2007 09 - best practices in multichannel


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2007 09 - best practices in multichannel

  1. 1. BEST PRACTICES December 18, 2006 Best Practices In Multichannel Retailing by Tamara Mendelsohn Helping Business Thrive On Technology Change
  2. 2. B E S T P R AC T I C E S Includes Consumer Technology Adoption Study data December 18, 2006 Best Practices In Multichannel Retailing by Tamara Mendelsohn with Bruce D. Temkin, Nikki Baird, and Brian Tesch EXECUT I V E S U M MA RY Multichannel issues are not new to the retail industry. However, retailers have made little progress over the last few years; we give the overall industry a grade of C- on its multichannel abilities. While this mediocre performance may have been okay in the past, consumers will push retailers to improve their multichannel capabilities. To uncover multichannel best practices, we spoke with leading multichannel retailers. Our research uncovered best practices in four areas: selling, service, organization and culture, and measurement and metrics. Not all retailers share the same priorities; store-based retailers need to focus more on selling, while manufacturers need to focus on organization and culture. TABLE O F CO N T E N TS N OT E S & R E S O U R C E S 2 The State Of Multichannel Retail: Not So Good Forrester interviewed 10 user companies and 2 Multichannel Retail Best Practices other field experts, including Accenture, Ann Taylor, Anthropologie, Avenue A | Razorfish, Blast 5 Multichannel Best Practice No. 1: Selling Radius, Borders, Circuit City, Deloitte, Fry, GSI 7 Multichannel Best Practice No. 2: Service Commerce, Lowe’s, PETCO, REI, and Timberland. 9 Multichannel Best Practice No. 3: Organization And Culture Related Research Documents 11 Multichannel Best Practice No. 4: Metrics And “Circuit City: A Case Study In Multichannel Selling” Measurement December 18, 2006, Case Study 12 Multichannel Retail Next Practices “REI: A Case Study In Multichannel Organization” 13 Setting Your Multichannel Priorities December 18, 2006, Case Study 15 Identifying Your Challenges “Understanding US Cross-Channel Shoppers” 15 Case Studies April 19, 2006, Trends 17 Supplemental Material © 2006, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, WholeView 2, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. To purchase reprints of this document, please email resourcecenter@forrester.com.
  3. 3. 2 Best Practices | Best Practices In Multichannel Retailing TARGET AUDIENCE eBusiness, channel, and product management professional; marketing leadership professional THE STATE OF MULTICHANNEL RETAIL: NOT SO GOOD The rise of online shopping in the mainstream puts pressure on firms to master an increasingly important skill: multichannel retailing. Supporting consumer interactions across channels like catalog, call center, Web, and bricks and mortar may seem like a no-brainer at this point, but not all firms have responded well to this challenge. Our review of today’s retailing environment shows that: · Consumers increasingly shop across channels. Using the Internet in the purchase process is no longer just for the technological elite; in fact, 88% of all online consumers use the Internet to research products.1 Researching online and buying offline, however, is a more complex activity. But cross-channel shopping is quickly becoming a mainstream activity, with more than half of online Gen Yers, Gen Xers, and Younger Boomers engaging in this behavior (see Figure 1). · Retailers fail the multichannel test. We often find that multichannel initiatives lose priority to other projects with a clearer ROI. While there were some improvements by leading retailers this year, firms continue to play catch-up to consumer demands, implementing one-off features like buy online/pickup in store without the foundation of a holistic multichannel strategy. Our assessment of the overall industry’s multichannel abilities is a C- (see Figure 2). While retailers get a passing mark for their online selling efforts, they fall well below the mark when it comes to multichannel organization and culture and measurement. · Multichannel retailing can no longer be ignored. For the past few years, retail channel managers have had the luxury of choosing how multichannel they want to be, but they’re about to lose this privilege. While multichannel retailing has been a nice-to-have capability, consumer adoption of technology — specifically the Internet — will turn this into a must-have capability over the next two years. MULTICHANNEL RETAIL BEST PRACTICES Forrester has been writing about multichannel retailing for the past five years. Interestingly, we continue to receive many of the same questions from eCommerce executives, VPs of direct, and CMOs: What are other retailers doing and how are they doing it? To answer these questions we spoke with the experts — channel executives from retailers that have taken multichannel strides over the past few years along with some of the vendors that support their efforts. Our analysis identified five specific areas of multichannel retailing best practices (see Figure 3): December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
  4. 4. Best Practices | Best Practices In Multichannel Retailing 3 Figure 1 Cross-Channel Shopping Approaches The Mainstream 1-1 More consumers like cross-channel shopping “I like to research products online and purchase them offline .“ (percentage who responded 4 or 5 on a scale of 1 [strongly disagree] to 5 [strongly agree]) 40% 2004 2006* 30% 20% 10% 0% Gen Yers Gen XersYounger Older Seniors Boomers Boomers Base: North American households Source: Forrester’s Consumer Technographics® 2004 North American Benchmark Study *Source: Forrester’s NACTAS 2006 Benchmark Survey 1-2 Cross-channel shoppers are more likely to be young males “Have you ever researched a product online and then purchased it (actually paid for it) in an offline store?” 68% Male Female 62% 59% 55% 52% 50% 52% 40% 30% 28% Gen Yers Gen Xers Younger Boomers Older Boomers Seniors Gap between males and females 20% 16% 12% 10% 5% 3% 2% 0 Base: US online consumers Source: Forrester’s NACTAS Q2 2006 Survey 39988 Source: Forrester Research, Inc. © 2006, Forrester Research, Inc. Reproduction Prohibited December 18, 2006
  5. 5. 4 Best Practices | Best Practices In Multichannel Retailing Figure 2 Multichannel Retailing Report Card 2006 Competency Grade Comment Selling B- The industry has made the most improvement in this area. We’re beginning to see some innovative Web applications that bridge channels and more consistency of information across channels. Servicing C This year, many firms focused on large data integration projects. We hope that next year retailers will use this data to provide better and more relevant service. Marketing C+ Many retailers took this year to get to know their customers. Large customer data projects kicked-off, and customer-centricity took center stage. Organization and D Some retailers have begun to put incentive structures in place to culture encourage channel cooperation. However, this remains a large barrier to many multichannel retail organizations and deserves more attention and effort. Measurement F Retailers are still struggling to determine what to measure and how to measure it. Overall grade C- Multichannel retailing has shown progress but is still performing below a satisfactory level. 39988 Source: Forrester Research, Inc. Figure 3 Multichannel Retailing Best Practices Selling Servicing Marketing Metrics and measurement Organization and culture Selling • Build Web applications that bridge the channels. • Enable reserving or buying online with pickup in store. • Offer consistent pricing and promotions. Service • Offer service choice. • Provide an extended inventory network. Marketing Not covered in this report. Metrics and measurement • Provide incentives for channel cooperation. • Treat the Web as more than just another store. • Assign clear executive leadership. Organization and culture • Create metrics on cross-channel consumer growth and satisfaction. • Use loyalty programs to track customers across channels. • Use surveys to gather additional insight. 39988 Source: Forrester Research, Inc. December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
  6. 6. Best Practices | Best Practices In Multichannel Retailing 5 1. Selling. Multichannel retailers have to support customer buying processes, which often cross channels. To do so, retailers should create applications and services that help consumers seamlessly move across channels and establish multichannel strategies for pricing and promotions. 2. Service. Once a customer decides to make a purchase, retailers still have a lot of work left to do. They have to establish multichannel processes around fulfillment and integrate order information to handle customer requests. 3. Marketing. The role of multichannel marketing is to drive consumers to specific channels by communicating the benefits of each channel. But perhaps the biggest role for marketing is to understand customers, determining their needs and desires as well as their propensity to shop across channels, and then communicate with them on their terms. Note: We decided to not include marketing best practices in this report because multichannel marketing entails many categories of best practices unto itself. 4. Organization and culture. It can be difficult to get channel organizations that have historically operated as separate businesses — and even competed against one another — to work together toward a common goal. Retailers must establish reporting and incentive structures to help foster collaboration, along with strong leadership and training. 5. Metrics and measurement. For channel managers to understand the impact and success of their multichannel initiatives, they must define metrics and implement methods for collecting the data. MULTICHANNEL BEST PRACTICE NO. 1: SELLING Of all the multichannel retailing competencies, retailers have made the most progress in supporting the multichannel buying process: helping consumers find products. This has been an easy place for retailers to start because it is the most visible area, and it also provides the most tangible benefits. But there continue to be lost opportunities. Almost half of cross-channel consumers buy from a different retailer than the one that they used to do research.2 These defections represent a significant opportunity for retailers to retain customers as they cross channels. That’s why successful multichannel retailers: · Build Web applications that bridge the channels. To help prevent consumers from switching retailers as they switch channels, channel managers at Circuit City, Lowe’s, and IKEA have deployed configuration applications that let consumers do the research at home but then access their work in the store. This approach allows consumers to get help from a sales associate to confirm and augment their selections. Circuit City offers a home theater configurator and © 2006, Forrester Research, Inc. Reproduction Prohibited December 18, 2006
  7. 7. 6 Best Practices | Best Practices In Multichannel Retailing Design Within Reach provides a carpet design tool. Lowe’s and IKEA offer kitchen configurators (see Figure 4). IKEA even lets consumers download its application and design their kitchen offline and then upload it back to the IKEA servers when they are ready to come into the store. · Enable reserving or buying online with pickup in store. Retailers like Ann Taylor, Circuit City, Coach, and Famous Footwear let consumers check local store inventory on items that they are interested in buying. Borders and Talbots take it one step further and let consumers reserve products online to have them ready and waiting in the store. If consumers aren’t confident about a purchase, these applications help to bring them into the store to complete the process. Buy online/pickup in store offers consumers a chance to see the product as well as providing immediacy to online purchases. Circuit City has done a good job with its 24/24 Pickup Guarantee program; it guarantees that purchases are ready for pickup in the store in 24 minutes. Retailers shouldn’t rush to offer this service because of competitive pressure — it is dangerously easy to underestimate the complexities. Like Circuit City, retailers should take the time and effort to make sure that this type of service runs smoothly before marketing it to customers.3 · Offer consistent pricing and promotions. Most of the retailers that we spoke with try to keep pricing consistent across channels so as not to frustrate consumers who come into the store expecting one price and are presented with another. Circuit City specifically calls out its Web-only prices online, but it honors them in the store if a consumer asks for that price. Ann Taylor is testing ways to share inventory across channels to maximize inventory productivity, product pricing, and margin. The push for transparency and consistency doesn’t mean that all promotions have to be available across all channels. In fact, retailers successfully use promotions to drive customers to different channels. Borders sends out weekly emails highlighting the week’s top picks along with in-store promotions to drive weekend store traffic. Multichannel Selling Pitfalls To Avoid When looking to help consumers through the buying process and working to keep them loyal as they cross channels, retailers should avoid: · Inaccessible or difficult to use Web applications. One of the common pitfalls to multichannel retailing is also one that stymies online retailing: poor online usability. We’ve found that Web applications like configurators and design tools are often buried behind confusing menus and unclear hyperlinks and fly in the face of usability best practices. · Wait time for pickups in store. Without proper signage, solid processes, and employee training, what might seem like an easy win can significantly harm customer satisfaction. If purchased merchandise isn’t held in an organized fashion or if the retailer doesn’t implement processes and accountability for picking up purchased items in a timely manner, consumers can end up waiting at the store longer than if they had come in to make an in-store purchase in the first place. December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
  8. 8. Best Practices | Best Practices In Multichannel Retailing 7 Figure 4 Lowe’s Configuration Application Helps Consumers Cross Channels 39988 Source: Forrester Research, Inc. · Inconsistent pricing and promotion policies. Consumers who research online and travel to the store to make the purchase will be frustrated if a price or promotion that they expected is not available to them when they arrive in the store. Retailers should avoid frustrating valuable shoppers with opaque policies or unexpected price changes. MULTICHANNEL BEST PRACTICE NO. 2: SERVICE Multichannel retailers can’t just focus on getting the sale. The service experience provides an opportunity to win — or lose — consumer loyalty. Many retailers now allow online product returns through the store, but this has become the minimum standard. In speaking with retailers that use customer service to strengthen their multichannel brand, we found that they: · Offer service choice and consistency. Retailers like Best Buy, L.L.Bean, and Macy’s offer click- to-chat or click-to-call options, while other retailers are experimenting with in-store kiosks that link to live customer service representatives (CSRs). As the number of service points increases, so do the integration demands. CSRs should have visibility into not only customer and order data but also into the same cross-sells, upsells, and promotions that the customer is seeing online (see Figure 5). Self-service is also an important service channel. Many cross- channel shoppers are tech savvy and prefer to control their experience, so retailers like PETCO, American Eagle Outfitters, and Famous Footwear ensure that online and offline order and account information as well as applicable coupons are easily accessible online. © 2006, Forrester Research, Inc. Reproduction Prohibited December 18, 2006
  9. 9. 8 Best Practices | Best Practices In Multichannel Retailing Figure 5 CSRs Should Have Cross-Channel Visibility CSRs should have visibility into relevant cross-sells. 39988 Source: Forrester Research, Inc. · Provide an extended inventory network. Retailers can avoid walkouts because of stock-outs by providing access to other local store inventories and Web inventory. Ann Taylor arms its sales associates with an application called Style Finder that lets them order out-of-stock products for delivery to the consumer’s home straight from another store or from online, whichever has the most inventory. Over the past year, sales through this application have increased in the high double digits. Along with other retailers that offer this service like the Gap, J. Crew, and REI, Ann Taylor rarely has to turn a customer away. Service Pitfalls To Avoid When setting up multichannel service options, retailers should avoid mistakes that jeopardize the customer relationship, such as: · Inconsistent communication. With more options for escalation and help, the complexity of consistency increases. Retailers should avoid frustrating consumers by an inability to service them because information is unavailable or by making customers repeat information. December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
  10. 10. Best Practices | Best Practices In Multichannel Retailing 9 · Channel wars. Retailers should watch out for policies that discourage employees from delivering good multichannel service. Stores often don’t like returns of online purchases because they can jeopardize their sales numbers and leave them with inconsistent merchandise. But if stores make it difficult for customers to return these products, they risk losing future online sales because of a frustrating returns process. MULTICHANNEL BEST PRACTICE NO. 3: ORGANIZATION AND CULTURE Of all the multichannel competencies that we examined, organization and culture represents the area with the most need for improvement. Strong channel organizations create silos that get in the way of cooperation on multichannel initiatives. Retailers that have begun to break down these barriers: · Provide incentives for channel cooperation. Multichannel initiatives require multichannel incentive structures. Many retailers, including Best Buy, Timberland, and Staples, give credit from in-store kiosk sales to both Web and store groups to provide incentives to store associates to help consumers use the kiosks when an item that they are looking for isn’t carried or is out of stock. Best Buy takes it one step further and attributes all Web sales to both its online group and to individual stores based on their proximity to the shipping address. This helps to eliminate channel competition and foster collaboration. Incentives often go hand-in-hand with strong cross-channel training programs. Ross-Simons trains store employees on the value of capturing customer email addresses and awards gift certificates to the associate who collects the most. · Treat the Web as more than just another store. While many retailers leverage the efficiencies of treating the online store like any other store (purchasing power and shared inventory), retailers shouldn’t force the online channel to share all resources with the stores (see Figure 6). The value of the Web channel goes far beyond that of just a virtual store; it drives almost as much offline as online sales, and it is a marketing and brand vehicle as much as another channel.4 Many multichannel retailers that we spoke with allocate dedicated and significant marketing, merchandising, and customer experience teams and resources to the online channel. These groups should then collaborate closely with corporate marketing, merchandising, and customer experience as they do in retailers like PETCO and Timberland. · Assign clear executive leadership. Many of the best multichannel organizations have explicitly defined executive champions to oversee the coordination of all channels and ensure that multichannel initiatives remain a priority. At REI this position is held by the CEO, at Anthropologie it is the president, at Timberland it is the VP of consumer direct, and at other retailers, like Circuit City, there is a dedicated position created for this role (see Figure 7). Anthropologie makes sure that multichannel initiatives don’t slip through the cracks by assigning senior-level managers responsibilities across channels. For example, the general © 2006, Forrester Research, Inc. Reproduction Prohibited December 18, 2006
  11. 11. 10 Best Practices | Best Practices In Multichannel Retailing merchandise manager is responsible for buying for all channels; the creative director oversees creative for stores, catalog, and Web; and the head of direct is responsible for marketing across all channels. Figure 6 Treat The Web As More Than Just Another Store Activity Treat the Web as a store Treat the Web separately Buying Gain buying power and negotiation leverage due to x higher volumes Inventory Capitalize on sales opportunities where the inventory is not in x local stock Marketing x Can see incremental opportunities beyond driving immediate sales Merchandise x Can use the site as a concept store that spans all geographies to test new products and services before rolling them out Customer data x Realize additional opportunities to gather customer data and provide incentives to users who create a login that can be traced across channels 39988 Source: Forrester Research, Inc. Figure 7 REI: Organized For Multichannel Success CEO SVP, marketing SVP, sales, store CFO and merchandising development, and logistics Merchandising Private label* Finance IS Marketing Online Public affairs Stores Call center Logistics *REI branded Gear and Apparel 39988 Source: Forrester Research, Inc. December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
  12. 12. Best Practices | Best Practices In Multichannel Retailing 11 Organization And Culture Pitfalls To Avoid When establishing the organization and culture to support multichannel initiatives, retailers should avoid: · Dotted line reporting. Matrix organizations can be dangerous if they are not properly implemented. If the collaboration isn’t appropriately supported, budget holders will ignore dotted lines and prioritize initiatives based on their own P&L. · Getting married to one structure. There is no one-size-fits-all organizational structure for multichannel success. If retailers settle too quickly into one structure, they can easily miss opportunities for refinements that will better support their goals. After REI’s original organization structure failed to provide the clear leadership that it was looking for, the retailer reorganized a few years later to align online, public affairs, and marketing under one leader. MULTICHANNEL BEST PRACTICE NO. 4: METRICS AND MEASUREMENT Without the right measurements, multichannel initiatives lack validation — and the wrong metrics can send retailers on a wild goose chase. In speaking with multichannel retailers, we found that they: · Create metrics on multichannel consumer growth and satisfaction. Multichannel consumers are some of a retailer’s most valuable customers. The multichannel customers at Macy’s, for instance, spend 20% more than the company’s single-channel customers, and PETCO’s multichannel customers spend almost 30% more than their single-channel counterparts. Many of the retailers that we spoke with measure and monitor the percentage of their customers who are multichannel shoppers and strive to grow this over time. That’s why successful retailers consistently measure loyalty and satisfaction rates of multichannel customers through methods like Net Promoter.5 Use loyalty programs to track customers across channels. Retailers like REI, Borders, and PETCO use their loyalty programs to gather information and gain deeper insights into their consumers’ cross-channel behaviors. Borders captures about 50% of transactions through its loyalty program, and REI members account for almost 90% of the retailer’s transactions. The data provides these retailers with strong proof of their customers’ behaviors and its analysis drives many of their multichannel initiatives. Retailers should refocus their loyalty programs and use them to get consumers to use their identifiers for all interactions. · Use surveys to gather additional insight. Many of the retailers that we spoke with use a combination of online surveys, intercept surveys, and post-sale surveys conducted online or through a toll-free number. Firms should integrate multichannel topics into these existing measurement efforts. They should ask questions like whether the customer researched the product online before coming into the store to buy it and whether they had ever bought a © 2006, Forrester Research, Inc. Reproduction Prohibited December 18, 2006
  13. 13. 12 Best Practices | Best Practices In Multichannel Retailing product from the retailer’s Web site. This customer feedback helps retailers gauge the volume of cross-channel shoppers, gain insights into the categories that matter most to these customers, and their current satisfaction level. Metrics And Measurement Pitfalls To Avoid We heard retailers describe these common pitfalls to avoid: · Loyalty program denial. While there is still debate about whether or not loyalty programs drive loyalty, retailers should recognize that they do provide valuable customer data. If retailers only look to the loyalty programs to build loyalty, they will miss a valuable opportunity to gain visibility into their customers’ cross-channel behavior. · The channel metrics trap. Until retailers get a better handle on which levers ultimately drive multichannel success, retailers need to stay away from defining metrics that can reinforce competition between channels. If leaders of multichannel efforts don’t develop and support measurements and metrics, they will find it difficult to justify increased attention and budget. · Unproven methods. Using new methods for data capture can be risky because they are easier to question. If you’ve never used intercept surveys, for instance, don’t use them for the first time to gather new data because you’ll likely spend more time focusing on the method than on the results. MULTICHANNEL RETAIL NEXT PRACTICES While our research uncovered a number of multichannel retailing best practices, here are some next practices that firms can focus on once they’ve mastered the basics that we’ve described (see Figure 8): · Selling — mobile commerce. Cell phones represent yet another channel to connect with consumers and are poised to have a significant impact on the retail industry when customer adoption hits critical mass. Some retailers like Target and Sephora are beginning to experiment with the channel and are taking some early learnings back to the drawing board. · Service — right channeling. Today, most retailers push customers to low-cost, self-service channels like the Web. In the future, retailers will need to develop a more balanced view of interactions across channels, optimizing for a combination of cost and satisfaction.6 Valuable customers, for instance, may require different service options than other customers. · Organization and culture — company P&L. Getting rid of channel-specific P&Ls altogether will allow multichannel retailers to collaborate more effectively across channels, prioritize multichannel initiatives, and support decisions that put the customer first. December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
  14. 14. Best Practices | Best Practices In Multichannel Retailing 13 Figure 8 Multichannel Retailing Next Practices Selling Mobile commerce represents another channel for retailers to connect with consumers when adoption hits critical mass. Service Right channeling can allow retailers to optimize customer satisfaction and cost by coordinating across channels. Metrics and measurement Category gross margin is a good indicator of whether or not channels are working together effectively to drive sales. Organization and culture Category-specific P&L will encourage cross-channel collaboration and support customer-first decision-making. 39988 Source: Forrester Research, Inc. · Metrics and measurement — gross margin by category, not by channel. While channel measurement will most likely continue, retailers need to shift their focus to total product and category sales across all channels. Category gross margin is the number that they need to grow and is a good indicator of whether or not the channels are working more effectively together to drive sales. SETTING YOUR MULTICHANNEL PRIORITIES To help identify which practices to prioritize, we evaluated the needs of three types of retailers: store- based retailers, catalog-based retailers, and manufacturers (see Figure 9). Our analysis uncovered that: · Store-based retailers should focus on selling and organization and culture. Retailers that have a large store presence need to support their customers as they cross channels through the buying process. These firms have the biggest risk of losing these customers as they move from research to buy, so attention to multichannel research tools and services like reserve or buy online and pickup in store will have the biggest benefit. However, to ensure that customers receive the most consistent multichannel experience, store-based retailers need to incent the channels to work together and embrace multichannel cooperation companywide. · Catalog-based retailers should start with service. Because service is a core value proposition to many catalog-based retailers, it is a natural fit to focus on servicing the customer more consistently across channels. Implementing click-to-call or click-to-chat options can help to make sure that customers feel comfortable with their purchases and provides another opportunity to build loyalty and deliver on brand value. Catalogers with a large store presence should also focus on multichannel selling best practices as well as measurement and metrics. © 2006, Forrester Research, Inc. Reproduction Prohibited December 18, 2006
  15. 15. 14 Best Practices | Best Practices In Multichannel Retailing · Manufacturers need to overcome organizational and cultural hurdles. Most manufacturers were not organized with retail at their core, so their retail divisions are not always understood throughout the organization. But for manufacturers like Timberland, Nike, and Apple, the direct retail connection with their consumers was paramount to their success. These firms need to focus on changes in organization and culture to enable the shift in strategy. Because brand often rules for manufacturers, they also need to ensure that consumers have all the information that they need when researching a product and can easily find answers to their post-purchase questions. Figure 9 Multichannel Priorities Vary By Retailer Type Low importance Medium importance High importance Store-based Catalog-based Manufacturers Focus Marketing Product Brand Selling Multichannel applications Reserve, buy online/ in-store pickup Consistent pricing and promotion Service Service choice Extended inventory Organization and culture Incentives Leadership and training Metrics and measurement Margin by category, not channel Cross-channel consumer growth and satisfaction Loyalty programs 39988 Source: Forrester Research, Inc. December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
  16. 16. Best Practices | Best Practices In Multichannel Retailing 15 IDENTIFYING YOUR CHALLENGES Where should you start? Use this diagnostic tool to assess your current capabilities — and opportunities for improvement — and see how you stack up against your peers. Scores will be calculated automatically for online readers. All scores are anonymous (See Figure 10). CASE STUDIES We conducted in-depth case studies of two retailers to highlight multichannel selling and multichannel organization and culture. Circuit City: A Case Study In Multichannel Selling Our research shows that multichannel retailers have a significant opportunity with online- purchase/in-store pickup services. One of the best practices that we found for this was Circuit City’s 24/24 Pickup Guarantee program. We spoke with Circuit City execs and found out how training, empowering stores, marketing, leadership, and metrics helped the retailer successfully implement this program.7 REI: A Case Study In Multichannel Organization And Culture Our research shows that multichannel retailers need to focus on their organization and culture. REI’s efforts in building a multichannel culture represent best practices for other firms to learn from. The retailer developed a focus on the customer — that cuts across channels — with a combination of organizational restructuring, new incentives, training, and flexibility.8 © 2006, Forrester Research, Inc. Reproduction Prohibited December 18, 2006
  17. 17. 16 Best Practices | Best Practices In Multichannel Retailing Figure 10 Self-Diagnostic Tool For Multichannel Retailing Part 1: Selling Yes No Do you offer a Web application, such as a configuration tool, that bridges channels? Do you let consumers reserve or buy online and pickup in store? Do you provide consistent pricing and promotions across channels? If not, are your pricing and promotion policies clear and transparent? Do you let consumers reserve or buy products through their cell phone? Total Part 2: Service Do customers have service choice when browsing online (click to chat, click to call, prominent call center number)? Do all service channels have full and real-time visibility into orders and customer information? Do call center agents have visibility into relevant cross-sells, upsells, and promotions? Do you offer an integrated inventory at the store level to help customers order out-of-stock items from other stores or the Web? Do you optimize service options for customer satisfaction and low cost based on the value of the customer? Total Part 3: Organization and culture Do you provide incentives to help channels coordinate efforts and support multichannel initiatives? Are buying groups for stores and online combined? Do you view the online channel more than just another store? Do multichannel initiatives have an executive champion? Do you operate under one company P&L? Total Part 4: Measurement and metrics Do you measure multichannel customer growth? Do you measure multichannel customer satisfaction? Do you use your loyalty program or store credit card to track customers across channels? Do you use surveys to gather insight on multichannel consumer behavior? Do you track gross margin by category instead of channel? Total 39988 Source: Forrester Research, Inc. December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
  18. 18. Best Practices | Best Practices In Multichannel Retailing 17 SUPPLEMENTAL MATERIAL Online Resource The online version of Figure 10 is an interactive self-diagnostic tool that helps clients assess how their current practices stack up against their peers. Companies Interviewed For This Document Accenture Fry Ann Taylor GSI Commerce Anthropologie IBM ATG Lowe’s Avenue A | Razorfish NearbyNow Blast Radius PETCO Borders REI Circuit City Timberland Deloitte ENDNOTES 1 Source: Forrester’s NACTAS Q2 2006 Survey. 2 Although cross-channel shoppers spend big bucks in stores, they’re disloyal when they cross channels: 49% of cross-channel shoppers report buying their last cross-channel purchase from a different offline retailer than they used to conduct their online research. This brand crossover not only represents the loss of highly qualified and high-spending shoppers, but also the loss of a rich opportunity for upselling: $16 billion of the $126 billion that cross-channel shoppers spent in stores was on products in addition to what they had researched online. See the April 19, 2006, Trends “Understanding US Cross-Channel Shoppers.” 3 One of the key areas that multichannel retailers need to focus on is selling: supporting the buying process across channels. During our research, we uncovered a best practice in this area at Circuit City. See the December 18, 2006, Case Study “Circuit City: A Case Study In Multichannel Selling.” 4 More than $126 billion of offline sales are influenced by online research. See the April 19, 2006, Trends “Understanding US Cross-Channel Shoppers.” 5 Our research uncovered five levels of voice-of-the-customer activities: relationship marketing, interaction monitoring, continuous listening, project infusion, and periodic immersion. Companies should create formalized programs that address these different types of insight. See the December 1, 2006, Trends “Voice Of The Customer: Five Levels Of Insight.” © 2006, Forrester Research, Inc. Reproduction Prohibited December 18, 2006
  19. 19. 18 Best Practices | Best Practices In Multichannel Retailing 6 Companies want to differentiate products and services by improving customer experience. They also want to cut costs by shifting more customers from human-assisted channels to self-service channels like Web sites and phone self-service systems. Their dilemma: Even the best-designed automated systems have weaknesses that make them inappropriate for supporting many types of customer goals. To deliver effective customer experiences across a portfolio of channels, firms should document their customers’ current behaviors with cross-channel scenario maps and make the most appropriate touchpoints available at each step of the user’s journey. See the October 12, 2006, Best Practices “Match Channel Capabilities To Customer Goals.” 7 One of the key areas that multichannel retailers need to focus on is selling: supporting the buying process across channels. During our research, we uncovered a best practice in this area at Circuit City. See the December 18, 2006, Case Study “Circuit City: A Case Study In Multichannel Selling.” 8 One of the key areas that multichannel retailers need to focus on is organization and culture. During our research, we uncovered best practices in this area at REI. See the December 18, 2006, Case Study “REI: A Case Study In Multichannel Organization.” December 18, 2006 © 2006, Forrester Research, Inc. Reproduction Prohibited
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