Why no-one is doing true omnichannel – and what that means for retail

‘Omnichannel retailing’ is one of the sector’s big buzzwords at the moment – but one that all too few people beyond the industry truly understand and one that many in the industry really don’t like too much due to this very opaqueness.

When you boil the term down to its basics though, what it’s actually about is providing an optimum customer experience, says Danny Bagge, executive head of retail at IBM UK and Ireland.

“Most organisations are very product-centred so they focus on how efficiently they can get product to where it needs to be. But omnichannel is not that – instead it’s about what’s right for the customer,” he explains.

This, in turn, means enabling consumers to control their own experience – making it easy for them to access your website should they wish to do research, use their mobile phone in-store to make price comparisons and to call your contact centre if they want a tailored service – or any combination of the above.

Because, ultimately, the aim is to develop a long-term, mutually loyal relationship with people. “It is not about taking money or data from customers every time you talk to them. It’s not all about the basket,” says Bagge. “Instead, retailers need to build a relationship, and in doing so take a more holistic view.”

Here we discuss with him just what is involved in adopting this much-talked about omnichannel approach, who is on the right track and what the future is likely to hold:

Q. What is the business case for moving to an omnichannel approach?

A. The business case is growth because, for lots of clicks-and-mortar retailers, store growth is low or flat-lining. While ecommerce is seeing double-digit growth, it is still a small proportion of an organisation’s total business. So omnichannel is the joining point –how to get that great online growth into the huge scale of the store’s business.

But omnichannel should really also achieve cost reduction. You can cut the cost of your processes by opting to deliver them digitally – for example, many stores spend money on classroom training, but it is arguably more cost-effective to enable digital on-the-job learning and there are many good examples to prove this, where retailers have chosen lowest cost channels to change their operating models.

Q. What impact are millennials having on all of this?

A. Millennials are the bell-weather because they’re driving great new experiences that other generations are learning from. So they’re having an impact on others.

For instance, their desire for immediacy is starting to make others think ‘why should I have to wait?’ Millennials want the total experience so if retailers can get it right for them, they’ll get it right for everyone else

We recently ran a panel with five millennials for the board of one of our largest digital customers, and their responses were really insightful - you can design experiences much better just by asking the real consumers.

The panel re-enforced with real live examples the importance of social, mobile and location-based services. The ability to engage socially is huge for millennials and they all like to share content with friends before they buy.

But it’s immediate, not in an hour’s time – and mobile is great for immediacy and the ability to take content, like pictures, with them. For millennials they demand what is currently aspirational and convenient shopping experience.

Location, meanwhile, means that they’re happy to be marketed to - if it adds value and it’s in context, i.e. ‘don’t send me something like a voucher tomorrow if I need it today and don’t spam me’. They want to drive their own customer experience rather than have retailers do it on their behalf.

So the key words here are the three ‘I’s – immediate, innovate and influence. Millennials may not have much money just now, but they’re a retailer’s secret resource in that they’re happy to try things out even if they’re not 100% there yet.

And that’s at the core of retailers being agile – put it out there, see if it works and then refine and improve before you try it out on the rest of us.

Q. Where are retailers at today in terms of moving to omnichannel?

A. No one is doing true omnichannel at the moment because of all their technology infrastructure and legacy processes – what we now mostly see is multichannel. As a result, the constant message today is ‘where is omnichannel in my stores? The next step change is getting digital into physical operations.

So, if we look at how the shopping experience could be enhanced using digital, you might introduce a mobile concierge, instant product information, vouchers or coupons at the till and employees having access to data so they know as much as the customer they are serving. However the principle should instead be “how can digital add new value and insight”.

There’s a lot of interesting strategic work ongoing at store level right now. Retail operations are optimising and doing good work, but the next step is to rip it up, throw it in the air and create new experiences.

The problem is that retailers still have a sequential flow in their heads – home page, search, product selection, product details, buy and deliver.

But they should be asking ‘what is the real flow for you and other people like you? Can we use new technologies to change how we search, pay or get updates?’

So the idea is, if you know I’m a certain person, find others like me and just market those products to me and nothing else using a hefty chunk of social, neurolinguistics and big data analysis to find out what I want.

It’s DNA-specific and very liberating because, by definition, it has to be different for each group. So for me to be loyal, you have to understand my DNA and use the right channels at the right time to give me the shopping experience I’m after.

As to how you go about doing it, the secret is to be iterative. Try it out – many companies have innovation labs – and do some social marketing, explore how people buy in your store and do price analysis. Then give it a go with a range, a segment or a category group, do a few of these and then work out how best to take it forward.

If you can get it right, you’ll be able to generate growth very quickly and it doesn’t have to be expensive. If you’re doing heart and lung surgery it will be, but really it’s cherry-picking the best of social, location and mobile.

And so attitude and mindset is one of the biggest challenges here. There has to be good governance in an organisation to enable the conversation and there has to be a willingness to do it quickly

Q. What other key challenges are retailers facing in going down this route?

A. The biggest challenge is agility in decision-making: getting people in the business to take decisions quickly - and that cuts across the whole organisation, not just marketing or IT. Barriers exist in every organisation and the challenge with omnichannel is to remove these. It is a change management challenge as much as a technical one.

Therefore, agility in decision-making is being able to influence the rest of the organisation to create new experiences. Everyone has to start working together and you need a change management programme to achieve it.

Another issue is integration - integrating old and new systems, as we’re back to millennials wanting things immediately, which is hard. However, it’s also integrating people and processes. If your marketing and supply chain processes don’t work together it is hard to offer an integrated experience.

However, we are starting to see big transformations, particularly where retailers are getting their heads around the mobile experience. To do so requires access to all of the processes you’ve ever created, except now things are immediate and you’re sharing them with stores, your ecommerce site and CRM systems. So it requires agility of thinking.

A further consideration is that, while lots of retailers are getting good at managing and manipulating their own data, they’re not so good at including other external data to really gain new insights. So for example, they’re not using weather or event information to help them decide what they should market or merchandise by locality.

For me this is at the heart of analytics in retail, being able to bring back ‘local’ to every day operations. There are trials happening and some good use cases exist, but pick your top five retailers and they’re not doing as much as they could. It’s very much a work in progress.

Q. Do you have any examples of retailers who are on the right track?

A. I have three personal examples of companies that I think are getting it right in terms of providing a customer experience based on their brand values.

The first is Pets At Home because you go in there and they’ve got it nailed on loyalty.

Their products and brand lend themselves to building a relationship just because of what they are, but they also have a very simple loyalty card process. So if you forget your card, you can just give them your registered mobile number and you’ll still get your discount. It’s easy. The points also go to pet charities.  Back to loyalty.

The second one is Nespresso. It’s a company that has really used digital plus physical to offer a service that is quite aspirational for other retailers to consider. So it’s not just selling coffee capsules. It’s giving you a luxury brand experience that’s based on a relationship because they’ve made it subscription-based.

The third is business-to-business marketplace Alibaba.com. It’s staggering what it can do in terms of breadth and it enables someone like my daughter to design something or find a great idea on Pinterest, go to Alibaba and get someone in the developing world to create it, market it to her friends on Facebook and sell and deliver it via eBay. But Alibaba as the global marketplace of buyers, sellers and manufacturers is the crux of it all and it’s based on convenience.

Q. What will the retail customer experience look like in 10 years’ time?

A. In 10 years’ time, we’ll have done omnichannel and will be onto the next transformation. And the next transformation will be personal ecosystems, which means that it won’t just be retailers offering a fantastic experience across all kinds of channels.

Instead, you’ll have organisations that you like working with and which will all work together cohesively. So it won’t be about an individual retailer working in its own silo – it’ll work with other organisations such as local government, transport or banks, and I’ll drive it all to create value that give me a wow experience.

Undoubtedly privacy is a huge issue here, but technology will help to solve that problem. So everyone will have their own licensed bank of loyalty data, which you’ll only award to people that you trust and which you’ll revoke if they breach that trust.

But where it gets really clever is that organisations will also have to provide statistics on how many people have awarded or revoked access so that consumers can see what’s happening and be masters of their data.

So your data becomes an asset that you own and control and that no one else can access without permission. And the system really makes it clear just who you can trust or not, which is key.