BearingPoint Cross Channel Growth
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BearingPoint Cross Channel Growth

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For classic brick & mortar retail companies there has not been lack of warning about the growth of e-commerce in the last 15 years. The actual impact has been slower to materialise, but turns out ...

For classic brick & mortar retail companies there has not been lack of warning about the growth of e-commerce in the last 15 years. The actual impact has been slower to materialise, but turns out to be more dramatic than expected. At first, only books and consumer electronics seemed to be affected. Now, in one category after another, new successful competitors are taking off, including shoes, apparel and even groceries. Whilst e-commerce advances, the next wave of innovation such as mobile shopping arrives, with Tesco and Ahold launching QR-based shopping channels.

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BearingPoint Cross Channel Growth BearingPoint Cross Channel Growth Document Transcript

  • POINT OF VIEWGrowth strategyCross-channel retail To get there. Together.
  • ContentsContributors Inroduction....................................................................................4Author Cross-channel threat for classic retailers...........................................8Jan Jacob Koomen Value appropriation in the shifting ecosystem................................12ContributorsJessica Groeneweg Effective cross-channel response....................................................18Natasha Permyakova Needs based cross-channel design.................................................24Marketing & CommunicationSandrine Pigot Operating model transformation...................................................30Design Open up to accelerate change.......................................................36Sabrina MalaurieAngélique Tourneux Summary.....................................................................................40 Point of view 3
  • Introduction
  • IntroductionFor classic brick & mortar retail companies there •  almart has spent more than $300 million Whas not been lack of warning about the growth of acquiring five tech firms since May and hired moree-commerce in the last 15 years. The actual impact than 300 engineers and code-writers in the U.S.has been slower to materialise, but turns out to be and India1.more dramatic than expected. At first, only books •  hold has acquired Bol.com, the leading e-tailer in Aand consumer electronics seemed to be affected. the Dutch home market, for €350 million2.Now, in one category after another, new successful •  ears Holding Corporation, the owner of Sears, Scompetitors are taking off, including shoes, apparel Kmart and 1995 e-tailer “Land’s End” states:and even groceries. Whilst e-commerce advances, «We are accelerating actions intended to drivethe next wave of innovation such as mobile shopping our strategic agenda to become the leader inarrives, with Tesco and Ahold launching QR-based Integrated Retail. Profound changes in technologyshopping channels. have an impact on the entire retail landscape, the way customers shop and the way they live... WeJust as the record industry has been transformed by are accelerating our actions to bring together apeer-to-peer downloading, the software industry by unique set of technology and retail assets to deliveropen source development, telecom by Skype and a seamless, integrated experience for our ‘Shop‘The Britannica’ stopping producing printed versions Your Way’ Rewards members and customers—atwith the advent of Wikipedia, now retail companies the store, online, and at home3.»are increasingly in the line of fire of social andinternet- driven cross-channel innovations. Many smaller retail companies have invested in cross-channel initiatives, making the assortmentAs Amazon posts another 41% revenue growth to available online, experimenting with Facebook$48.1 billion, we are now at tipping point and in and introducing new technology in store. Theseresponse many retail organisations have recently initiatives have often been responsive, ad-hoc andaccelerated cross-channel investments. separate from the core business; not delivering the turnaround and volume growth that was expected. 1  Bloomberg Businessweek-Europe Edition – April 2012 2  Press release Ahold May 9th 2012 3  Annual Report – K10 – Sear Holding Fiscal year ending 28th  of January Point of view 5
  • We propagate a more profound response to the These reasons support a six-step approach to cross-developments in the market. Retail should transform channel growth strategy for a retail company:its business system to reap opportunity for growth • Change  imperative: Create a commonin cross-channel. There are six reasons why this understanding and a sense of urgency by evaluatingtransformation requires an integrated and urgent the current and future market situation with theresponse from the retail industry: arrival of successful cross-channel competitors•  lternative innovative ways to deliver retail A • Business system analysis: Analyse value chain and  services pose an increasing threat to classic brick assess the impact of cross-channel innovations & mortar focussed retail companies in the market on each of the steps where the retail company•  ew competitors introduce innovations that pose N competes a substantial threat by profoundly changing the • Strategic positioning: Sharpen up the generic  business system and delivering higher value to strategic position: in what aspect of the retail customers at lower costs service does the company intend to distinguish•  n effective response to the cross-channel A itself from the competition opportunity links innovation to the existing • Cross-channel design: Define key cross-channel formula position and leverages the existing innovations that will be the centre of the strategy. channels. Cross-channel is not a bolt-on; it is an These innovations and the generic position should integral part of value creation by retail companies address the same customer needs•  ross-channel innovations should address the C • Operating model: Identify the impact on the same needs as the core retail formula addresses. current operating model, including governance Existing and new points of contact with the and IT customer should reinforce the value perceived by • Change management: Open up your organisation the customer and implement a pilot-based change program•  he impact of innovating these existing business T based on lean principles models is substantial, as a shift has to be made from product/outlet-centred processes towards Each step will be discussed in the next six chapters. more customer/order-oriented processes. This transformation therefore affects all aspects of the retail company operating model•  s the future is increasingly dynamic and uncertain, A successful transformation requires continuous innovation based on connected processes and empowered organisation. This requires a cultural change that will open up the organisation6 Point of view
  • Point of view 7
  • Cross-channel threatfor classic retailers
  • Cross-channel threat for classic retailers Key Question: Is your retail company ready After decades of systematic growth the classic brick to cope with the growth in cross-channel & mortar retail is facing the combined pressure of business? economic recession and the growth of alternative Key take out: Cross-channel business is growing innovative channels. at the cost of classic retailing, and many retail companies are ill prepared to gain from this E-commerce companies like Amazon, consumer- growth. to-consumer retail like e-Bay and other innovative Your action point: Create an imperative for group-based or mobile channels grow rapidly at the change: assess the market of your retail expense of classic retail volumes and loosen the business and project impact of the arrival of grip that retail corporations have on the consumer a substantial cross-channel competitor, both through the extensive network of brick & mortar in terms of profitability and your ability to outlets (see fig.1). compete. Fig 1: Retail growth is concentrated in channels where classic retailers are less dominant 100% Others Growth: e-Commerce & Social commerce Loss Share of value/revenue Classic retailers Revenue of classic brick & mortar focussed retailers 0% e- & social commerce Brick & mortar sales Share of consumer purchases by channel Source: BearingPoint - 2012 Point of view 9
  • Fig 2: Breakthrough e-commerce growth appears in one category after another Share of e-commerce Books: Search Consumer electronics: Compare sites Shoes: Return policy Clothing: Online depart- ment stores Groceries: Weekday subscriptions Time Source: BearingPoint - 2012The core capabilities of retailing, great Instead of aggressively charging into growthmerchandising, relevant formula design and high opportunities that cross-channel provides, manyperformance execution are still key to a successful retail companies have simply placed their assortmentretail growth, but the underlying trend is that, in on-line and initiated ad-hoc initiatives on newone category after another, a substantial volume media, focusing mainly on communication. Theyshifts towards new channels. fail to deliver the transformation in the relationship between retail company and consumer that is hopedThe ability of classic retail companies to compete with for.innovative e-commerce pure players is hamperedby the need to protect existing channel revenue The question that these retail companies need toand partners. Also pure players in e-commerce are answer is: how can we re-invent our business modelbetter able to attract talent, achieve higher stock to leverage the potential of these new channels,turnovers, create better quantitative insights in their combining the strength of brick & mortar with thecustomers and generate more exciting innovative use of new concepts. This paper addresses someconcepts for consumers. key steps to take to understand and develop the cross-channel strategy that will deliver the required growth.10 Point of view
  • E-commerce growth is just showing the tip of the on the value chain outside the brick & mortar outleticeberg by addressing only the transaction step. channel1.Consumers spend a much larger part of their journey 1  Lesson 4, The 6 CCDNA Lessons, BearingPoint 2012 Fig 3: Impact of other channels is larger than can be measured by looking at the growth of e-commerce 9% is 2012 online share of all European retail business e-commerce Transaction 96% of European in brick & 71% of European consumers research and mortar smartphone owners use compare products online their phone in store 44% of consumers that start 16% of consumers change their mind about their offline product search online migrate purchase based on information to the offline channel gathered with their smartphone Source: BearingPoint - 2012 Historic context: enhanced the position of the retail industry. These developments have been driven by The term ‘Retail’ is derived from ‘tailer’, increased affluence, mobility, globalisation, meaning to cut off. Its function was to cut back product availability and changes in real estate large quantities for trade to portions suitable for prices. domestic use. E-commerce and social commerce shift the power In the last century the arrival of supermarkets, back to smaller scale retailers as they greatly category killers and own retail brands brought reduce the investment required to set-up shop the transformation to the value chain that has and make it easier to attract a wide clientele. Point of view 11
  • Value appropriation inthe shifting ecosystem
  • Value appropriation in the shifting ecosystem Key Question: How should we interpret the impact of cross-channel on the retail ecosystem and our competitive position? Key take out: Existing and new competitors that successfully implement cross-channel transformation pose a strong threat to incumbents as they improve competitiveness in many aspects of the business system, creating more value, increasing efficiency and improving customer relations. Your action point: Draw your own value chain including margin build up and competitors. Assess the impact of new channels.Retail is a part of the value chain that creates value Cross-channel innovation has put retail incumbentsby enabling consumers to acquire items that fulfil under threat. Key innovators have transformedtheir needs. business models for each step in the value chain. Invest Innovate Make Attract Select Transact Provide Service Retail value chain defined: • Invest: Invest in all aspects of the chain required • Transact: Exchange ownership of the item and  before payment comes in payment • Innovate: Create products and service concepts • Provide: Ensure the item is made available to  that fulfill consumer needs the consumer at the place where it is required • Make: Produce items that deliver value • Service: Maintain relationship with consumer  • Attract: Attract consumers to consider the item to enhance product experience as well as • Select: Help consumer to arrive at the best  facilitate additional acquisition by consumer choice Point of view 13
  • Here are some cross-channel innovations that work • Zipcar is another example of a transformedwith an alternative superior operating model: business system – this very popular carpooling• Amazon has not just allowed customers to order  community allows its customers to share a ride (transact) on-line. It has also greatly improved the with other customers, bypassing alternative ways search for the right book (select) and has built a of providing a transportation service (select, competitive alternative to brick & mortar stores provide). for delivery of the books (provide). • Crowdsource.com is a platform that offers instant • eBay has changed the role of the small scale access to more than 500,000 hyper-specialized manufacturer by creating a platform for an workers. The business problem is divided into alternative retail system built on peer-to-peer small tasks which are sent to thousands of sales (transact) and promotions (attract). workers who quickly complete them. The tasks Fig 4: Cross-channel value chain innovations Invest Innovate Make Attract Select Transact Provide Service A  mazon: Has made it possible to better find books in a wider assortment E-Bay has supported the (resurrection) of a home grown C2C and B2C industry Now followed by Reuse, C2C and Landshare Crowdsource.org: Is an Zappos: Has initiated a score alternative for banking and of online fashion department research combining the wallet stores and brains of many Nestlés Maison Caillier introduces PayPall, Square & Stripe: Plug individually customised chocolates and play electronic payment Metaio: Develops 3D printers allow for Bodymetrics: mobile phone home manufacturing Kinect based body augmented reality under € 10.000,- scan user manuals Source: BearingPoint - 201214 Point of view
  • are then reassembled into a final product and • Bodymetrics introduced its Kinect body scan that  delivered to a client (finance, make). 3D-maps the consumers body to create a perfect• PayPal and Square challenge the way businesses fitting pair of jeans (attract, select). transact with consumers by introducing mobile • Metaio created an augmented reality app to  payment dongles that process credit card replace paper user manuals (service). The app payments via smartphones (transact). can help users with everyday activities – such•  estlés Maison Caillier invites its consumers to N as opening a box or replacing a spare part. By unveil their “Chocolate personality”. Consumers pointing a smartphone at the object that has first have to order a box of 5 differently flavoured a problem, the app identifies the object and chocolates, taste them and then rate them online gives instructions on how to fix the problem by (innovate). Then the company will follow this showing the instructions as augmented reality to rating to personalize an individual’s chocolate the camera’s view. box (make).To create competitive cross-channel retail concepts Design themes for improving the performanceand address consumers in all aspects of their of the retail business system along the valuejourney when purchasing an item, retail companies chain:should address all aspects of the value chain whendesigning a cross-channel strategy. Innovations can •  alue creation for the customer: The customer Vimprove both value creation for the customer as attaches higher value to the way he is helpedwell as value appropriation by the retail company1 to acquire an item that satisfies his needs. The(see fig.4). Innovation can improve efficiency, make value may orginate from: the proposition more effective and strengthen the -  fficiency: Reduce the cost or effort to Erelation with customers. acquire an item - Effectiveness: Ensure an item acquired 1  Lesson 6, The 6 CCDNA Lessons, BearingPoint 2012 better satisfies the needs of the customer - Engagement: Add emotional value to the product with the shopping format or experience • Value appropriation by the company: The  company can deliver the same value to the customer more competitively in one of three ways: - Efficiency: Reduce the cost to deliver the service and item - Effectiveness: Better tuned format to meet the customers’ needs more effectively - Lock-in: Reduce churn by ensuring customers want to come back Point of view 15
  • Some examples of different design themes: Company efficiencyConsumer efficiency •  wiss watchmaker Tissot introduced the S augmented reality app that allows consumers• Tesco South Korea opened a virtual grocery  to try on different watches without going to the store that allows consumers to shop with their physical store. By wearing a paper wristband, smartphones by scanning QR-codes in the metro consumers can see how the watches look on their station. This strategy makes productive use of wrists in 3D and change different features using commuters waiting time, while simultaneously the touchscreen. saving shoppers time spent going to the • Nordstrom is rolling out 5,000 mobile checkout  supermarket. devices at 116 full-line stores in preparation for its• Peapod, an American subsidiary of Ahold, Anniversary Sale in July. has recently placed a virtual grocery store in Chicago’s highly travelled State and Lake Station Company effectiveness Tunnel. Commuters can order groceries on the platform, manage shopping lists and schedule • ehkamp, a Dutch online retail company, offers W deliveries – for next day or even several days or discounts based on the GPS location of the weeks in advance – during their train ride to or consumer in more than 5500 brick & mortar stores from the office2. in the Netherlands. •  igh-end dress designer Derek Lam in partnership HConsumer effectiveness with eBay posted 16 looks from his Spring 2011 collection for consumers to go online and vote.• Nordstrom sales associates use an iPod to look up More than 120,000 votes were cast and the top past purchases. This enables them to spend more five were produced and available for sale on eBay. time with consumers on the shop floor. • Threadless is a t-shirt company that allows• Apple store employees use iPod touch or iPhone customers to submit, discuss and rate designs, devices to complete the transaction and email and the most popular ones are chosen for the customer a receipt. production.Consumer engagement Consumer lock-in• C&A Brazil makes it easier for consumers to choose  • Amazon saves delivery address, payment details  a garment by displaying the number of Facebook and purchase history of the customer, which likes on the garment hanger. When the item is makes the next purchase faster and easier and “liked” on Facebook, it will instantly appear on creates lock-in with the retail company. the hanger in the store helping a consumer in •  upermarket in the neighbourhood may attract S doubt to make the right choice. consumers solely due to the habitual loyalty it creates. Consumers wont go to another store2  Press release Ahold May 7th 2012 simply because of the location convenience.16 Point of view
  • Fig 5: Breakthrough e-commerce growth appears in one category after another Invest Innovate Make Attract Select Transact Provide Service Home shopping / automated Customer vending efficiencyValue Customercreation effectiveness Online search & advice Customer engagement Digital enhanced experiences / customer life solutions Operational Connected supply chain Self-help / self-service efficiencyValue Operationalappropria- effectiveness One-on-one customer behavioural datation Customer Direct relation via social / my account lock-in Source: BearingPoint - 2012 Point of view 17
  • Effective cross-channelresponse
  • Effective cross-channel response Key Question: How do I develop an effective cross-channel strategy and roadmap for my company to grow? Key take out: Linking your core retail position with a cross-channel strategy that supports this position will maximize your impact on consumers and will support your growth. Your action point: Review the company position and cross-channel proposition. Find key initiatives to enhance experience using cross-channel.By trying to be the best in meeting every need thatmight be relevant for consumers at the lowest Seven discriminating strategies topossible price, a retail company runs the risk of compete in retail1:being attacked by lower cost rivals that run at aslightly lower quality. Consumers will not be able 1. Lowest priceto recognise the difference and focus will shift 2. Biggest selectiontowards the price (see fig.6). 3. Quickest service 4. Easiest solutionTo be effective in cross-channel, a retail company 5. Greenest propositionfirst needs to decide on an overall strategy to win 6. Hottest propositionin the mind of the consumer. There is an infinite 7. Most exciting experiencenumber of options to compete in, however thesecan be grouped in seven core choices. 1  oosly based on “Winning at retail” WILLARD N. ANDER L and NEIL Z. STERN1. Lowest priceThese retail companies focus on discipline and Walmart, for instance, a vivid example of a low-costoperational excellence, provide no perks and retail company, pushes shoppers to scan their ownniceties and offer consistently low prices which items and make payments themselves, eliminatingcreates a no-risk environment that satisfies the cashier.the consumers need for safety. Cross-channelelements addressing the same safety need will helpto enhance the customer experience, e.g. cross-channel transparency and digital assisted self-help. Point of view 19
  • 3. Quickest service Fig 6: By trying to be good in everything retailers become undistinguished The quickest retail companies aim to fulfil consumer need as quickly as possible. They are normally in High quality / high cost convenient locations with parking facilities, they High know what the customer is looking for, enable accuracy and efficient check-out and make it possible to order and collect an item at convenient hours. By addressing the need for functionality and Red Ocean experience, cross-channel elements such as digital assisted self-help would be a good tool to enhance Low quality / low cost this strategic choice. Low McDonalds introduced self-service touchscreen PRICE DEEP FIND & ENTER- ASSORTMENT SELECT TAINMENT kiosks that take orders and money. Adding extra WIDE EASY EXTENSIVE ASSORTMENT ACCESS SERVICE cheese, more fries, a larger Coke – is now only at Source: BearingPoint - 2012 a finger tap away. In addition, a customer gets instant access to the full McDonald’s menu, and knows at a glance if something isn’t available for2. Biggest selection any reason.This strategic choice is characterised by the 4. Easiest solutiondominant assortment in a specific category.Finding the ‘sweet spot’ between having too much This type of strategy implies that a store is not justand not enough is the key to this type of strategy. a place to buy, but a solution to a problem. It isIt reassures consumers’ comfort that they do not characterised by a limited assortment and customerneed to shop anywhere else and can be sure to find centric employees. This type of retail companywhat they need, thus addressing basic functional offers the perfect product selection that aims toneeds and making shopping an easy experience. make it easy for consumer to choose. Cross-channelThe perfect cross-channel mix for this choice will elements that address the consumers need forappeal to functionality and ease of the shopping experience would be a suitable option here.experience. A number of Swedish online retail companies,Amazon is one of the biggest retail companies, which such as Mat&Ro, Linas Matkasse and City Grossbuilds its strategy around the wide assortment. Its offering grocery subscriptions, are a shiningcross-channel roadmap relies on the availability example of this strategy. They aim to make the lifeof the information as well as relations with social of their customers easier by helping to plan andcommunity. The “Customers who viewed this item, do grocery shopping. They offer packed groceryalso viewed…” tool is a shining example of how it bags containing fresh ingredients and recipes for acan be done.20 Point of view
  • selected number of meals that are delivered right 6. Hottest propositionto the customers door. The ‘hottest’ retail companies are experts in5. Greenest proposition their category, they stand apart from the rest by employing innovative concepts and fashion. ThisThis type of retail company offers a selection of type of retail aims to address consumer need forproducts that minimise the impact on the world experience and recognition; the level of customerthus addressing functional need as well as helping engagement and customer service plays a crucialconsumers to communicate who they are and role. Cross-channel strategy should focus onexpress their identity. Providing local connected building continuous relations with the customer asservices and building relations with the social well as create distinctive shopping experience.community could be suitable options to enhancethis strategic choice. Louis Vuitton introduced its groundbreaking app Amble conceived as a digital travel diary thatMarqt is the Dutch chain of supermarkets that allows to design emotional experience and memoryoffers ‘real food’ that is produced with respect for of travel. The app was designed not merely as apeople, nature (the environment) and animals. travel guide, but to transform travel experienceThis is a typical example of greenest proposition, into enriching personal experience by allowingwhich is supported by the use of local suppliers that consumers to create and share their own spots orcultivate fresh organic products. In addition, such discover must visit haunts of such celebrities asa supply chain allows to build relations with social Sarah Jessica Parker or Sofia Coppola.community by providing work for people who needsocial help. Fig 7: Successful retailers focus on value divers that fit their strategy High Experience Hottest Greenest Red Ocean Easy Quickest Biggest Price Low PRICE DEEP FIND & ENTER- ASSORTMENT SELECT TAINMENT WIDE EASY EXTENSIVE ASSORTMENT ACCESS SERVICE Source: BearingPoint - 2012 Point of view 21
  • 7. Most exciting experienceIn this case a retail company provides fullexperiential proposition that combines product,service and price. Cross-channel options that helpto enhance the ultimate experience are the wayto go. It can be cross-channel experience design,in-store and mobile digitization, turning staff fromsellers to entertainers, etc.Starbucks recently opened its first concept store inEurope with its “Slow” Coffee Theatre, hyper-localdesign, floating community gathering spaces andon-site bakery. The Coffee Experience Laboratoryat Starbucks was designed and engineered to,as Starbucks says, “treat coffee as a theatre”.The moment a customer walks in the door, hiseyes focus on the “stage” (where the baristas areworking) and there are no seating locations in theentire facility where the baristas and the stage areout of sight which creates an exciting experiencefor Starbucks consumers.22 Point of view
  • Point of view 23
  • Needs basedcross-channel design
  • Needs based cross-channel design Key Question: How can I assess the impact of Retail consumer needs pyramid individual cross-channel innovations especially with respect to their attractiveness to my Analysis of consumer behavior shows basic customers? needs are shifting in channel but not changing Key take out: Cross-channel innovations in core quality. In the context of retail the are ways to create value for consumers by Maslow pyramid can be summarized in four addressing existing core needs much more needs: effectively. Your action point: Make list of potential cross- •  unction: Make the acquisition of an item F channel elements that you are considering and that fulfills the consumer requirements at check what basic customer need is addressed. the lowest cost, both in terms of finance as well as in terms of effort. •  afety: Ensure that the acquisition of an S item does not cause any anxiety in terms ofCross-channel innovations, and the technology having paid too much, having purchased anbehind them, enable faster creation of customer item that is not suitable or having purchasedvalue by addressing the underlying consumer need an item that is not received well by socialmore effectively. These innovations are a source of peers.sustainable competitiveness. Consumer needs inretail can be organised in four categories. •  xperience: Deliver the acquisition process as E an experience that is tuned to the situationFunction of the consumer, who might be in a hurry or might be looking for entertainment.Cross-channel delivery makes the item moreefficiently available to the consumer. Also in some •  ecognition: Provide the means to allow a Rareas it is a more safe way to get items. consumer to increase his social status withDe Bijenkorf, a Dutch department store chain, the acquisition as well as the acquisitionoffers in-store collection for online orders. experience. Point of view 25
  • Safety Historic context:Digital and mobile shopping technology has Needs have not changed over time, whatenhanced the availability of item acquisition has changed is the ways to deliver them. Theopportunities, thus limiting associated anxiety and first retail innovation was the emergence ofrisks. markets many millennia ago. These markets facilitated acquisition of the right products atAmazon released Price Check, its comparison a reasonable price, reduced risk and increasedshopping app, that allows users to scan the safety.barcode of a product, take a picture of it or type theitem’s name to see prices from Amazon.com and its A second major innovation was the arrival of the2 million online merchants. shop, a fixed building with a fixed assortment. This further enhanced efficiency and security.Experience Branded products in these shops further reduced risk of buying bad quality product and increasedDigital and mobile tools can turn the acquisition the ability to compare pricing.of an item into an exciting experience. DisneyExplorer is a free app for iPad that offers a mobile Supermarkets allowed consumers to acquireexperience of the sights and sounds of Disneyland items at lower costs (lower retailer margin),while getting information on and planning the trip. due to increased productivity of the retailerThe app offers the ability to “tap into beautiful organization.images, animation and interactive touch pointsthat represent experiences inside Disneyland park, Specialty shops were an early sign of socialDisney California Adventure park, Downtown Disney standard. Being accepted was the first step. AsDistrict and all three hotels of the Disneyland Julia Roberts in the scene of “Pretty Woman”Resort.” shows, this is still the case for exclusive shops in present days, if a customer enters withoutRecognition the proper look or credit card. Branded high- end retailers have enhanced the ability ofConsumers can share preferences and rate each consumers to communicate the social standardother’s taste in a social community while shopping. more effectively.Fantasy Shopper is a new website that allowsconsumers to shop in real world stores without Experience and belonging also play a crucialspending real money. It allows to share picks with role in the classic form of social sales, theFacebook friends, create outfits for them and follow ‘Tupperware party’. Tupperware producesstyle icons. In addition, it allows to unlock discount durable household containers as well as relatedcodes and win real world shopping vouchers. It is household products. Housewives can invitealso possible to buy the desired item for real with friends to a party in their home facilitatedjust one click. by a Tupperware representative in which Tupperware is demonstrated and sold.26 Point of view
  • Fig 8: Cross-channel innovations address the same underlying needs that other earlier retail innovations addressed. MASLOW Before retail Small shops Mass retail Cross-channel Tupperware Exclusive parties Branded Belong products /Recognition carrier bag Social fabrics In-store recognition Personal Parking Outsourcing service EasyExperience to staff Ritual Known Self-help assortment Brands Branded formulas Information GuildsSafety No-risk Local word Consumer of mouth association Shopping Shops Town malls Self-helpFunction markets Automation Door-to-door Price /quality delivery improvement Source: BearingPoint - 2012 Point of view 27
  • Each of the seven discriminating strategies to Examples of price focus include the use ofcompete in retail (see figure 9) focus on different electronic self-help, comparison sites and consumerneeds. For instance, when competing on price, key connection platforms.consumer needs that are met are functional andsafety: «I want to be sure that this is the cheapestway of acquiring the product that will fulfil myrequirements». Fig 9: Each strategic direction is linked to other consumer needs Recognition Experience Function Safety “We have an experience you do Experience not want to miss” ++ + “With us you will be hot and Hottest fashionable” + ++ “You will minimise impact on the Green globe if you use our product” ++ + “We have the perfect selection for Easy you and make it easy to choose” ++ + “You will fullfill your need in a fast Quickest way at our place” + ++ “We will make sure you will find + + Biggest what you are looking for” “You can trust us to provide the Price lowest cost product” ++ ++ Source: BearingPoint - 201228 Point of view
  • More generically, any cross-channel innovation needs that are addressed by the core strategy.should be selected and designed to reinforce the Fig 10: Cross-channel innovations should enhance the consumer needs that are central to the overall retailer format if it is to create competitive advantage Recognition ion Consumer needs inn ovat Experience nel chan addressed by oss- cross-channel innovation cr Safety ffe ctive of e Function Area Function Safety Experience Recognition Consumer needs central to retail format Source: BearingPoint - 2012 Point of view 29
  • Operating modeltransformation
  • Operating model transformation Key Question: What are the key issues I have to address in my operating model to achieve successful cross-channel transformation? Key take out: Although there are many design themes, attention should be given to: customer experience design, cross-channel handling of orders, use of networks as an extension to the organisation, changing role for the personnel in store, shift from product towards customer centric IT design and additional investments in electronic channels. Your action point: Review your strategy, make the choices and draft a roadmap for developing and implementing your cross-channel capabilities.BearingPoint has developed a framework for Others are specific to a cross-channel strategy, andassessing the impact on the operating model these are the ones that require the most attention,five key themes. Some of the capabilities in the as they might be new and the ones that are the keyframework are generic, already in place and will source of competitive advantage.need to be reviewed against shifting strategy. Operating model cross-channel Organisation capabilities • Management structure • Owned network (incl. franchises) Strategy • Paid network (incl. media) • Strategic orientation • Earned network (communities, partnerships)* • Segmentation model • Incentive systems* • Value creation model* • In-store operations* Formula design Systems • Assortment & pricing • ERP • Channels • Planning, logistics & distribution • Locations • Integrated view of the customer* • Customer experience* • Customer relationship management • E-commerce* Processes • Social on-line (incl. my.account.)* •  ssortment, pricing & promotion management A • POS systems • Sales forecasting & monitoring • Sales force automation* • Order management • Consumer in-store automation* • Inventory treatment* * Especially affected by cross-channel Point of view 31
  • Strategy • Strategy: Is a company-wide cross-channel  strategy defined? If so where is the ownershipCross-channel impact: To create a competitive and the budget allocated?cross-channel retail organisation, the strategy «Only one third of European retail companiesneeds to address all aspects of the value chain, and have a companywide cross-channel strategy»systematically introduce innovative cross-channelconcepts. • Strategic orientation: Is the companies´ DNA  more defensive or innovative? Is the organisation• Customer value: What is the key value that  cost focused or is the organisation willing and in consumers will find, compared with the position to commit funds to more adventurous competition? How and where will cross-channel/ innovations? Is the organisation driven strictly digital innovations create this value? Is standard from the centre or is power allocated more customer segmentation in place across all decentralised? channels? «42% of the European retail companies state «Almost half of the EU retail companies say they that they find it important to analyse costs and address customer segments differently across- revenues carefully, to keep costs under control channels» and to selectively generate new services or enter new markets. Only 19% state that keeping costs under control is their most important goal.» Fig 11: Classic retailer operating model Outlet 1 Category Region Outlet 2 Outlet 3 Outlet 1 Logistics Category Region Outlet 2 Consumer ERP Outlet 3 Outlet 1 Category Region Outlet 2 Outlet 3 Marketing communication Source: BearingPoint - 201232 Point of view
  • Fig 12: To compete in cross-channel, the operating model needs to be changed and expanded Outlet 1 Category Region Outlet 2 Outlet 3 Outlet 1 Logistics Category Region Outlet 2 ERP Outlet 3 e-Commerce Consumer e-Services Third party assortment Home delivery Third party services Retailer enabled social networks Content creation Direct communication Marketing communication Affected Third party Source: BearingPoint - 2012Formula designCross-channel impact: Formula design gets more «More than half of EU retail companies say theyextended. All channels are an integral part of the have harmonised prices on all channels»formula as the consumer experiences it. •  ustomer experience design: Do you design C•  ross-channel assortment set-up: To what level C the journey of the customer outside the direct is your assortment harmonised across-channels environment of the shop? What channels do my with respect to core assortment and “long tail”? customers use as part of their purchase journey? Is consistency desirable? To what level are prices Have you reviewed the consistency of your standardised? customer experiences in all channels? Point of view 33
  • Processes OrganisationCross-channel impact: Key complication in the Cross-channel impact: To harness the innovativeprocesses is that inventory and orders are not power and local execution power of the worldchannel or store-specific anymore. Items bought outside the retail company, a network of partnersin one channel might be picked up in another and might be required that are much looser organisedreturned in a third. than a classic top down retail organisation. These partner networks used to include franchisees and• Merchandising, sales forecasting & monitoring:  large suppliers. They might now be extended to Is merchandising executed across channels? Are local suppliers, local individuals who perform sales targets set per channel or cross-channel? services, social communities, key persons in social Is in-season planning across channels? Is sell- communities, key customers, IT partners and media through monitoring cross-channel? How are partners. purchase budget limits managed? «27% say that closed-loop feedback of sell- • Integrated management structure: Are operations through/ order management/ merchandise integrated or do separate business units exist for planning is already realised» channels? Are stores centrally owned, or do local owners need to come on board? How are cross• Integrated inventory treatment: Do you keep sales allocated, for instance to regions or store separate DC stock allocations between channels areas? or is inventory integrated? Is in-store inventory «Almost half of the retail companies state visible across-channels? Do all channels share their management structure is decentralized item availability and shipping time? and participatory, thus encouraging many «Only 17 % of the respondents offer multiple organisation members to be involved» order/ pick-up/ delivery options» • In-store operations: Are in-store personnel • Integrated order management & procurement: willing and able to handle more advanced Is ordering, order management and controlling ordering, service and sales tasks? Are staff centralised? Mixed order & delivery models? willing and able to move from transaction Centralised fulfilment or decentralised (store executioners to experience deliverers? At what based) fulfilment return policy ? level do you have full control of the quality of «Most companies have a mixed mode in cross- in-store operations? channel fulfilment, a quarter does not have cross- «Only 7% of European retail companies have channel capabilities at all» equipped their stores/associates with mobile technology: 45% expect to implement this within the next 3 years»34 Point of view
  • • Network: How do you plan to gather the resources Business Intelligence, Customer Relationship required to deploy the strategy? At what level are Management, POS-System, In-store automation you able to find, recruit and keep these resources for sales assistants and In-store automation for within your company? How will you connect customers? communities and organisations outside your «Only 15% of the European retailers state company to fill in resource gaps? that they are currently satisfied with their IT landscape in terms of supporting cross-channelSystems retailing»Cross-channel impact: As much of the transformation • ntegrated view of the customer: Do you have Ito cross-channel is driven by the growth of internet, an integrated view of your customers? Do youmobile and other technologies it is not surprising make customer information available to salesthat technology is key to some aspects of the associates? Is your store personnel equippedcross-channel transformation. In the heart of with mobile technology to access customerthe organisation ERP, assortment management information?and planning & logistics systems will be affected «33% of European retail companies synchroniseas they cannot be based on regional/ outlet- customer information across all channels»based processes only, but need to move towardscustomer/ order-based processes. To create a In conclusion, one could say there is a vast amountconsistent customer experience, information about of work to be done in order to build competitivethis customer should be available on all interaction cross-channel capabilities in European retailpoints (360° view of the customer). This might also companies. Despite the recession, many retailrequire you to provide support to sales people with companies are investing substantially in cross-ways to access and enrich this data. channel capabilities.Also specific capabilities might be needed fordirect consumer interaction such as e-commerce Source of the citations: «C3 Retail - Cross-Channel-suites, social on-line and in-store automation for Commerce in Retail Business», 2012, BearingPointconsumers.• IT system integration: At what level are IT systems  integrated and available especially with respect to: Enterprise Resource Planning System, Distributed Order Management, Merchandise Planning & Control System, Inventory Management, Order picking and packing system, Data Warehouses/ Point of view 35
  • Open up to acceleratechange
  • Open up to accelerate change Key Question: How do I manage the organisational transformation to a cross-channel retail company? Key take out: The transformation needs to be planned and managed at three levels: continuous innovation of cross-channel interaction with customers; change management of organisation, network and personnel to shift to a more flexible adaptive way of working; systematic transformation of process and systems to support these initiatives at competitive costs1. Your action point: Divide your strategic roadmap into three parts: Cross-channel innovations, underlying capabilities and change management. 1  Lesson 1, The 6 CCDNA Lessons, BearingPoint 2012 Fig 13: Continuous cross-channel innovationAlthough the benefits can be huge, the impact on needs to be supported by organisationalthe organisation will also be significant. If your strengtheningorganisation decided to embrace the cross-channelworld and get fully ready, this means that not justthe IT systems, processes and organisation will Cross-channelchange. InnovationImpact on the DNA of the company Connected Empowered process & system peopleA cross-channel retail company will be competing change transformationwith fast-growing rivals that have a culture focused managementon luring talent, enlisting communities and thatare fully connected. For a typical retail companyorganisation that is grown from the adage “retailis detail” and that has the associated check andcontrol culture in place, it might be hard to Source: BearingPoint - 2012compete with such highly motivated competitionwith low overhead. Point of view 37
  • Retail companies do not, will not, and need not rather it needs to be enticed by well-informed,change to a ‘start-up’ mentality, but there are connected respectful interaction.two core choices that are inevitable. First, theorganisation needs to be tighter connected and • Adaptive: At this moment in time no one operate at lower fault margins. Second, the knows the exact impact and take-up of currentorganisation needs to release control and empower technological developments in the future. Alsoits personnel and partners. These changes are changes are happening fast, both in the mediadriven by the need to achieve consistent consumer landscape, places where consumers conveneexperience, connect socially and be able to adapt and technological possibilities.Technologicalto the rapid changes of the cross-channel world. fates are determined by classes of independent programmers who decide to support one• Consistent Customer Experience: To build a  technology over another. In this environment it lasting relation with a consumer ‘extended’, is key to centrally manage the IT investment very organisation needs to be trustworthy. This trust is strictly, carefully and incrementally. To generate gained by repetitive consistent experience at all innovations retail companies need to enlist points where your customer comes into contact partnerships with small suppliers and IT firms, with your formula or products. This touchpoints testing new concepts on a small scale, managing are at the edge of your organisation where your incentives intelligently and being ready to scale personnel, your partners or your systems have up when success is met. a direct impact on the consumer. It is an infinite number of possible experiences that can only be The change in the DNA needs to be managed managed by the people involved based on clear explicitly and carefully as part of the vision and expectations and supported with all transformation, both by involving the organisation relevant information of the customer and the as well as by systematically building up of system product. and process capabilities. Leading such a change requires a simple and clear message around the• Socially connected: A huge source of potential in  goal to achieve the individual responsibility of cross-channel retailing is relations within social the organisation members and the sharing of and communities, either based on shared interest, connection to information. shared transactions or shared social groups. To tap into this source effectively, a retail company should interact in a balanced way with these groups. Networks that are owned or paid for by a retail company do not have the same scope or level of trust and value as those networks to which a retail company has earned access. The process of building up credibility is largely done by the social network itself. It cannot be commanded,38 Point of view
  • Point of view 39
  • Summary
  • SummaryInnovative ways to deliver retail services over Transformation to become a competitivealternative channels pose an increasing threat to cross-channel retail company affects all majorclassic brick & mortar retail companies. components of the operating model. Although many design themes remain, attention shouldThe arrival and growth of cross-channel be given to: customer experience design, cross-innovations drive profound transformation of the channel handling of orders, use of networks asbusiness system. Existing and new competitors an extension to the organisation, changing rolethat successfully implement cross-channel for the personnel in store, shift from producttransformation pose a strong threat to incumbents towards customer centric IT design and additionalas they improve competitiveness in many aspects investments in electronic channels.of the business system, creating more value,increasing efficiency and improving customer Successful transformation supports continuousrelations. innovation based on connected processes and an empowered organisation. The transformationAn effective cross-channel strategy links a cross- needs to be planned and managed at threechannel innovation roadmap to overall retail levels: continuous innovation of cross-channelcompany positioning. Linking your core retail interaction with customers; change managementposition with cross-channel strategy that supports of organisation, network and personnel to shift to athis position will maximize your impact on more flexible adaptive way of working; systematicconsumers and support your growth. transformation of the process and systems to support these initiatives at competitive costs.A customer needs analysis is the base for designingand implementing cross-channel innovations inretail. Cross-channel innovations are ways to createvalue for consumers by addressing existing coreneeds much more effectively. Point of view 41
  • ContactsNetherlandsJan Jacob Koomen Jessica GroenewegTel: +31 6 53 23 25 75 Tel: +31 20 504 9000janjacob.koomen@bearingpoint.com jessica.groeneweg@bearingpoint.comNatasha PermyakovaTel: +31 20 504 9000natasha.permyakova@bearingpoint.comOther countriesPeter Brente Ulrik NoergaardSweden DenmarkTel: +46 8 410 11 630 Tel: +45 2210 2007peter.brente@bearingpoint.com ulrik.noergaard@bearingpoint.comCarole Giraud Henrik OhlssonFrance NorwayTel: +331 58 86 38 07 Tel: +47 240 69 000carole.giraud@bearingpoint.com henrik.ohlsson@bearingpoint.comJari Laine Christian WolterFinland GermanyTel: +358 400 7696 86 Tel: +49 40 41 49 22 75jari.laine@bearingpoint.com christian.wolter@bearingpoint.com© 2012 BearingPoint Holding B.V. All rights reserved. Printed in the EU. The content of this document is subject to copy right (“Urheberrecht”). Changes, cuts,enlargements and amendments, any publication, translation or commercial use for the purpose of trainings by third parties requires the prior written consent ofBearingPoint Holding B.V. Any copying for personal use is allowed and only under the condition that this copy right annotation (“Urheberrechtsvermerk”) will bementioned on the copied documents as well. SO 0631 EN42 Point of view
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