Changes in trade – the future lies in multi-channel
The all-channel chase for customers
Retail is becoming digitalised. New tools and ideas are pushing their way into bricks-and-mortar retailers, while more and more sales are made online. Customers’ growing expectations call for new ‘smart’ shopping experiences. Traditional high street shopping is no longer enough; bricksand-mortar retailers have a challenge to face by expanding their existing business models towards the full blown multi-channel experience – the integration of online and offline sales platforms.
Online trade has become a firm part of consumers’ everyday life. In Germany the Institute for Retail Research predicts that 2014 will witness a new record in e-commerce; sales are expected to break the 40 billion euro mark, totalling somewhere around 42.8 billion – an increase from 8.4 to 9.4 percent of all retail sales. Consumer trade has been shifting away from bricks-and-mortar retailers to mail order for years, prompting fundamental restructuring. The IFH predicts the online share of overall sales will reach up to 22 percent by 2020.
Multi-channel packs more punch
If you look at ongoing developments in the sector, multi-channel strategies are clearly on the increase. More and more bricks-and-mortar retailers are entering the online business at the same time as formerly online-only retailers are starting to open a few local outlets. The aim is to provide the ultimate shopping experience across all channels, matching goods and services as perfectly and conveniently as possible for the customer. So, bricks-and-mortar and online trade do not necessarily have to compete with one another. Used properly, the two platforms can complement each other perfectly. In fact, online shops are just one of many options and not always the best solution. The increasing mobility of the Internet (thanks to smartphones and tablets) opens up additional opportunities for bricks-and-mortar retail to enter the multi-channel trade. This can be costly but opens up new potential at the same time.
Mobility adds value
According to a recent eBay survey, one out of four online customers has already tried out the “click & collect” service, bricks-and-mortar retail particularly benefits from this kind of service since around 50 percent of these consumers bought additional products from the shop when collecting their online purchase, in addition, they have a personal point of contact to which they can return items for exchange or under guarantee. This effective in closing the online/offline gap, whilst preserving the advantages of bricks-and-mortar procurement.
Beacon technology has recently proven how networking both channels can bolster success. Small Bluetooth transmitters installed in stores send special offers to nearby potential customers’ smartphones. Tests run by Breuninger, Görtz and Sport Arena have shown that 60 percent of the recipients read the message and enter the shop if interested. Beacon also offers a whole range of shopping experience enhancements to customers already in the shop, such as directing them to the product they’re searching for via smartphone, informing them of special discounts, or recommending additional items.
It’s important to keep the emotional aspects of the shopping experience in mind. A Media Economics Institute survey cites attractive store design and displays as the main incentive for entering a shop, closely followed by capable and friendly staff. “The customers need to feel well cared for and have their various needs properly met. This is precisely where convincing concepts can pay off.”
Has procurement reached a watershed?
Targeted range planning can be used across all sales channels. The majority of multi-channel retailers have succeeded in establishing a uniform and overarching portfolio, according to a recent study by INVERTO and The IUBH School of Business & Management. Almost a third of the businesses surveyed solely operate bricks-and-mortar outlets, and 18 percent only offer certain items online. Goods requiring extensive advice are most often sold exclusively via bricksand-mortar channels, whereas large volume items and niche products tend to only be offered online.
The transition to multi-channel retail not only represents a challenge for category management, it also creates new tasks for the retailer’s procurement organisation. As part of the survey, trading companies were asked about what demands multi-channel retailimpose on the procurement organisation.
New sales potential
The majority of companies surveyed were bricks-and-mortar retailers, including numerous firms of more than fifty years’ standing, all of which have recognised this new potential and braved the venture into the multi-channel environment. Almost a quarter of the companies surveyed are looking to generate over 40 percent of their sales revenue via the new channel by 2020. But how can this be achieved in practice?
The major issues concerned are the company’s own procurement organisation and whether reorganising sales would necessarily lead to restructuring procurement. Those surveyed believe the different sales channels can be linked whether procurement is organised centrally or not. A majority of 89 percent of respondents operate a central procurement organisation, and only very few (ten percent) want to change their existing arrangement. Businesses that switched to separate procurement did so immediately after launching the new sales channel and are generally very satisfied (80 percent). The key functions concerned were range and space planning aimed at ensuring a consistent range set-up across all channels.
Even if retailers have already come a long way towards meeting the customer’s requirements, that does not mean all of them can offer boundless “channel hopping” without any noticeable differences. The process of change must continue: sales channels will need to be thoroughly intertwined and the retailer’s main strengths pushed to the fore to make the expansion of the multi-channel retail concept a proper success.