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.

1. POINT OF VIEW
Growth strategy
Cross-channel retail
To get there. Together.

3. Contents
Contributors Inroduction....................................................................................4
Author Cross-channel threat for classic retailers...........................................8
Jan Jacob Koomen
Value appropriation in the shifting ecosystem................................12
Contributors
Jessica Groeneweg Effective cross-channel response....................................................18
Natasha Permyakova
Needs based cross-channel design.................................................24
Marketing & Communication
Sandrine Pigot Operating model transformation...................................................30
Design Open up to accelerate change.......................................................36
Sabrina Malaurie
Angélique Tourneux
Summary.....................................................................................40
Point of view 3

4. Introduction

5. Introduction
For classic brick & mortar retail companies there • almart has spent more than $300 million
W
has not been lack of warning about the growth of acquiring five tech firms since May and hired more
e-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
A
and 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,
S
competitors 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 drive
the next wave of innovation such as mobile shopping our strategic agenda to become the leader in
arrives, with Tesco and Ahold launching QR-based Integrated Retail. Profound changes in technology
shopping channels. have an impact on the entire retail landscape, the
way customers shop and the way they live... We
Just as the record industry has been transformed by are accelerating our actions to bring together a
peer-to-peer downloading, the software industry by unique set of technology and retail assets to deliver
open 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—at
with the advent of Wikipedia, now retail companies the store, online, and at home3.»
are increasingly in the line of fire of social and
internet- driven cross-channel innovations. Many smaller retail companies have invested in
cross-channel initiatives, making the assortment
As 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. These
response many retail organisations have recently initiatives have often been responsive, ad-hoc and
accelerated 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

6. 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 common
in cross-channel. There are six reasons why this understanding and a sense of urgency by evaluating
transformation requires an integrated and urgent the current and future market situation with the
response 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 organisation
6 Point of view

7. Point of view 7

8. Cross-channel threat
for classic retailers

9. 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

10. 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 - 2012
The core capabilities of retailing, great Instead of aggressively charging into growth
merchandising, relevant formula design and high opportunities that cross-channel provides, many
performance execution are still key to a successful retail companies have simply placed their assortment
retail growth, but the underlying trend is that, in on-line and initiated ad-hoc initiatives on new
one category after another, a substantial volume media, focusing mainly on communication. They
shifts towards new channels. fail to deliver the transformation in the relationship
between retail company and consumer that is hoped
The ability of classic retail companies to compete with for.
innovative e-commerce pure players is hampered
by the need to protect existing channel revenue The question that these retail companies need to
and partners. Also pure players in e-commerce are answer is: how can we re-invent our business model
better 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 the
customers and generate more exciting innovative use of new concepts. This paper addresses some
concepts for consumers. key steps to take to understand and develop the
cross-channel strategy that will deliver the required
growth.
10 Point of view

11. E-commerce growth is just showing the tip of the on the value chain outside the brick mortar outlet
iceberg 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

12. Value appropriation in
the shifting ecosystem

13. 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 incumbents
by enabling consumers to acquire items that fulfil under threat. Key innovators have transformed
their 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

14. Here are some cross-channel innovations that work • Zipcar is another example of a transformed
with 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
Nestlé's 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 - 2012
14 Point of view

15. are then reassembled into a final product and • Bodymetrics introduced its Kinect body scan that
delivered to a client (finance, make). 3D-maps the consumer's 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
• estlé's 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 performance
and address consumers in all aspects of their of the retail business system along the value
journey when purchasing an item, retail companies chain:
should address all aspects of the value chain when
designing a cross-channel strategy. Innovations can • alue creation for the customer: The customer
V
improve both value creation for the customer as attaches higher value to the way he is helped
well 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
E
relation 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

16. Some examples of different design themes: Company efficiency
Consumer 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
H
Consumer 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
• CA 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 won't go to another store
2 Press release Ahold May 7th 2012 simply because of the location convenience.
16 Point of view

17. 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
efficiency
Value Customer
creation effectiveness Online search advice
Customer
engagement Digital enhanced experiences /
customer life solutions
Operational Connected supply chain Self-help / self-service
efficiency
Value Operational
appropria- effectiveness One-on-one customer behavioural data
tion
Customer Direct relation via social / my account
lock-in
Source: BearingPoint - 2012
Point of view 17

18. Effective cross-channel
response

19. 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 that
might be relevant for consumers at the lowest Seven discriminating strategies to
possible price, a retail company runs the risk of compete in retail1:
being attacked by lower cost rivals that run at a
slightly lower quality. Consumers will not be able 1. Lowest price
to recognise the difference and focus will shift 2. Biggest selection
towards the price (see fig.6). 3. Quickest service
4. Easiest solution
To be effective in cross-channel, a retail company 5. Greenest proposition
first needs to decide on an overall strategy to win 6. Hottest proposition
in the mind of the consumer. There is an infinite 7. Most exciting experience
number of options to compete in, however these
can be grouped in seven core choices. 1 oosly based on “Winning at retail” WILLARD N. ANDER
L
and NEIL Z. STERN
1. Lowest price
These retail companies focus on discipline and Walmart, for instance, a vivid example of a low-cost
operational excellence, provide no perks and retail company, pushes shoppers to scan their own
niceties and offer consistently low prices which items and make payments themselves, eliminating
creates a no-risk environment that satisfies the cashier.
the consumer's need for safety. Cross-channel
elements addressing the same safety need will help
to enhance the customer experience, e.g. cross-
channel transparency and digital assisted self-help.
Point of view 19

20. 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 McDonald's 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 for
2. Biggest selection any reason.
This strategic choice is characterised by the 4. Easiest solution
dominant assortment in a specific category.
Finding the ‘sweet spot’ between having too much This type of strategy implies that a store is not just
and not enough is the key to this type of strategy. a place to buy, but a solution to a problem. It is
It reassures consumers’ comfort that they do not characterised by a limited assortment and customer
need to shop anywhere else and can be sure to find centric employees. This type of retail company
what they need, thus addressing basic functional offers the perfect product selection that aims to
needs and making shopping an easy experience. make it easy for consumer to choose. Cross-channel
The perfect cross-channel mix for this choice will elements that address the consumer's need for
appeal 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 MatRo, Linas Matkasse and City Gross
builds its strategy around the wide assortment. Its offering grocery subscriptions, are a shining
cross-channel roadmap relies on the availability example of this strategy. They aim to make the life
of the information as well as relations with social of their customers easier by helping to plan and
community. The “Customers who viewed this item, do grocery shopping. They offer packed grocery
also viewed…” tool is a shining example of how it bags containing fresh ingredients and recipes for a
can be done.
20 Point of view

21. selected number of meals that are delivered right 6. Hottest proposition
to the customer's door.
The ‘hottest’ retail companies are experts in
5. Greenest proposition their category, they stand apart from the rest by
employing innovative concepts and fashion. This
This type of retail company offers a selection of type of retail aims to address consumer need for
products that minimise the impact on the world experience and recognition; the level of customer
thus addressing functional need as well as helping engagement and customer service plays a crucial
consumers to communicate who they are and role. Cross-channel strategy should focus on
express their identity. Providing local connected building continuous relations with the customer as
services and building relations with the social well as create distinctive shopping experience.
community could be suitable options to enhance
this strategic choice. Louis Vuitton introduced its groundbreaking app
Amble conceived as a digital travel diary that
Marqt is the Dutch chain of supermarkets that allows to design emotional experience and memory
offers ‘real food’ that is produced with respect for of travel. The app was designed not merely as a
people, nature (the environment) and animals. travel guide, but to transform travel experience
This is a typical example of greenest proposition, into enriching personal experience by allowing
which is supported by the use of local suppliers that consumers to create and share their own spots or
cultivate fresh organic products. In addition, such discover must visit haunts of such celebrities as
a supply chain allows to build relations with social Sarah Jessica Parker or Sofia Coppola.
community by providing work for people who need
social 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

22. 7. Most exciting experience
In this case a retail company provides full
experiential proposition that combines product,
service and price. Cross-channel options that help
to enhance the ultimate experience are the way
to go. It can be cross-channel experience design,
in-store and mobile digitization, turning staff from
sellers to entertainers, etc.
Starbucks recently opened its first concept store in
Europe with its “Slow” Coffee Theatre, hyper-local
design, floating community gathering spaces and
on-site bakery. The Coffee Experience Laboratory
at Starbucks was designed and engineered to,
as Starbucks says, “treat coffee as a theatre”.
The moment a customer walks in the door, his
eyes focus on the “stage” (where the baristas are
working) and there are no seating locations in the
entire facility where the baristas and the stage are
out of sight which creates an exciting experience
for Starbucks consumers.
22 Point of view

23. Point of view 23

24. Needs based
cross-channel design

25. 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 of
Cross-channel innovations, and the technology having paid too much, having purchased an
behind them, enable faster creation of customer item that is not suitable or having purchased
value by addressing the underlying consumer need an item that is not received well by social
more effectively. These innovations are a source of peers.
sustainable competitiveness. Consumer needs in
retail can be organised in four categories. • xperience: Deliver the acquisition process as
E
an experience that is tuned to the situation
Function of the consumer, who might be in a hurry or
might be looking for entertainment.
Cross-channel delivery makes the item more
efficiently available to the consumer. Also in some • ecognition: Provide the means to allow a
R
areas it is a more safe way to get items. consumer to increase his social status with
De Bijenkorf, a Dutch department store chain, the acquisition as well as the acquisition
offers in-store collection for online orders. experience.
Point of view 25

26. Safety Historic context:
Digital and mobile shopping technology has Needs have not changed over time, what
enhanced the availability of item acquisition has changed is the ways to deliver them. The
opportunities, thus limiting associated anxiety and first retail innovation was the emergence of
risks. markets many millennia ago. These markets
facilitated acquisition of the right products at
Amazon released Price Check, its comparison a reasonable price, reduced risk and increased
shopping app, that allows users to scan the safety.
barcode of a product, take a picture of it or type the
item’s name to see prices from Amazon.com and its A second major innovation was the arrival of the
2 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 increased
Digital and mobile tools can turn the acquisition the ability to compare pricing.
of an item into an exciting experience. Disney
Explorer is a free app for iPad that offers a mobile Supermarkets allowed consumers to acquire
experience 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 retailer
The app offers the ability to “tap into beautiful organization.
images, animation and interactive touch points
that represent experiences inside Disneyland park, Specialty shops were an early sign of social
Disney California Adventure park, Downtown Disney standard. Being accepted was the first step. As
District 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 without
Recognition the proper look or credit card. Branded high-
end retailers have enhanced the ability of
Consumers can share preferences and rate each consumers to communicate the social standard
other’s taste in a social community while shopping. more effectively.
Fantasy Shopper is a new website that allows
consumers to shop in real world stores without Experience and belonging also play a crucial
spending real money. It allows to share picks with role in the classic form of social sales, the
Facebook friends, create outfits for them and follow ‘Tupperware party’. Tupperware produces
style icons. In addition, it allows to unlock discount durable household containers as well as related
codes and win real world shopping vouchers. It is household products. Housewives can invite
also possible to buy the desired item for real with friends to a party in their home facilitated
just one click. by a Tupperware representative in which
Tupperware is demonstrated and sold.
26 Point of view

27. 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
Easy
Experience to staff
Ritual Known Self-help
assortment
Brands Branded
formulas
Information Guilds
Safety
No-risk Local word Consumer
of mouth association
Shopping
Shops
Town malls
Self-help
Function markets
Automation Door-to-door Price /quality
delivery improvement
Source: BearingPoint - 2012
Point of view 27

28. Each of the seven discriminating strategies to Examples of price focus include the use of
compete in retail (see figure 9) focus on different electronic self-help, comparison sites and consumer
needs. For instance, when competing on price, key connection platforms.
consumer needs that are met are functional and
safety: «I want to be sure that this is the cheapest
way of acquiring the product that will fulfil my
requirements».
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 - 2012
28 Point of view

29. 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

30. Operating model
transformation

31. 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, and
assessing 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 key
framework 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

32. Strategy • Strategy: Is a company-wide cross-channel
strategy defined? If so where is the ownership
Cross-channel impact: To create a competitive and the budget allocated?
cross-channel retail organisation, the strategy «Only one third of European retail companies
needs to address all aspects of the value chain, and have a companywide cross-channel strategy»
systematically introduce innovative cross-channel
concepts. • 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 - 2012
32 Point of view

33. 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 - 2012
Formula design
Cross-channel impact: Formula design gets more «More than half of EU retail companies say they
extended. 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

34. Processes Organisation
Cross-channel impact: Key complication in the Cross-channel impact: To harness the innovative
processes is that inventory and orders are not power and local execution power of the world
channel or store-specific anymore. Items bought outside the retail company, a network of partners
in one channel might be picked up in another and might be required that are much looser organised
returned 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

35. • 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-channel
Systems retailing»
Cross-channel impact: As much of the transformation • ntegrated view of the customer: Do you have
I
to cross-channel is driven by the growth of internet, an integrated view of your customers? Do you
mobile and other technologies it is not surprising make customer information available to sales
that technology is key to some aspects of the associates? Is your store personnel equipped
cross-channel transformation. In the heart of with mobile technology to access customer
the organisation ERP, assortment management information?
and planning logistics systems will be affected «33% of European retail companies synchronise
as they cannot be based on regional/ outlet- customer information across all channels»
based processes only, but need to move towards
customer/ order-based processes. To create a In conclusion, one could say there is a vast amount
consistent customer experience, information about of work to be done in order to build competitive
this customer should be available on all interaction cross-channel capabilities in European retail
points (360° view of the customer). This might also companies. Despite the recession, many retail
require 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 for
direct 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, BearingPoint
consumers.
• 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

36. Open up to accelerate
change

37. 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 innovation
Although the benefits can be huge, the impact on needs to be supported by organisational
the organisation will also be significant. If your strengthening
organisation decided to embrace the cross-channel
world and get fully ready, this means that not just
the IT systems, processes and organisation will
Cross-channel
change. Innovation
Impact on the DNA of the company
Connected Empowered
process system people
A cross-channel retail company will be competing change
transformation
with fast-growing rivals that have a culture focused management
on luring talent, enlisting communities and that
are fully connected. For a typical retail company
organisation that is grown from the adage “retail
is detail” and that has the associated check and
control culture in place, it might be hard to Source: BearingPoint - 2012
compete with such highly motivated competition
with low overhead.
Point of view 37

38. 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, the
organisation 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 current
organisation needs to release control and empower technological developments in the future. Also
its personnel and partners. These changes are changes are happening fast, both in the media
driven by the need to achieve consistent consumer landscape, places where consumers convene
experience, connect socially and be able to adapt and technological possibilities.Technological
to 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

39. Point of view 39

40. Summary

41. Summary
Innovative ways to deliver retail services over Transformation to become a competitive
alternative channels pose an increasing threat to cross-channel retail company affects all major
classic brick mortar retail companies. components of the operating model. Although
many design themes remain, attention should
The 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 as
business system. Existing and new competitors an extension to the organisation, changing role
that successfully implement cross-channel for the personnel in store, shift from product
transformation pose a strong threat to incumbents towards customer centric IT design and additional
as 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 continuous
relations. innovation based on connected processes and
an empowered organisation. The transformation
An effective cross-channel strategy links a cross- needs to be planned and managed at three
channel innovation roadmap to overall retail levels: continuous innovation of cross-channel
company positioning. Linking your core retail interaction with customers; change management
position with cross-channel strategy that supports of organisation, network and personnel to shift to a
this position will maximize your impact on more flexible adaptive way of working; systematic
consumers 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 designing
and implementing cross-channel innovations in
retail. Cross-channel innovations are ways to create
value for consumers by addressing existing core
needs much more effectively.
Point of view 41

42. Contacts
Netherlands
Jan Jacob Koomen Jessica Groeneweg
Tel: +31 6 53 23 25 75 Tel: +31 20 504 9000
janjacob.koomen@bearingpoint.com jessica.groeneweg@bearingpoint.com
Natasha Permyakova
Tel: +31 20 504 9000
natasha.permyakova@bearingpoint.com
Other countries
Peter Brente Ulrik Noergaard
Sweden Denmark
Tel: +46 8 410 11 630 Tel: +45 2210 2007
peter.brente@bearingpoint.com ulrik.noergaard@bearingpoint.com
Carole Giraud Henrik Ohlsson
France Norway
Tel: +331 58 86 38 07 Tel: +47 240 69 000
carole.giraud@bearingpoint.com henrik.ohlsson@bearingpoint.com
Jari Laine Christian Wolter
Finland Germany
Tel: +358 400 7696 86 Tel: +49 40 41 49 22 75
jari.laine@bearingpoint.com christian.wolter@bearingpoint.com
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42 Point of view

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44. About BearingPoint
BearingPoint. Management Technology Consultants.
We deliver Business Consulting. We are an independent firm with European roots and
a global reach.
In today’s world, we think that Expertise is not enough. Driven by a strong
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