 2014, with retailer John Lewis stating that more than half its online traffic now comes via mobile devices.

9 2015

Q. Is the expansion of your digital presence the number one priority for your company in the next 2 years?

3% 3% 25% 42% 27%


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Online and Store Integration on the Rise

A huge 90% of retailers in Spain and 80% in the Netherlands have already linked their online-to-store channels to support click-and-collect initiatives, but there was a generally high adoption rates across all territories. There was a slightly lower adoption of store-to-online integration to enable customers to order products that are unavailable at the store via online channels, which can then be delivered to their homes. Retailers in the Benelux and Nordic regions lead the way in this area, with 75% already having this integration in place, compared to 55% in Italy.

10 2015

78% Yes

22% No

67% Yes

34% No

Online

Store

Store

Online

Q. Has your company linked or does it plan to link the following sales channels in the next 2 years?


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It is business rather than technology issues that European retailers see as the biggest challenge to their omnichannel strategies.

Developing a long-term strategy is such a challenge due to the rapid pace of change in the retail sector. Customer buying behavior and internal management priorities change on a quarterly basis, while the sheer scale of the challenge of integrating multiple channels – o f ten across d i f ferent brands and geographies, makes it very difficult to pin down a three- or five-year plan.

The biggest regional differences were in the responses from German and UK retailers. The development of a long-term strategy is a huge concern for the former (cited by 73% as a major challenge), as was the need to make changes to the organizational structure (68%).

But UK retailers are much more sanguine on long-term strategy planning (38% see it as a major challenge), and instead are much more concerned about understanding customer activity across multiple channels (43% vs 15% in Germany).

The Key Challenges of Omnichannel

11 2015 Major Challenge Clear

Challenge

Developing a long-term channel integration strategy

Making changes to the organizational structure

Integration of payment procsses across channels

Understanding client activity across different channels

Real-time access to POS information

Uniform cashless payment methods

A single customer retention system across channels

Ability to support mobile payments

Cross-channel inventory management

Re-alignment of existing ERP systems

Low/No Challenge

Flexibility of supply chain for returns management

Management of external and internal data

Uniform price system across all channels

Uniform customer services (loyalty, basket etc)

Q. What do you see as the biggest challenges for your omnichannel strategy?

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Omnichannel Investment Priorities (1)

Very few European retailers have deployed cross-channel integration solutions (6%), with the Nordic retailers (15%) leading the way. The biggest short-term surge in adoption will be in France, where 45% of retailers plan to roll out integration platforms in the next two years. There has been a lot of discussion about the potential that data analytics & big data holds for retailers in helping them better understand customer behaviour and operational performance. Only 7% of European retailers have an analytics solution in place, but it will be a major growth area with 51% planning to invest in this area in the next five years. There has been a low adoption of in-memory solutions for big data at a European level, but there will be a sharp increase in Spain and France in the next five years with 75% and 65% of retailers planning to invest in solutions such as SAP Hana.

12 2015

In Next 2 Years

In Next 2-5 Years

Already Invested

None Planned

Yes

Cross-Channel

Integration Solutions

Q. In which areas do you plan to invest as part of your omnichannel strategy?

Webshop Solutions

Mobile Shopping Apps for

Smartphones/ Tablets

Customer Relationship Management

Data Analytics &

Big Data

In-Memory Solutions for

Big Data

Online Payment Solutions

Not a Priority

22%

38%

19%

6%

13%

3%

67%

11%

10%

3%

8%

2%

43%

18%

13%

3%

20%

4%

54%

19%

14%

1%

10%

3%

27%

26%

29%

7%

10%

2%

29%

25%

29%

6%

11%

1%

62%

12%

7%

6%

11%

3%


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Omnichannel Investment Priorities (2)

Mobile payments are a hot topic in the retail sector, following the launch of Apple Pay in the UK in 2015. European retailers have made limited investment in this area to date (4%), but 37% plan to deploy in the next five years, with Germany (35%) and the Netherlands as notable hot-spots. The adoption of self-service branch technology has been patchy across Europe, but it is interesting to see that 25% of German retailers, which have been particularly cautious in this past, plan to invest in self-service solutions in the next two years. The study also assessed retailers‘ appetite for clienteling solutions – systems to manage customer engagement processes for bringing customers into the store, and found that 35% plan to deploy in the next five years, with retailers in the UK (43%) and the Benelux region (40%) planning to be the most active.

13 2015

In Next 2 Years

In Next 2-5 Years

Already Invested

None Planned

Yes

Mobile Payment Systems

Q. In which areas do you plan to invest as part of your omnichannel strategy?

Tablet-based Payment Terminals

Management/Marketing

Tools

Self-Service Branch

Technology

Branch Infrastructure

Solutions

Clienteling Solutions

Not a Priority

35%

24%

13%

22%

3%

32%

23%

17%

23%

2%

33%

17%

20%

4%

25%

2%

20%

19%

9%

6%

40%

7%

28%

18%

15%

13%

18%

9%

12%

18%

17%

3%

44%

7%

4% 4%


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Omnichannel presents both a huge opportunity and a challenge to European retailers and many of the findings of the study suggest that they are tackling it in the right way.

It is seen as a business rather than a technology issue, and is generally being led by senior business stakeholders rather than the IT function. There is also a clear appreciation that the physical store will remain a crucial element of the channel strategies of European retailers, despite their aggressive plans to invest in enhancing their digital presence. Many retailers are already ensuring that their stores are able to support their customers‘ digital activities through click-and-collect and returning an exchanging online orders.

The maturity and adoption of omnichannel retail is moving at different speeds across key European markets. Based on the findings of the study, the UK and the Nordic and Benelux regions stand out as the most advanced in their use of mobile channels, cross-channel integration platforms and advanced data analytics. They also take a more proactive approach to tracking NPS and customer effort as a way to measure the impact of their omnichannel initiatives.

However, other countries are catching up fast, with retailers in France and Germany planning to invest in omnichannel-related IT in both the short and medium term. With many planning to deploy solutions in areas such as big data analytics, self-service technology, mobile payments and clienteling solutions, it is also encouraging to see a high proportion of retailers looking to work with external suppliers to help them tackle the often complex integration and implementation challenges.

Analyst conclusion

14 2015

Nick Mayes Research Director,

PAC


© PAC 2015 15

For over 40 years, HP has been helping retailers evolve with the dynamics of a changing marketplace, delivering solutions and services from the corporate office to the store front and everywhere in between.

Flexibility? Check. Reliability? Absolutely. Affordability? You bet. Whether you need a traditional POS system and a host of peripherals for every outlet from Toledo to Taiwan or something more mobile to serve your customers out on the sales floor, we have a solution for you. And we don’t stop there. We can help you enhance and personalize the customer experience and improve operational efficiency with energy-efficient designs and built-in protection and manageability features that lower your costs and increase your revenue.

We have the whole package—hardware, software, consulting, and services—and we back these solutions up with differentiating analytic insights, cost-saving cloud infrastructures, and sustainability-enabling risk management.

For further information, please visit: http://www8.hp.com/us/en/campaigns/retail-solutions/overview.html

HP - Company Profile


© PAC 2015 16 Omnichannel Retail in Europe - Strategies, Challenges & Measuring Success - Executive Summary

Fujitsu - Company Profile (1/2)

Fujitsu‘s international strength and continuous investment in technology innovation allows us to deliver consistent services to our customers. We are committed to using our size, scope and experience as one of the world’s largest IT companies to deliver global capabilities with local responsiveness and know-how. This encompasses: •  159,000 people in more than 100 countries around the globe •  Over 202 billion yen (US$1.69 billion), approximately 4.3 percent of revenue in R&D, 95,000 patents worldwide on technologies,

products, services and processes •  End-to-end portfolio of retail applications, devices and supporting services •  One-stop-shop with the majority of products and solutions developed by Fujitsu Our Connected Retail solutions cover the whole value chain – from store, warehouse and headquarter to the backbone in the data center. We transform the customer experience in stores and across channels, and we have the retail solution intellectual property, process knowledge and integration skills to make a difference. Connected Retail describes Fujitsu`s end to end retail offering that can bring about TRUE business benefits which can enable Retail & Hospitality organisations to grow efficiencies, their customer base and their business through IT solutions that relate to and solve their current and future business challenges. At Fujitsu, we pride ourselves on our reputation in the Retail & Hospitality sector and will build on our Top 3 position in the market and continue to deliver a rapid, secure and agile service to all our customers.


Fujitsu - Company Profile (2/2)

(cont.) Fujitsu works with retailers to help them master these challenges, using IT to take the customer experience and business efficiency to the next level. Building on a deep understanding of retailing that we have gained over the past 30 years with more than 500 customers and 82,000 stores in 52 countries worldwide, Fujitsu’s mission is to deliver a differentiated customer experience that will increase sales, operational effectiveness and customer satisfaction for our retail clients. Fujitsu delivers high-performance, best-of-breed hardware solutions, integrated software applications and multi-vendor lifecycle support services to help retailers around the world deliver on their brand promise and operate more effectively. Spanning front- and back office, our portfolio includes point of service, mobile and self-service solutions, end-to-end retail business applications including business analytics, customer loyalty and dynamic digital media, and a suite of managed IT services across the store, networks, applications and infrastructure. Independent research firm, Forrester Research Inc., recognizes Fujitsu in the Leaders category of The Forrester Wave™, Point of Service, Q3 2015. Fujitsu is the emerging leader in cloud and the role of cloud technology and services for today’s retailers, in which the FUJITSU Cloud Initiative demonstrates how cloud underpins the three technology trends of mobile, big data and social to deliver business and social innovation as part of our wider vision of the Human Centric Intelligent Society. For further information, please visit: http://connectedretail.global.fujitsu.com/


SAP - Company Profile

SAP is the world leader in enterprise applications in terms of software and software-related service revenue. Based on market capitalization, SAP is the world’s third largest independent software manufacturer with more than 293,500 customers in 190 countries.

With Run Simple as our operating principle, SAP’s nearly 74,500 employees focus on a singular purpose that inspires us every day: To help the world run better and improve people’s lives.

For further information, please visit: www.sap.de/handel


GK Software - Company Profile (1/2)

GK Software is a leading technological software partner in the international market for retail-store solutions. Building on the firm foundation of its high-quality portfolio of solutions, management stability and motivated and professionally competent employees, the company has successfully completed numerous major international projects. Over 206,000 installations are currently in operation in more than 38 countries around the world, helping Tier 1 and Tier 2 retailers to improve their process efficiency. GK Software has been setting the trend in modern applications for retail chains for many years. The list of customers using innovative GK products such as point-of-sale solutions, store management systems and mobile customer loyalty applications features well-known names including EDEKA, Lidl, Christ, Netto, Fressnapf, Galeria Kaufhof, coop, Migros (both Switzerland), JYSK (Denmark), Loblaw, Bentley Leathers (both Canada), JD Group (South Africa) and X5 (Russia). Since going public in 2008 GK Software has grown by more than 300% and has considerably increased its stock market value. The firm generated an annual turnover of EUR 44.64 million in 2014 (up 5.1% compared to 2013). Across its 11 international locations, which include offices in Schöneck, Plzeň, Berlin, Hamburg, Raleigh, Johannesburg, Cologne, Zürich and Moscow, the company employs over 700 people, approximately 350 of whom are involved in Research & Development. GK Software was founded in 1990 by CEO Rainer Gläß and Stephan Kronmüller, and has been consistently basing all its solutions on the Java platform since 1997. Strategic acquisitions have helped GK Software to expand its mobile and service-related competences.


GK Software - Company Profile (2/2)

(cont.)

The GK/Retail suite of solutions was launched more than 10 years ago and there have been continual further developments ever since, based on the very latest technologies and open standards. In 2000 it was the first store solution to be certified by SAP, and a reseller agreement has been in place between the two companies since 2009. The agreement currently applies to five products and extends to North America in addition to Europe. It is GK Software's mission to be the leading global supplier of the most comprehensive range of retail applications for real-time omnichannel business. By integrating the market-leading components from GK/Retail, SAP back-end and SAP-Hybris online store solutions, it is possible for an open transaction to be conducted through all channels, to be amended at various points and to be completed either online, using a mobile device or in a physical store – all in real time, without interruptions and appropriately to the relevant media. Meanwhile, not only current but also future omnichannel topics are covered consistently and transparently. The solution offering provided by GK Software, SAP and Hybris is the world's only end-to-end omnichannel platform. It ensures that the right information and processes can be made available at all touchpoints in real-time for optimal customer service.

For further information, please visit: www.gk-software.com

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Disclaimer, usage rights, independence and data protection

This study was compiled in multi-client mode under the sponsorship of HP, Fujitsu, GK Software and SAP

For more information, please visit www.pac-online.com.

Disclaimer The contents of this study were compiled with the greatest possible care. However, no liability for their accuracy can be assumed. Analyses and evaluations reflect the state of our knowledge in September 2015 and may change at any time. This applies in particular, but not exclusively, to statements made about the future. Names and designations that appear in this study may be registered trademarks.

Usage rights This study is protected by copyright. Any reproduction or dissemination to third parties, including in part, requires the prior explicit authorization of the sponsors. The publication or dissemination of tables, graphics etc. in other publications also requires prior authorization.

Independence and data protection This study was produced solely by Pierre Audoin Consultants (PAC). The sponsors had no influence over the analysis of the data and the production of the study.

The participants in the study were assured that the information they provided would be treated confidentially. No statement enables conclusions to be drawn about individual companies, and no individual survey data was passed to the sponsors or other third parties. All participants in the study were selected at random. There is no connection between the production of the study and any commercial relationship between the respondents and the sponsors of this study.

21 2015 Omnichannel Retail in Europe - Strategies, Challenges & Measuring Success - Executive Summary

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Contact

Founded in 1976, Pierre Audoin Consultants (PAC) is part of CXP Group, the leading independent European research and consulting firm for the software, IT services and digital transformation industry. CXP Group offers its customers comprehensive support services for the evaluation, selection and optimization of their software solutions and for the evaluation and selection of IT services providers, and accompanies them in optimizing their sourcing and investment strategies. As such, CXP Group supports ICT decision makers in their digital transformation journey. Further, CXP Group assists software and IT services providers in optimizing their strategies and go-to-market approaches with quantitative and qualitative analyses as well as consulting services. Public organizations and institutions equally base the development of their IT policies on our reports. Capitalizing on 40 years of experience, based in 8 countries (with 17 offices worldwide) and with 140 employees, CXP Group provides its expertise every year to more than 1,500 ICT decision makers and the operational divisions of large enterprises as well as mid-market companies and their providers. CXP Group consists of three branches: Le CXP, BARC (Business Application Research Center) and Pierre Audoin Consultants (PAC). For more information please visit: www.pac-online.com PAC’s latest news: www.pac-online.com/blog Follow us on Twitter: @PAC_Consultants

Nick Mayes Principal Analyst +44 (0)20 7553 3968 [email protected]


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Strategies, Challenges & Measuring Success€¦ · as key measure of omnichannel success Germany - 85% believe physical branch will become more important - 73% see long-term strategy