WHITEPAPER OmnichannelRetail

MAX RYERSON
Digital Strategy Consultant
WHITE PAPER: Strategies for the future

of retail in an omnichannel world
First published on Which-50.com 16 November 2013
Todays retail landscape

Digital is changing the way we shop and in return it is changing the way retailers respond to our
demands. Like many industries, retailers are experiencing major disruption from digital: new
technology is changing customer behaviour, offering more choices and empowering the
consumer with information when they want, where they want, and how they want it.
Most executives understand multichannel - undertaking activities in several channels such as
online (eCommerce), a network of stores, social media, marketing events, and traditional sales
initiatives all tied by a back-end operations unit. However, multichannel implies that the
operations being undertaken in each channel are siloed (see figure 1 below).
In an omnichannel world there are no silos - each activity in each channel is not only seamless
from an experience point of view by virtue of the correct branding strategy implementation, but
is interconnected. All information is shared across all channels.
This is where many stumble in the nuance between both, but has a huge impact on the way a
business operates. It requires considerable shifts in managerial mindset, financial and human
resources, investment, and staff learning and development.
The debate around whether digitisation and omnichannel works or not has now clearly been
answered. Studies such as Telstras 'How you can join the Omnichannel Shopper in
transforming Australian retail have demonstrated the benefits of digitisation and omnichannel
retailing to the retailers revenue.
And numerous case studies have shown that one channel wont necessarily cannibalize the
other. Retailers who have adopted an omnichannel approach to their business and
appropriately invested in digital technology are seeing either level revenues or growth in their
overall revenue. Some examples include Macys, Burberry, Westpac, and CommBank.

www.maxryerson.com | mr@maxryerson.com
MAX RYERSON
Figure 1:
Macys for example now tracks online behaviour of its site visitors, promotes the download of its
app on TV, has tagged (using QR codes) products inside the store and made them scannable
using the app (and theyre tracking this too), and have transformed 500 of their stores into mini
distribution centres for online orders.
Another example: in March 2013, Westpac released an Australian Financial Services Market
Update on their digitisation of their retail branch customer experience and how theyve
leveraged mobile in their retail environments.
Their digitisation had major impact on their branch and channel design, technology and
processes, and peoples roles, mix and capabilities. Their efforts resulted in more inviting retail
environments with open and flexible branch layouts, 25 per cent smaller branch footprints with
larger front of house area (i.e. where sales are made), 24/7 self serve lobby convenience for
their clients, enhanced digital marketing, in-branch mobile technology deployment.
MAX RYERSON
This saw incredible gains in efficiency including a 20 per cent decrease in property and ATM
lease costs, 40% reduction in paper usage, and in some case net customer growth up by 40 per
cent.
According to the US Census Bureau, US online retail sales accounted for just over 13 per cent
of total retail sales in 2012 (excluding groceries, fuel, and automobiles). In Australia, NABs
Online Retail Sales Index shows online retail sales represent 6.3 per cent of total retail sales.
So bricks and mortar is still important but bricks and mortar stores will change significantly from
what we experience today Furthermore, as retailers are disrupted by market forces their
transformation will impact other businesses who will need to adapt as well. It will see the birth of
new businesses and the slow death of those who dont change.
Online retailer Amazon is driving six times more online sales than its closest competitor.
Retailers are now rushing to engage with their customers on the Web, mobile, and social media
but theyre forgetting one thing: in-store customer service. Its not about the technology its
about how you use it to satisfy your customers needs and create an emotional connection to
convert them to consume.
Looking at Apple, its bricks and mortar retail success is about the in-store customer experience.
Layout plays a part, design plays a part, technology plays a part, but what nails the success and
is the greatest differentiator is the staff that makes the customer experience so valuable. Each
staff member is highly knowledgeable about the products and services being sold.
Its a simple concept that seems other retailers are simply not investing in.
The fear by traditional retailers of the general assumption that online retailers would steal their
market share at a rapid rate is myth. No, the disruption caused by the internet and digital
technology has created highly needed and refreshing competitiveness, breaking down barriers
to entry into the retailing sector. In doing so it has lifted the veil on the status quo and stale
operating models that had not been challenged in decades.
The resulting disappearance of companies - retailers or non-retailers - is a product of their
inefficiencies in light of market forces not solely the success of online retailers.
What so many retailers have lost over the years in their determination to deal with global price
pressures is customer service and what consumers crave: experience.
MAX RYERSON
You dont have to look far to witness this: department stores are the stereotypical example of
this issue. Human being dont generally buy or consume based on rational thought process, but
most often on emotions.
Ultimately retailers who embrace both a digitally enabled omnichannel approach and a
customer-centric retail experience will undoubtedly succeed and sustain longevity.
One of the main market forces driving such structural shifts in retail is customer behaviour and
this behaviour has changed due to digital technology empowering shoppers by giving them
access to more choice (i.e. more competition) and real-time information on products, brands,
services regardless of geographical location.
Todays consumer behaviour

Traditional retailers who are not investing in training their staff to be brand, product and service
ambassadors, or not investigating and investing in the right digital technology and channels, still
have one competitive advantage: instant gratification.
This competitive advantage is quickly being eroded, not just by access to information and better
prices online, but by improvements in logistics. Driven by major organisations such as Amazon
(recently announcing their Sunday delivery service in the US through the postal office), Google,
Ebay, and The Iconic, who are either already offering same day delivery (sometime within a
couple of hours from purchase) locally or working on delivery in the coming hours at scale
across major metropolitan areas, instant gratification is coming to online shopping en mass in
the near future.
Returns are also still considered a significant barrier to online shopping. But studies show that
not only are retailers offering in-store returns seeing greater online sales versus retailers who do
not offer in-store returns, but this barrier is coming down with more retailers facilitating more
convenient return options for shoppers.
This structural shift in logistics will mean retailers will need to focus much more on in-store
customer experience, especially retailers of products that are perceived by shoppers as being
as conveniently purchased online as in-store - such as electronics, homeware, necessity and
basic fashion (t-shirts, underwear), household appliances.
This does not mean that the physical store isnt important - on the contrary research shows that
people still want to touch, feel, and inspect.
MAX RYERSON
A recent study commissioned by UPS and conducted by ComScore revealed the behaviours
and preferences of shoppers worldwide:
Europeans have the second highest rate of returns of online purchases (57 per cent)
and free returns shipping is the top element of a best returns experience.
In Canada, consumers are willing to wait an average of 10 days to receive their online
purchases and 69 per cent of consumers have added items to their carts to qualify for
free shipping
In the US, online shopping satisfaction is lower than 50 per cent for flexibility to choose
delivery dates and re-route packages while only 44 per cent are satisfied with flexibility
to reroute packages
In Mexico, 52 per cent of consumers want the ability to complete a purchase in-store on
their mobile
device and 67 per cent of shoppers want the ability to buy online and make returns instore
In Asia and mainly China, only 50 per cent of online shoppers are satisfied (including
only 38 per cent in Hong Kong) and 65 per cent have abandoned a cart due to shipping
time not provided
In Australia, shoppers have the second lowest online shopping satisfaction rate and 34%
prefer to access their favorite retailers in store versus via online channels
MAX RYERSON
(Infographic: What differentiates shoppers around the world. Source UPS)
MAX RYERSON
The future is not a world of dichotomy - of online and offline retail - but a world where there is no
difference between online and offline. Ultimately it will simply be commerce. In the future there
may still be online only retailers, however, it is doubtful that they will be any bricks and mortars
only retailers.
Recommendations for operating in an omni-connected world.
(1) Managerial mindset:
Digital is a facilitator, not a stand-alone resource. Over time digital will be the way we do things.
Actually we have been doing digital for sometime but we have known it as information
technology.
Step back in time for a moment and imagine telling someone they would be using personal
computers to type reports, keep accounting records, update their rolodex, send telex messages,
access their bank records, write and calculate complex financial equations. Most would have
thought of personal computers as a stand-alone resource. Yet today no business operates
without some form of IT. Digital is the label mainly for the convergence of information,
technology, and end-user delivery through consumer-centric interfaces.
Digital has become the buzzword because while IT was focused on process optimisation, digital
is about communication optimisation.
Communication is engagement. Engagement is attention. And attention is what businesses
strive for to garner from their potential audiences in order to tell them about a product or service
in the hope those listening will convert and purchase repeatedly. Digital optimises this
process.
Coming to grasp with the potential of this communication optimisation is the ongoing challenge
as well as a field for innovation, and an area for research.
And because it is about communication it not only affects the obvious business areas marketing, communications, PR - it impacts all areas of a business.
And so it should, if a business is to truly make the most of digital. Much like IT today you would
not only have computers being used by the accountants, digital too should not just be a
marketing initiative.
With this understanding comes a real mindset challenge. The mindset needs to change as it did
when people had to let go of paper ledgers and typewriters. Its a mindset that thrives in start-up
environments because being at the cutting edge of something, exploring the unknown, is a
MAX RYERSON
place filled with trial, error, failure and only those who can grasp and be comfortable in this
environment will be able to make the most of digital, and learn from and adapt to the findings of
errors and failures.
The notion of failing often but failing fast is a very real one in the digital age - one that
challenges the core foundations of so many companies entrenched in the certainty of things and
processes that have been in place for decades.
Failing to change a mindset leads to business failure in the long term a term that is
decreasing in length at a greater rate than in the past as a result of emerging technologies and
rapid behavioural change.
Famous examples now include businesses such as Blockbuster and Borders Books.
Mindset changes wont limit themselves to embracing digital communication practices, but also
to digital ownership a point investigated by my fellow Which-50 contributor Malcolm Alder
recently.
The proposed solution is having a clear strategic business purpose, identifying digital needs and
responsibilities, and actively manage alignment. And this should come from the most senior
managers whose responsibility it is to make sure that it permeates throughout the business.
(2) Omnichannel operations
Once you have overcome and have started to change mindsets - which may take up to several
years in some cases through development of strategy and buy-in from all stakeholders - youll
need to evaluate, adjust, and invest in omnichannel operations.
Companies like The Luxottica Group took two years to formulate their digital strategy,and are
now embarked on an 18-month implementation. They have increased their investment in digital
technology by 300 per cent which translates into of millions of dollars They have hired
extensively to create a digital marketing team, and have a senior vice-president with a dedicated
team overseeing digital across the group and reporting to the leadership group.
Your IT department (internal or outsourced) should lead and facilitate this by working closely
with all business units. They need to capture all the requirements of the business along with the
over all business objectives, but also for each business unit.
Two of the most important elements to consider in this process are:
Your business customers
Your staff as end users of the systems
MAX RYERSON
Too often IT departments think a system is fantastic in their ultra geeky world view, and then
push it use onto business users resulting in a negative user satisfaction rate. User interface and
user experience (UX) is vital in the adoption and usage of any system by your staff. If it looks
rubbish and is visually over loaded with features, then staff will dislike using the system. Having
interfaces that progressively disclose features is the way to go when building powerful complex
systems.
Your system should integrate your CRM, sales and POS, responsive Website (content
management and analytics), order management and fulfillment system, inventory system,
supplier management system, digital marketing system (email, social media, display advertising,
search engine marketing), in-store technology including wifi and other tagging and tracking
technology (such as TapStars new loyalty system), and third party data feeds.
MAX RYERSON
Your omnichannel system should then be able to optimise your operations by answering
numerous questions. You should be able to run business intelligence reports and gain valuable
behavioural insights that will maximise your marketing efforts, delivering a higher conversion
rate, repeat visitations and purchases, and ultimately increase your ROI:
Who are my clients, really?

Who are my most valuable clients, most valuable demographics, and most valuable
customer profiles?
What do my clients like best, what and when do they buy most?
How do they use the store?
How should we optimise visual merchandising?
What is their favorite delivery option? Is in in-store pick-up, home delivery, office
delivery?
Should a particular store stock for local distribution of online orders?
Should it become a showroom?
Should it accept click and pick up orders?
Should it stay open?
What do clients think of our staff?
Where should we open another store?
The benefits of interconnecting all systems will give you a big data approach to your business
operations. For example, by using in-store technology including wifi and tagging all the products
you sell you will be able to understand where shoppers are spending the most time in your store,
how they are navigating the store, what they are looking at the most, and what they end-up
purchasing.
Technologies from providers like as TapStar, Vmob, or IBM can help you transform your store
into a data capturing hub and deliver smarter in-store experiences to shoppers in order to build
loyalty.
Overlaying this with content such as social media engagement and real-time offers youll be
able to increase your in-store conversion rate. Tracking mobile and online behaviour will give
you a better understanding of who your customers really are - each particular profile - and which
profile is most valuable. Adding third party data from companies such
as Experian and Quantium will enhance your understanding of where your customers live, what
their online and offline habits are, and how they spend their money.
Centralising your data and implementing technology that tracks mobile devices and behaviours
(such as dwell time, purchase paths, attribution, conversion, when and how your customer
interact with their world, your brand, and your competitors) will also allow you to understand how
to optimise your stores layout, and your trade area impact.
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MAX RYERSON
But beyond technology and digital insights, one of the most overlooked and powerful
investments is your in-store staff - your front line sales team - those who interact with your
customers and who represent your brand. The more knowledgeable they are the better they will
be able to serve your customer. The more satisfied your customer feels about the service they
receive the more likely they are to purchase and repeat purchase from your store.
So what would your retail business look like?
It would have an IT system in the cloud- not because thats a buzz word but because it will be
more cost effective long term while allowing for much greater flexibility to access services and
data going forward - that integrated all-business-units system in a complex database and CRM
solution. This database would collect all data created by all business units (leasing, supplier
management, inventory, order fulfilment, POS and online sales, marketing, in-store technology
monitoring and management) and share it as needed across all business units and their
systems.
The website would track online behaviour (visitations, pages viewed, repeat visitation, time
spent, visit navigation, conversion, shopping cart abandonment, content viewed and clicked),
along with time, location, history of each visitor, preferences, demographics.
It would offer an easy ecommerce service with as few steps to purchase as possible, with clear
buy buttons throughout, a visual representation of the steps left to complete the purchase, and
information regarding delivery and return options constantly displayed during the process. The
ability to offer the shopper as many delivery and return options is a major factor to order
completion.
Allowing shoppers to either pick up their order in store, have it delivered in a few hours
(express), or delivered in a couple of days (rapid), delivered in a week (slow), or delivered to a
locker located on their commuting route for example (Australia Posts locker network), or even
pick-up from warehouse. Such options will be invaluable in the future success of ecommerce.
Mobile applications are another essential ingredient that includes:
Smartphone apps - this application would not try to be everything to everyone but
instead would surface the relevant content based on the users profile (history,
preferences, demographics), location, and situation. Analysing those three elements
(profile, location, situation) the applications would dynamically surface the most relevant
content for the individual user at that particular place at that particular time. This
application would focus on basic information and the ability to review and research
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products (including prices), navigate to and inside the store, and receive in-store
recommendations including offers triggered by the users behaviour.
Tablets - this application would be purely focused on browsing, pricing, comparing,

recommending, and purchasing products and or services. It would be a glossy magazine
type of application, rich with content. Like all other digital technology it would track and
store user behaviour data.
Your order management system would precisely track inventory levels, recommend price points
to negotiate with suppliers, automatically place orders for stock replenishment with those
suppliers, integrate with warehousing, and by using customer behaviour data it would anticipate
likely items that will sell out fast or that are likely to be purchased. It would handle fulfilment
options, tracking, shipping prices, taxes, and returns.
Your stores would be tailored to their location within your larger trade area and would reflect the
most valuable customer profile of that location. Most of you stores would be showrooms with
warehousing/stocking facilities to fulfil both local online orders and click and pick-up orders.
Your stores would have digital technology installed to constantly learn and improve your visual
merchandising and store layout. The digital technology would be interactive and tie in with your
mobile application to optimise conversions. It would also be used to enhance the experience
such as scanning an item on the shoppers smartphone or taking an item to a flat screen display
to learn more about the product and offer recommendations of other products to the shopper
(cross + up-sell).
As showrooms, your stores would stock every item you sell in all the possible options, and
technology (such as iPad, NFC/paywave/Square/PayPal Beacon) would make their purchase as
easy as possible. The orders would then be delivered to the shoppers prefered delivery option
within hours. Using the application or the website the shopper could have either purchased
online or checked for in-store inventory had they wanted it sooner than 2 hours.
Most importantly both your in-store staff and call centre staff would be highly trained about every
product and service you sell, and go above the expectation of shoppers to help them find what
they are looking for, even price comparing to the local market and matching the lower price
found (as happened to me at an Apple store recently) - making for a pleasurable customer
experience and increasing the chances of loyalty and repeat purchase.
When it comes to marketing, focus your efforts on;
your website and applications dynamically presenting content, offers, and
recommendations that the individual shopper would be interested in most
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MAX RYERSON
using data analytics across all the customer information your omnichannel system
gathers, focus on social media in your particular geographical areas (mainly through
Facebook) with a well crafted content strategy around an established conversational
calendar (including crowdsourced content, competitions), digital cross promotion, SEO,
SEM, some digital display advertising, online video advertising
using all the customer data available, look at branded content initiatives that are most
relevant to your most valuable shopper profiles
and very carefully choose some traditional advertising across print, outdoor, radio that
targets your most valuable shopper profile.
The future of retail is in the hands of retailers. Those who adopt the right mindset, the right level
of investment in an omnichannel approach to their business, in technology, in human resources
and in staff training will succeed. This is due to significant market forces driven by major
changes in consumer behaviours powered by technological innovations and shifting control to a
consumer population now exposed to a vast amount of choice never seen before at each step
of the purchasing path.
This means consumers are now able to choose how, where, when, and at what price they are
willing to purchase a product or service.
Remembering that convenience and customer service are key, the simplicity of customer facing
operations (website, mobile, in-store layout and visual merchandising) will present the
convenience sought, while training staff to have a deep knowledge of products and services will
deliver the expected customer service, leading to loyalty and repeat purchases.
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MAX RYERSON

Digital Strategy Consultant

WHITE PAPER: Strategies for the future

Todays retail landscape

Todays consumer behaviour

(Infographic: What differentiates shoppers around the world. Source UPS)

Who are my clients, really?

Tablets - this application would be purely focused on browsing, pricing, comparing,

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