Happy customers who come back time after time. They’re what all retailers want. They drive revenue and profits. Their purchasing power pays dividends to shareholders. Further, those same customers can be your biggest advocates, happy to tell people about your brand and their experience with it. Of course, that happiness rests on your ability to provide them with an effortless service, when they want it and from where. More often than not today’s customers also want instant gratification: to immediately know that what they’ve bought will be with them faster than ever before.
How you achieve this is down to your ability to operate as an omnichannel retailer. Only with a true omnichannel strategy can you deliver a seamless customer experience, regardless of which touchpoints your customers use. Increasingly referred to as ‘unified commerce’, the vision is a business design incorporating fully integrated and aligned processes, systems and applications across both the back office and customer-facing channels.
This Point of View considers how a true omnichannel retailer does (and doesn’t) operate and asks why so many companies have yet to achieve omni status. We also discuss what success looks like and offer recommendations for your evolving digital and omnichannel journey.
What omnichannel is and what it is not
Perhaps you’ve invested in eCommerce, digital in-store systems, social/mobile customer engagement, intelligent automated customer service, and more. But is that really omnichannel? It is certainly ‘multi’ channel, yet there’s much more to being an omnichannel retailer than this.
Cutting across so many departments and lines of business, an omnichannel strategy must embrace everything from people and processes, to the underlying technology platform. Further, to be effective it should be driven either by the CEO or at Board level, with each Board member putting aside their individual objectives or targets in support of a single, consistent omnichannel vision. This will ensure it is a wholly collaborative strategy and not weighted towards one channel or line of business over all the others.
Operating an agile business model
To be truly omnichannel, getting the underlying capabilities aligned is equally, if not more important, than a focus on the channels themselves. That means everything from ensuring a single enterprise-wide customer view, to aligning product data, pricing, promotion, procurement and inventory management.
There is limited value being agile and flexible at the point of sale if order management, stock and inventory, replenishment, distribution and accounting systems are unable to absorb the necessary change.
Thus, the entire enterprise must operate within an agile business model designed for flexibility and change. Currently, while many organisations claim to be omnichannel retailers, there are very few businesses really structured and operating in this way.
Why are so few retailers truly omnichannel?
With each new customer touchpoint, such as a disruptive mobile channel or a personal recommendation app, new opportunities arise. It is important that your business is agile enough to engage with customers and capture orders from these new touchpoints – as well as from existing channels – to maximise sales. This includes B2C sales, B2B sales, private sales, flash sales, co-branding, employee sales, marketplaces, mobile apps, instant shopping apps and online magazines.
However, the way in which companies set up their operations is a critical barrier to omnichannel. We typically see each of these touchpoints operated as a silo, which begs the question ‘how can you ensure the customer experience is consistent across them?’ This consistency is increasingly vital because customers like to hop between channels on their purchasing journey and expect the same price and availability, wherever they’re shopping.
Why consistency is key
A key challenge with traditional retail organisation structures is that different customer touchpoints are managed and measured as separate lines of business (LoBs), which can be competing with each other as they seek to optimise their specific channel. For example, retail employees in store might not be motivated to spend time with a ‘buy online, pick-up in store’ customer. Why not? Because they are measured and incentivised based on in-store sales only, and online sales do not contribute toward their targets. Other examples could include B2B sales channels offering a commission structure that’s incompatible with the B2C business, or the customer services channel providing better price or promotion options to boost sales.
All the above actions would be legitimate methods used by the business leaders responsible for those individual channels to optimise the results on which they are measured. However, they are incompatible with providing a consistent customer experience.
To be truly omnichannel, it’s important that all areas of the business are governed by consistent processes, incentives, measurements and ways of working.
I believe decisions on remuneration and incentive schemes should be made at the very highest level of the business. This will avoid the inevitable clashes between LoB leaders with different approaches to how employees should be compensated and the way the company is run.
How to manage external alliances for omni
Retailers often view marketplaces, such as eBay and Amazon, as a potentially lucrative additional sales channel, but their use needs careful thought and a clear strategy. While there are some critical differences in the approach to this channel compared with your more direct sales channels, it is still important to align the customer experience and journeys with your overall core vision.
The impact of not ‘owning’ the customer and customer experience needs to be carefully considered.
Ensuring seamless exchange of product, inventory, sales and logistics data is critical to the success of any marketplace channel, as is optimising the search and ensuring your products are represented correctly.
There is an alternative retailing model, which is to create an aggregated marketplace yourself. Here we see a business aggregating and selling other brands in a direct delivery model, holding inventory and managing logistics, for example the luxury apparel aggregator Farfetch.
Aggregating – but on a smaller scale
Creating an entirely new marketplace like this, however, is clearly a big step. Yet there is a smaller-scale aggregation model that can help to drive more customers to a retailer’s brand. Here, the retailer simply extends the assortment they sell with direct delivery products from other suppliers. This could see the core range of products the retailer manufactures, buys, stocks and distributes being complemented with a longer tail of products that they ‘back off’ as direct delivery items, just like a marketplace. In this model, the same challenges apply that I have outlined above, only in reverse.
New alliances will demand the introduction of new processes to manage and integrate trading partners in your business flows. These must facilitate and accelerate negotiations and sales agreements as you extend the assortment you assign to your different channels. They should enable efficient back-to-back orders and the delivery of ‘drop shipments’ direct from a retail or manufacturing partner to a customer’s door. All of this requires processes and technology that enable your people to see inventory across all extended assortment suppliers and to quickly and easily on-board products and product data, as well as to undertake financial settlement.
The delivery approach you need and why it often isn’t there
Another vital component in your omnichannel set-up is, of course, the underlying technology that makes it happen. Without it, your omnichannel strategy will simply not work. This is perhaps less complex for retailers born digital, those pureplay companies, such as Boohoo and Asos, that don’t have a store or catalogue heritage. Agile processes and Scrum/Kanban based iterative IT delivery are now well established in these organisations to enable small, speedy and regular change to be implemented.
It’s a different story for more traditional retailers, however. Let’s start with what they need to deliver repeatably and reliably at pace, with high quality:
- Cloud-ready infrastructure
- Automation of infrastructure and environment provisioning
- Automation of the application code build and a clear branching strategy
- Automation of deployment and promotion of application code, artefacts
- Test automation – as much as possible
- Strong test data management and provisioning.
How does legacy hinder Agile commerce?
The problem is that most of these capabilities are not in place and often not possible in the legacy world. This is typically a waterfall delivery world with larger ‘batches’ of work being managed as a project through more traditional requirements, design, development, test and implementation phases and slower and less regular change cycles.
The big issue with traditional development approaches is one of speed – or rather the lack of it.
You might be used to enhancements to your legacy ERP system taking months to roll out, but what happens when an Agile digital commerce project is reliant on a component of that legacy system? How do you force the pace of change so that you release the required ERP update tomorrow, not in several months’ time?
Finding a way forward - is Agile the answer?
How you marry legacy with new disruptive platforms and approaches in a genuinely omnichannel model is a question the great and the good in the technology and analyst communities are still seeking to find the right answer to. Gartner suggests pace layering and bi-modal IT, whilst Forrester argues these models are flawed and advocates a Business Technology approach. Neither provide tangible guidance that solve the core problem, which is that everything needs to change and move at speed, but some systems and processes are not suited to Agile delivery.
One challenge with this is that people are failing to think about things in a joined-up manner.
With IT estates typically characterised by overlapping legacy, digital and new systems, how do you bridge the gap between your Agile developers working in one way and the legacy (waterfall) developers working in another?
Striking a balance between the old and the new
To deliver a true omnichannel strategy these two worlds must co-exist, with Agile allowing innovation, speed (and risk), while traditional approaches enable control, rigour, quality and certainty for systems of record changes. Striking a middle ground with a mix of old and new technologies, along with both Agile and traditional development approaches, is about finding the right balance.
Clearly, the nirvana is to migrate to and do everything in the cloud, underpinned by an Agile microservices architecture. That isn’t possible with current legacy estates, but I urge my clients to take a long hard look at what they’ve got and then consider taking key capabilities from their legacy systems and begin to break them down for a digital world. For example, a microservice application could be built specifically for pricing or inventory management, taking these processes out of the ERP system and creating an Agile, digital delivery model.
Why taking Agile into the business is part of the omni story
Agile and iterative also need to become a business model, not simply an IT/digital delivery method. We know that in Agile development Scrum teams are assembled to manage the delivery of everything associated with a particular product, to remove silos, handoffs and external dependencies wherever possible. The same principles can be applied to business processes, particularly in the context of omnichannel.
I have seen organisations introduce Scrum teams combining merchandising, marketing, pricing, procurement, inventory, and product item data management for individual categories under category Scrum teams. Their objective is to help break down the silos and different (sometimes conflicting) objectives and goals of traditional business units.
Re-thinking siloed operations
As examples of the above, merchandising teams may have previously extended ranges and stocked more products without engaging with warehousing and logistics teams, or the marketing team might have created campaigns without forecasting the increased demand to purchasing and product teams.
Now, however, they all need to work in alignment to enable warehousing and logistics operations to optimise storage and delivery, and marketing teams to consider the concerns of the wider business.
Each of these previous silos of operation must re-think and re-structure with one single objective: to design the entire organisation, from structure and processes to the enabling IT, around the customer journey and a seamless customer experience.
What does success look like?
As a successful omnichannel retailer, everything you do will begin with the customer journey. That’s everything customer facing and everything behind the scenes, such as logistics and fulfilment, as well as in the back office.
So, from a merchandising, inventory and stock management perspective all your operations need to be managed for omni rather than being allocated to individual store or online channels. All stock must be visible and sellable at all times, for the convenience of the customer, not the selling channel.
This requires your people, processes and technology to be aligned across all touchpoints to deliver on the following principles for success:
Giving customers what they want how Sopra Steria can help
In the end, all customers demand, is for their purchases to be as specified, and in their hands as and when they want them to be. A fully integrated supply chain is pivotal to this. From merchandising and supplier management, to procurement and inbound logistics, every element must be aligned, and should consistently support all channels. For the customer, there is simply your brand, not multiple engagement channels.
Sopra Steria has defined a pragmatic approach to accelerating digital transformation and the journey to omni for retailers.
This sees us managing the best of the old with the promise of the new. Making legacy simpler to run and more adaptive to change enables our clients to implement omnichannel retail solutions that maximise existing IT investments, whilst taking advantage of new digital developments.
We embrace heritage technologies as well as the latest disruptive innovations, empowering companies to safely pioneer new and inventive technologies easily and cost effectively.
Accelerate business value
It’s how we get the most out of the assets you’ve invested in over the years, while ensuring you keep pace with modern, cloud-based developments. We ask what’s needed to accelerate the business value derived from existing IT assets and look at which legacy applications are now redundant and better replaced with new, cloud-native ones. We advise on what should be Retained, Re-built, or Retired. This then guides an Agile and iterative approach to designing, developing, testing and releasing the applications needed to support omnichannel retailing.
CxO Advisory (CEng, MBCS-CITP, MIET)
Gary is a passionate and experienced Digital Innovation leader and IT technologist who has spent his career designing, defining, inspiring and leading major change. He has worked as a Chief Technology Officer for large retail organisations, leading major digital transformation programmes, and as a CTO, chief architect and senior IT consultant for leading consultancies.
Gary is a certified IT architect (BCS, IEEE, TOGAF) and technologist, who also has the business acumen (MBA) and vast experience to drive change within both business and technology/digital contexts.
Join the conversation
Only with a true omnichannel approach to your customer journey will you meet the need for speed, scalability and flexibility throughout your organisation. It is the key to success in today’s highly competitive retail world in which end-to-end unified commerce is changing the game.
Contact us if you would like to discuss how our approach to digital transformation can help you align your people, processes and technology to deliver an effective omnichannel strategy.
On our blog: blog.soprasteria.co.uk/category/retail
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