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Omnichannel commerce

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Presentation by Jennifer Lee of Deloitte on Mobile Commerce for the Toronto Product Management Association, March 27th, 2013.

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Omnichannel commerce

  1. 1. Retail’s changing landscape Evolving from a multi-channel to an omni-channel customer experiencePresented by:Jennifer LeeMarch 27, 2013
  2. 2. Discussion items• Retail business model disruption• Implications• Shifting to an omni-channel world• Case study: Starbucks• Our team1 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  3. 3. Retail business model disruption2 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  4. 4. Retail business model disruptionOmni-channel The recent The present: The future: The past: past: Store 1.5 Store 2.0 Store 3.0™ Store 1.0 e-commerce multi-channel omni-channel Customers will We need to sell online Many customers shop Relevant products and come to us across channels services anywhere3 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  5. 5. Deteriorating store metrics “The big box store is not the right concept for the future.” Robert Dutton, CEO We will have to start downsizing our stores over the next five years as customers shift to e-commerce. On their smaller stores: “When you combine lower rents, lower build out and a smaller total footprint with high sales per square foot, it’s a very powerful economic model.” Walter Robb, Co-CEO “We’re looking for more ways to combine our e-commerce business into our bricks- and-mortar stores to create an integrated, multichannel shopping experience for our guests.” Daniel Duty, Director of Enterprise Strategy Shoppers Drug Mart CEO has commented that shrinking the size of Shoppers stores is part of the company’s strategy going forward. “This industry is under pressure. We are facing the single worst commercial environment that the drug sector has ever faced.” Domenic Pilla, CEO 363 stores and Who’s next? growing Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  6. 6. Changing consumer behaviourMobile price checking is becoming a competitive threat Makes pricing transparent Reduces the number of store to anyone trips to comparison shop Customers buy from your Reduces store transactions competitors in your store! … but it’s just the thin edge of the omni-channel wedge5 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  7. 7. Changing consumer buying behaviour Multiplier Consumers are using multiple channels Smartphones have become an integral effect to research and purchase part of the purchase process5 Multi-channel consumers are not loyal; Research on smartphone and 43% do not research and purchase from the 67% then buy in-store5 same retailer1 Research on smartphone, visit Shoppers use two or more channels to 78% store to check out product and 23% research and purchase an item2 then purchase online5 Smartphone users are interested in Research on smartphone, visit using their mobile phone to pay for an store to check out product and 16% 41%A item in-store, rather than using a then purchase on smartphone5 cashier3 Tablet owners use their tablets for Visit store, then purchase on 60% 9% shopping purposes4 smartphone5A) 45% of male respondent and 38% of female survey respondents indicated that they would be either “very interested,” “interested,” or “somewhatinterested” in checking out on their mobile device while in a store,Sources: 1) 2007 Forrester “Web’s Impact on In Store Sales” , 2) 2011 March “Cross-Channel Commerce: A Consumer Research Study”,Oracle White Paper, 3) 2011 April “Mobile Trends: Consumer Views of Mobile Shopping and Mobile Service Providers”, Oracle White Paper,4) 2011 July “Why Tablet Commerce May Soon Trump Mobile Commerce “, Forrester, 5) Google Insights6 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  8. 8. Implications7 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  9. 9. Purchase path was seen as traditionally linear • Social interaction • Product discovery Pre-Purchase • Marketing • Price-checking • Cashless/cardless Purchase purchase online or in-store • Self-checkout • Order management Post-Purchase • Customer service • Loyalty But there’s a new reality…8 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  10. 10. Connected consumers define the path – It is not linear! Erica is 13 years old and an example of the connected She checks for blogs consumer. She is interested in a and posts on the new game for her PS3. manufacturer’s web site.How Erica buys She checks with friends on Facebook to see how they liked the game followed upShe uses a PC to check for by face-to-face interactiononline reviews of the game. at school. Ultimately, she buys the gameShe uses a mobile device to in a physical store, but wouldcheck prices at retailer’s web have bought online if she hadsites. Note: she will abandon a gift certificate or pre-paidweb sites with poor credit card.functionality.9 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  11. 11. The future role of the store will be very different Present… … Future10 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  12. 12. Shifting to an omni-channel world11 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  13. 13. Retailers recognize the need to changeAs a result, omni-channel retailers are evolving into a more integrated businessmodel where all channels share a common strategy for profitable growth “Technology will form the way people shop and the way retailers need to redefine their model…I think there are many developments coming down the line which will transform how we define ourselves and how customers define what a good shopping experience looks like.” Andrea McDonnell, Head of Multichannel strategy “We are now as much a media-content company as we are a design company because it is all part of the overall experience.” Christopher Bailey, Creative Director for Burberry "Its clear to me the customer has evolved and changed the way they shop and we have to change with them. Theres no going back… The power of e-commerce extends far beyond the keyboard and onto the sales floor.” Terry Lundgren, Chairman, CEO, and President of Macy’s, Inc. “Much of our focus on digital is because we think the survivors in the industry are going to lead in this category.” Myron Ullman Chairman and CEO “The ability to allow our customer to take advantage of Walmart’s price leadership whenever and wherever she wants is what underpins our multi-channel strategy…In order to fully evolve into a multi-channel retailer here in the US, we need to make our organization, particularly in Merchandising and Marketing, channel agnostic.” Eduardo Castro-Wright, Vice Chairman of Walmart12 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  14. 14. Transforming the business modelThe multiplier impact of omni-channel Multi-channel effect (2015f) Online research/In-store purchase = 5.40x Mobile research/e-commerce purchase = 2x Mobile research/In-store purchase = 4x $103.4 billion 13.1 Digital goods Multiplier effect (2010) Online research/In-store purchase = 5.77x Mobile research/e-commerce purchase = 2x Mobile research/In-store purchase = 2x 79.6 E/M- commerce $37.1 billion influenced 9.4 sales 26.0 6.0 M-commerce 4.0 17.8 E-commerce 7.1 2010 2015f13 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  15. 15. Transforming the business model of retailersRetailers will experience significant profit improvement and brand awareness by investing inomni-channel capabilities Omni-channel Store e/m-commerce sales Sales ($000’s) $900 $300 Gross margin 47% 47% Occupancy and labour 26% 0% Online costs 0% 15% SG&A 11% 11% EBIT ($000’s) $90 $63 Conversion 20% 3% Traffic (000’s) 90 20014 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  16. 16. Nordstrom and Macy’s are outperforming peers since thelaunch of their omni-channel initiatives Quarterly growth rate of Nordstrom and Macy’s vs. Department store sector 20% Quarterly Revenue Growth (YoY) 15% Nordstrom launched omni-channel initiative Nordstrom 10% Macy’s 5% Department store sector1 0% -5% -10% -15% Macy’s launched -20% omni-channel initiative Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 2006 2007 2008 2009 2010 2011 Difference in quarterly growth rate Nordstrom 10% 15% 17% 12% 7% 7% - 1% - 1% 1% 9% 11% 16% 22% 17% 15% 15% 9% 9% Macy’s n/a 8% -2% 2% 0% 2% -2% 2% 1% 3% 2% 5% 4% 3% 6% 8% 9% 10% 4% 3%15 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.
  17. 17. Pure plays are realizing the economics of havingphysical presence • Dubbed “Chrome Zones”, Google introduced a pop-up store to introduce “Chromebook” • While sold online only, Google offered customers an opportunity to test and experience • The eBay Christmas boutique in London was stocked with 350 eBay best sellers • Customers connected with eBay via smartphones and learn about how easy it is to shop eBay with mobile • WIRED magazine introduced a pop-up store featuring gadgets, art installations and special events that embodied the “WIRED lifestyle” • The WIRED store provided a unique channel to physically interact with its consumers that WIRED had not previously met16 Retail’s changing landscape – omni-channel customer experience © Deloitte & Touche LLP and affiliated entities.

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