Multichannel retailing: the future for retailers

Greg Randall explains the power of multichannel retailing and why New Zealand’s retailers must adapt or slowly lose market share to international websites.

The New Zealand retail landscape continues to undergo dramatic change with a competitive environment that has retailers concerned. Retailers need to move into a time of reinvention and evolution in order to remain competitive from international threats.
In 2012, PWC released a document on the Australian and New Zealand online shopping market, clearly positioning New Zealand retailers behind the digital retail evolution.  
New Zealand’s geographical isolation was one reason for the slow digital adoption; there was simply no pressure, threat or urgency.
To add more impact to this issue comes two statistics for 2012:
• The total spend of New Zealand consumers on international websites was $1.12 billion.
• International website sales comprise 35 percent of total online purchases in New Zealand.

To quote the report: “The New Zealand traditional retail operating model is now at a critical juncture. Retailers must adapt the current model if they are going to meet consumer demands.”
The rest of the retail world continues to digitally evolve at an alarming rate. The attempt to grow/establish digital channels for New Zealand retailers has been average at best. Factors affecting the slow adoption of the digital channel for New Zealand retailers include:
• Low budget and resource allocation to digital channels.
• The entrenched ‘old school’ retail culture.
• Entrenched long term relationships with service providers who have weak digital and multichannel retailing experience and skills.
• Legacy technology.
• Weak positional power of digital staff.
• Lack of experience and knowledge of internal digital staff.
• Lack of preparation of CIOs.

The result of this average effort? New Zealand retailers are losing market share to international retailers. How have the New Zealand retailers reacted to these threats? By applying pressure on the Government to reduce the threshold of overseas purchases to deter New Zealand consumers.
This is the wrong approach.  

The consumer is now in control
New Zealand consumers are now completely in control of their own buying behaviour, information gathering, engagement, and socialising. The days of the retailers with the biggest marketing budgets winning market share are now over. The consumer is now completely unimpressed with loud, flashy, expensive advertising. Today consumers want change.  
To quote Seth Godin in his book Tribes: “Established in 1906” used to be important. Now it’s a liability.  

How consumer buying behaviour has changed
Google recently released a study showing two key findings over the past 12 months:
1. The combination of three different digital marketing tactics has a greater influence in consumer buying behaviour than television commercials: they are Google Adwords, Google Display advertising, and email marketing.
2. 90 percent of all media is consumed on four screens: smartphone, tablet, PC and TV.  

International retailers recognise these consumer behaviour shifts and buying trends and have developed their digital presentation to directly align to this new way of engaging with consumers.
New Zealand retailers need to embrace the power and control now in the hands of consumers and undertake a process of reinvention and evolution.
No organisation is too big and/or too bureaucratic for change. After 9/11 one of the most bureaucratic American organisations was forced into change… the Pentagon. Senior Pentagon officials realised they were ill equipped in dealing with modern global threats. They had to change. And so do New Zealand retailers.

The new philosophy
PWC states that New Zealand retailers need to evolve into “Consumer Adaptive Retailing” which is to “supersede traditional approaches”.
This evolution of retailing is intended to deliver a “full retail experience” through the utilisation of both physical and digital means, telling relevant brand and product stories. The consumer is placed in the middle of everything you (the retailer) do and your purpose is to simplify the consumer’s ability to find and interact with you – whether it is to purchase, to communicate, to learn, or to engage. You need to be ready to respond in a relevant manner when consumers want to engage with you regardless of their location and device.
Only by developing this new retailing philosophy can you truly learn, understand and adapt to consumer needs.    
“Multichannel” (also known as “Omni channel”) retailing is the approach that delivers this consumer-like cocooning.

Combating international threats
Multichannel retailing is the most effective approach to combat the growing threat of international retailers.
With the physical footprint of bricks and mortar locations, New Zealand retailers have a distinct advantage of international pure plays (digital only retailers).
Multichannel advantages include:
• Multiple options in which consumers can purchase.
• Multiple options to increase the standard of customer service (i.e. phone call, social tools, email, chat, physical location).
• The ability to offer better returns and guarantee policies reducing the risk of purchase.  
• Greater opportunities to communicate the retailer/brand story or stories through localised content.
• Gain insights into consumer needs: how they want to buy from you, talk to you, and have a long-term relationship with you.

The multichannel customer
Studies around the world have proven multichannel customers are more loyal and more profitable than single channel customers. In their book Customer Relationship Management: Concept, Strategy, and Tools, authors Kumar and Reinartz write:
“Using various channels for transactions and engagement means customers can achieve their service output demand more easily. Multichannel shoppers choose the most appropriate and convenient channel for each transaction, using different channels at different times. This channel option provides additional value.  
“Single-channel shoppers repeatedly use the same channel for each step. As a consequence they evaluate the retailer’s relationship and value based on this single channel and if it does not meet their demand at one time they quickly become dissatisfied and are more inclined to switch retailers.”  

How is a multichannel customer more profitable?
When you adapt to consumer needs, this approach (when done right) builds brand advocates, or ‘fans’.  Fans behave differently from a standard consumer:
• A fan will cross the street and avoid your competitors to buy from you.
• A fan will bring a friend (or friends) to engage with you and buy from you.
• A fan will reply to you if you ask them questions.
• A fan will tell you when he/she is unhappy with the way you are conducting yourself.
• A fan will pay extra for special or limited editions of your product(s).
• A fan will not comparison-shop because they trust you.
• And most importantly, fans connect with fans to amplify your brand, and your brand message.

Studies have proven peer referrals are far more impactful in decision making than celebrity endorsements. Building this ‘fan’ community will prove extremely profitable for New Zealand retailers.
Pure play retailers recognise the positive impacts of multichannel retailing to the extent of incorporating bricks and mortar strategies for themselves. Shoes of Prey (an international pure play retailer founded in Australia) has partnered with David Jones to deliver a Shoes of Prey concept store within their department stores.

The power of multichannel retailing
OpinionLab’s Customer Feedback Index analyses millions of customers who shopped at hundreds of the world’s largest online brands and retailers. The purpose of this study was to gauge what consumers preferred more, the pure play or the multichannel retailer experience. One of many areas where multichannel retailers scored higher was in shopping cart satisfaction.
This finding flies in the face of conventional wisdom. One would assume pure plays would be superior in the checkout process. To quote Multichannel Merchant, multichannel retailers “offer of varying purchase and fulfilment options is more favourable than the purely singular online offer” buy online, pickup in-store, and allowing in-store shoppers to make online purchases via tablets and kiosks.
It’s fitting the last word comes from Jodie Fox, Shoes of Prey co-founder; “We believe the future of retail is multichannel – it’s about being wherever your customer wants you to be in a relevant and valuable way.”
The times they are changing. Now it’s your turn.

›› Greg Randall is director of eCommerce digital agency Comma Consulting www.commaconsulting.co.nz  He welcomes feedback on this article; email [email protected].  Next month Greg focuses on the hurdles retailers face in their evolution to multichannel retailing and how to overcome them.

Sources:
PWC/Frost & Sullivan, Australian and New Zealand online shopping market and digital insights July 2012.
Multichannel Merchant, Pure Play vs Omnichannel, August, 2013.
Kumar, Reinartz, Customer Relationship Management: Concept, Strategy, and Tools 2012.
Seth Godin’s Tribes, 2008, Penguin Group, Book of the Year and NY Bestseller.
Google, “Multiscreen World, 2013.
NZ Herald, Retailer blasts tax ‘failure’, Dec 13th, 2013.
Thomas Barnett, The Pentagon’s New Map, 2004, Berkley Publishing.
Retail Biz, Shoes of Prey, David Jones launch concept store, 2013.