The Role of Manufacturers in Multichannel Retailing


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The Role of Manufacturers in Multichannel Retailing

  1. 1. The role of manufacturers in multi-channel retailing Getting Ahead of the Value Chain Integration Curve
  2. 2. 2 Multi-channel retailing in the US is rapidly growing driven largely by advancing technology and shifting consumer behavior Advancing Technology • Tablet and smart-phone adoption • Big data & analytics • Social media • Cloud computing Shifting Consumer Behaviors • Information-seeking • Mobile and social generation • Convenience premium US Retail eCommerce Sales, 2011-2017 ($bn) $434.2 $384.9 $338.9 $296.7 $258.9 $225.5 $194.7 2014 18.0% 2013 15.0% 2012 11.0% 2011 7.0% 21.0% 2016 25.0%24.0% 2015 mCommerce(%of eCommerceSales) TotaleCommerce Sales($bn) +14% 2017 eCommerce mCommerce(% of total eCommerce) Note: eCommerce sales exlude travel and event tickets Source: eMarketer, Forrester Research, National Retail Federation, comScore Multi-channel Growth Drivers Driver Description
  3. 3. 3 Retailer / Dealer Wholesaler / Distributor Manufacturer • Define offering and product specifications from demand • Design / enhance products lines • Produce new / existing products • Bundle products into end consumer batches • Distribute consumer batches to points of purchase and/or consumption • Display products for consumer discovery and trials • Provide products for consumers to try and test • Offer vehicle for consumers to make purchases • Ensure order fulfillment The traditional value chain is blurring under a multi-channel environment Reconfigured Multi-channel Value Chain Traditional Manufacturer Responsibilities Forward Value Chain Integration by Manufacturers Forwardly Integrated Responsibilities under Multi-channel Source: A.T. Kearney Backward Value Chain Integration by Retailers/Distributors
  4. 4. 4 Manufacturers across sectors are pursuing forward value chain integration Depth of Offering Multi-Channel Value Chain Integration Curve Source: A.T. Kearney Level 1 Level 2 Level 3 Level 4 Level 5 (Omni-channel) Research Shop Service / Omni • Online/mobile product search • Side by side feature comparisons • Online memberships • High resolution specs/photos (3D) • Product narration • User feedbacks and reviews • Smart recommend • User communities • Buy online for direct delivery • 1-click and/or mobile- payment • Store pick-up • Global shipping • Store fulfill with last mile delivery Buy / Fulfill • Subscriptions • Segmented assortment by channel • Product sampling for VIP customers • Online customization • Retail location recommend • Customized order management • No hassle returns • One click live customer service • Omni-channel integration
  5. 5. 5 Leaders have started unlocking value as they climb the forward value chain integration curve Source: Mobile Marketer (1/12), Lululemon Annual Reports; A.T. Kearney • Web sales grew over 10% faster than sale via other channels last year 17% Web 30% 15% Other Channels Total Channel Growth (2011 – 12) • In under 4 years, web sales have grown to 14.4% of company revenues • Mondelez is devoting 10% of marketing budget to mobile – Oreo “Daily Twist” campaign, which published new mobile content for 100 days, reached over 30 million social followers and fans – Use of geo-fencing technology in partnership with Waze mobile app and Target, users receive coupons when near Target 0 2009 197,255 1,173,103 2013 353,488 Channel Growth (2009 – 13) Other Web Strategy: Focus on using breadth of coverage to bridge online commerce with in-store experiences Strategy: Focus on using depth of capabilities to build a local communities of engaged consumers Strategy: Apply innovative digital solutions to engage consumers and drive sales via more traditional retail channels Mondelez “Daily Twist” Campaign
  6. 6. 6Source: A.T. Kearney 1. Consistent brand experience – Consumers have a consistent brand experience and not one that changes by channel 2. Seamless integration – Customers experience an effortless transition along the journey and across touch points (“anything, anytime, anywhere”) 3. Single view of the customer – The manufacturer/retailer has a singular view during the customer journey and across all touch points Omni-channel key success factors Consistent experience of manufacturer brand Integrate own touch points and align to retailer channels to maximize likelihood of consumer continuing journey with brand Strengthen direct relationships with customers across touch points and channels Consistent experience of retailer brand Integrate channels to maximize likelihood of shopper continuing the journey in the retailer’s channels Build and maximize a long-term, channel- agnostic customer relationship RetailerManufacturer The end-state objective is to offer a consistent brand, seamless integration and one view of the customer
  7. 7. 7 Social Media To succeed, manufacturers and their retailing partners must manage channel conflict Source: A.T. Kearney Online MobileRetailer / Dealer Pricing • Define and set integrated pricing based on channel offerings and objectives • Define coordinated promotions and sales plan Cannibalization Stealing Share from Partner • Segment product by channel (long tail vs. fast mover) • Focus on complimentary product via desired channels • Ensure effective inventory deployment across channels • Increase transparency (leverage customer data to show win-win rather than zero-sum impact) • Link partner trade funding to manufacturer’s overall sales across all channels
  8. 8. 8 Three steps manufacturers can take to get ahead of the multi- channel value chain integration curve Source: A.T. Kearney  Assess tailored multi-channel engagement journeys across purchase cycle for core and new customers  Assess size of prize and cost to serve economics Actions  Develop multi-channel 5 year strategic vision (multi-channel offerings by category and customer segments) Steps Assess the sector’s current value chain structure Define the manufacturer’s desired strategic role in the value chain Develop roadmap to build out capabilities to desired level  Define sequenced and flexible capability build program  Identify and active pilot offering programs  Identify cross-sector best practices and approach to multi-channel rollout
  9. 9. 9 A.T. Kearney is a global team of forward-thinking, collaborative partners that delivers immediate, meaningful results and long- term transformative advantage to clients. Since 1926, we have been trusted advisors on CEO-agenda issues to the world’s leading organizations across all major industries and sectors. A.T. Kearney’s offices are located in major business centers in 39 countries. Raj Kumar Partner Michael Hu Principal Contacts Amy Engel Consultant