In January, 2014 Accenture and Hybris, an SAP company commissioned Forrester Research to prepare a Thought Leadership Paper titled “Customer Desires VS. Retailer Capabilities: Minding the Omni-Channel Gap”. This study was based on in-depth interviews with 256 US and European retail decision makers involved with digital commerce initiatives and 1,503 multi-channel shoppers.
The Paper highlights four key findings:
- Technology investment is critical to enabling exemplary omni-channel customer experience
- Omni-channel customer experience is now a brand differentiator
- Many retailers have reached a false state of Omni-channel comfort
- New titles alone won’t cut it-retailers must abolish siloed channel strategies altogether
I sat down with Jerry Socol, veteran retail executive, founder of The Socol Group, and member of the Newmine Advisory Board to discuss the Forrester Thought Leadership Paper, with a particular focus on the organizational challenges presented within the last point.
The Omni-channel Financial Model
Let’s start with one of the key findings from the Forrester research: Only 6% of retailers reported no significant barriers to becoming an integrated Omni-channel company. Regardless of who is ultimately responsible for Omni-channel, a successful strategy requires more than just deep cross-functional alignment. Many retailers today are going further by unifying their P&Ls, organizations, and technology to ensure an obsessive focus on the needs of the customer rather than the needs of legacy channel structures.
JS: “It starts with the overall strategy. How do you set targets for the overall business and each channel in terms of growth, revenue, and profitability? In a true Omni-channel model it’s the brand that drives the business and the channels are co-dependent. The challenges of allocating sales credit include the offline and online channels, but also the marketing and promotional initiatives. The Omni-channel model is far more complex than a pure offline or pure online retail channel. For example, some brands have established flagship retail locations in major cities. While the store may or may not make money as a standalone entity, the impact on overall brand sales is significant- irrespective of the channel. In order for the Omni-channel strategy to be successful and to create the right organization, financial modeling and measurement must catch up. Today’s CFO must be an integral member of the management team that develops the strategy and must take a more active role in planning and adjusting the financial goals and strategy.”
Omni-channel Organization, Operations and Technology Barriers
Forrester highlights three major barriers that must be overcome to support the Omni-channel business model. These barriers are summarized as follows:
- Organizational and ownership challenges- Channel conflict despite the presence of cross functional teams, particularly when dealing with attribution of cross-channel sales
- Technology and integration challenges- Forty percent of retailers reported difficulty integrating back-office technology across channels, particularly when the goal is providing a consolidated, real-time view of inventory across stores and distribution centers.
- Operational and execution challenges- On top of the challenges around distributed real-time inventory, forty percent of retailers reported store associate training issues. The role of the associate is expanded to include much more than sales and the training necessary to support product knowledge, customer service, and the various functions required to support ship from store.
JS: “How do you invest your resources; the main one being people, to grow the business and maximize profitability? We discussed the need for an overall brand and complementary channel based strategy to drive and measure investment and revenue for the brand. Today’s organizations are lean and the line between merchandising, marketing and IT (information) is blurring. Plus, definition of each can vary by company. Realignment of resources must transition to support all of these critical responsibilities in the Omni-channel organization.”
“The three major barriers highlighted by Forrester all have their roots in the silo based structures of the past. Merchants must be able to plan and deliver product in each channel based on the Omni-channel strategy developed to support the influence of offline and online initiatives. Similarly, much of the difficulty with integrating back-office systems stems from the fact that they are dated and were not designed for a dynamic Omni-channel business. I recognize the magnitude of change, both financial and organizational, that is required with major systems changes. However, the customer is demanding more, not less and organizations not equipped technically, will lose out.”
“The third point around operational and execution challenges, particularly employee training is both critical and a larger task than you might think. The customer expects consistency with their experiences across the brand. They are not qualifying the experience by channel these days. That means that every person that “touches” the customer must be on the same page when it comes to brand culture, policies, products, and practices. I would also add that incentives that typically drive down to the director level should be extended to include those closest to the customer. Those that act as ambassadors to the customer should be incented and rewarded for providing the best possible customer experience.”
About Jerry Socol:
Jerry Socol is the founder and CEO of The Socol Group, a Boston based consultancy that provides business coaching, advice, and mentoring. Jerry has a long and rich history in both retail executive management and consulting. He is the former CEO of Filene’s (now Macy’s), J. Baker, and has held senior positions at other major retailers, guiding these companies to achieve significant growth. Jerry is a member of Newmine’s Advisory Board.
Newmine is a global retail strategy and management consulting company specializing in Omni Channel operations and technology. Our deep experience on both sides – industry and consulting – provides the unique value proposition to deliver strong results to our clients. Whether program management of complex E-commerce implementations or optimizing all operations behind the buy button, the adoption of our pragmatic and collaborative approach to solving Omni Channel problems positions our clients for success.
References and Credits:
“Customer Desires Vs. Retailer Capabilities: Minding The Omni-Channel Commerce Gap” A Forrester Consulting Thought Leadership Paper Commissioned By Accenture and Hybris, an SAP company.
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