March 2010 – Online Insights: Strategy

What Does Cross-Channel Really Mean for Retailers?

According to a paper from Harvard Business School titled “Crafting Integrated Multichannel Retailing Strategies,” more than 80 percent of retailers are now selling across multiple channels, including physical stores, websites and call centers. However, according to Forrester Research, less than a third of retail executives say their companies can provide a consistent customer experience across those channels.

While some retailers have implemented specific cross-channel initiatives such as the ability to purchase online and pick up the order in-store, very few are able to go beyond these basic transactional capabilities. As retailers develop their cross-channel strategies, it’s important they understand the three core principles of a true cross-channel experience.

A Single View of the Customer
In a recent CrossView study, we evaluated 26 leading multichannel retailers and assessed their cross-channel capabilities. We researched products, completed orders and tracked customer information across the online, call center and in-store channels. Of the 26 retailers we examined, only one–cross-channel trailblazer Best Buy–could access a customer’s online profile in-store. For the vast majority of retailers, this relatively straightforward–and potentially valuable–request proves to be a challenge.

Access to cross-channel information isn’t just an in-store problem. We found that in 62 percent of call center interactions, the customer service representative couldn’t access online customer profiles, either.

It’s fair to say, then, that although modern retail systems do a good job of capturing a tremendous amount of customer data, very few retailers can leverage that information to provide a single view of the customer across their sales channels. Having equal and consistent access to customer information–including customer preferences, order history and recent behaviors–is the key to creating a focus on the customer, no matter where they are.

An Endless Aisle of Inventory
Every day, countless orders are lost because products aren’t available when and where they’re demanded. Consider the simple example of a customer asking for a shirt in a specific style and size that isn’t on the rack. The product they’re looking for could be available in another store just a few miles away, or at a centralized distribution center waiting to be shipped to the customer’s home. Having visibility into available inventory regardless of location, coupled with the ability to then fulfill to any location, allows a retailer to save the sale and increase customer satisfaction.

Although this concept of the “endless aisle” has received a growing amount of industry attention, many retailers are challenged to make it a reality within their organizations. For example, according to Janet Sherlock at AMR Research, just over half of retailers are able to fulfill orders in one channel with inventory from another. We consider this capability critical for any retailer looking to derive maximum business value from their cross-channel platform.

A Consistent Customer Experience
Inconsistencies are a flashpoint for customer defection and lost sales, so retailers know that their brand experience should be consistent across channels. The same look and feel, the same tone, the same level of service–whether in a catalog, online or in-store–are all critical to maintaining a consistent experience with the brand.

Equally important is the need to maintain consistent pricing and promotions. In the CrossView cross-channel study, 58 percent of retailers offered different promotions across channels. When a customer is presented with an inconsistent experience, it can breed several levels of discontent. First of all, there is the immediate frustration that they aren’t getting the best deal. Second, and perhaps more important, the customer may feel they are being treated unfairly, creating feelings of mistrust and damaging brand loyalty.

In a true cross-channel environment, promotions and pricing are addressed once by the merchant and then leveraged across all channels. The retailer has the ability to initiate a promotion across the board, so the shopper who browses the catalog at home finds the same deals when they log in online or stroll through the store.

The Implications of Wider Cross-Channel Adoption
In spite of the clearly identified customer value of a cross-channel experience, the reality is that many retailers are bumping into the same barriers again and again. Just as we’ve defined some of the most important cross-channel principles above, it’s also critical that we address in clear terms what implementing a cross-channel solution will mean for retailers going forward.

A brief look at the evolution of online retailing provides a better understanding of the current divide in the retail business environment. The web started as a small offshoot of traditional retailing. When it entered a period of unprecedented growth, it became apparent that the web presented a formidable revenue opportunity and significant brand experience. Suddenly, the online channel had a seat at the table, so to speak. Unfortunately, that growth as an almost separate entity created side effects that are now obstacles to multichannel adoption.

The ramifications are clear. Different channel leaders are competing with one another–rather than working in tandem–for both customers and sales. For example, if the manager of a retailer’s physical store is incentivized based on in-store sales only, it’s understandable that he or she would be focused on converting and selling to the customers they have within their four walls. But this leads to lost sales and a bad customer experience.

The time has come for retailers to reinvent themselves and reconsider the traditional way of thinking. Consumers are becoming savvier by the minute. Those out shopping today already expect retailers to have these core cross-channel values in place. They become frustrated when they can’t move seamlessly between the web, the store and the call center. They become especially frustrated when they uncover inconsistencies in the overall experience, feeling that retailers are imposing their internal challenges on them, making it the customer’s problem.

A retailer risks higher customer defection and a loss of brand loyalty, which all translates into a loss of revenue. This is exacerbated by the rise of social media, which allows word of one bad experience to spread like a virus, impacting a retailer’s bottom line in near real-time.

What does this mean? The technology exists today to support full cross-channel adoption. The most significant obstacles remaining are the internal silos and the lack of alignment within the merchant organization. As a result, retail managers must lead from the top down to break apart existing barriers and advocate for improved processes for a new business environment. A retailer will need to examine all aspects of their operations–from bonus structures to organizational structures–to determine how each piece fits into a more integrated approach. Most important, retailers must establish clear cross-channel goals and metrics, and commit to ongoing testing and measuring against those goals to achieve maximum ROI.

Mark Fodor is CEO of CrossView, providers of multichannel commerce solutions for both B2B and B2C organizations. He can be reached at mfodor@crossview.com.