David Adams casts an eye over multi-channel retail in 2010 and asks: who are the UK leaders and what are the key challenges that they currently face?

Two years ago in this publication, I said that writing about multi-channel retail made me feel like I was living in a retail technology Groundhog Day. I’d been writing about the need for truly integrated sales channels and the single view of the customer for 10 years and we didn’t seem any closer to actually seeing them. Two years on, it’s still Groundhog Day.

But to be fair to retailers, we’re not talking about an easy target and it’s also a target that moves further away each day. For example, while the use of mobile devices for shopping has finally taken off, it presents a whole new set of integration challenges for retailers seeking to bind it into existing multi-channel strategies. Some retailers also have additional challenges because they face completely different sorts of competitors in different channels. And the recession hasn’t helped.

Multi-channel is difficult, but it is also more important than ever. More people now research possible purchases via more than one channel. The Capgemini IMRG Index figures for October 2010 showed that £5.2 billion was spent online by UK shoppers that month, a year-on-year increase of 23 per cent. Christmas will, as usual, break all previous online shopping records. Darryl Owen, head of trading industries for EMEA and India at SAP, points out that a rough average of analyst estimates would suggest that by 2013 around 35 per cent of retail sales will be transacted through electronic channels. “In some areas, like consumer electronics, we’re probably already there,” he says.

Yet recent SAP research on retailers selling through more than one channel revealed that less than 30 per cent were breaking even on website sales. There could be various reasons: some retailers run too many promotions and special offers online, while web operations that are not well-integrated are also expensive because of duplicated administrative, IT, logistical and supply chain
processes. It’s also not unusual for retailers to overspend on safety stock in an attempt to avoid disappointing customers.

“When you add all these costs up you’ve got to have high margins if you want to break even,” says Owen. “It’s not surprising many retailers aren’t doing too well on the internet side. That’s OK if it’s only worth five per cent of turnover, but if it’s 30 or 40 per cent it’s a serious problem.”

Better integration could solve those problems. Of course, some retailers are getting closer to offering a genuine multi-channel proposition, but there is always a caveat. So while many in the sector cite John Lewis as having a very strong proposition across multiple channels and brands, the extent to which they are truly integrated falls short of the multi-channel ideal.

“If I was going to name a retailer that was getting closer it would probably be Argos,” says John Bovill, group IT director at Aurora Fashion, which owns brands including Karen Millen, Coast, Warehouse and Oasis. “But their store experience is really more like a (goods) collection point. That’s why they can afford to be as flexible as they are. Tesco are doing a good job, but they’ve got a lot of channels and brands and a fair bit of work to do to bring them all together.”

Bovill believes Aurora is among the fashion retailers that is pushing furthest forward with multi-channel, pointing to the work the company has done with BT Expedite and Thomas Pink on developing an ‘integrated store’ which knits together inventory management for stores and online channels. “The aim is to bring the company’s assets closer together to build a competitive advantage against pureplay retailers,” he says. “The integrated store is linked into CRM, but are we using that to drive strategic decisions? Not yet.”

Walter Blackwood, principal consultant at W&MB Consulting, believes too many multi-channel strategies focus on front end systems. “There’s a lot of multiple channel retailing but not that many genuinely multi-channel propositions,” he says, echoing a distinction drawn by others. “Increasingly there’s more integration at the front end, but still a fair amount to do to get the back office integrated.

“In terms of who the leaders are, you’ve got John Lewis, Tesco, Marks and Spencer - the big boys who are clearly putting a lot of effort in, throwing skills, technology and money at it.”

But Blackwood also picks out two smaller retailers he believes are making good progress: Schuh and Republic. Jo Molineux, head of multi-channel at Republic, says the retailer knows it has a long way to go. “We’ve worked very hard to get a consistent experience,” she says. “So if we’ve got a 15 per cent discount on jackets, say, that will be the same across all channels. From an internal perspective the business is joined up. We’re working on a central ordering
system. Ultimately we want to give real-time stock visibility across any channel, any time, anywhere.”

The first phases of both a dedicated mobile device website and of a Click and Collect service are currently in development and will be launched in 2011. In 2010, the retailer created a social networking platform, linked into its website, incorporating a Facebook, Twitter and YouTube presence. “We can see it’s the right platform, because the number of people interacting with us through Facebook is 200 per cent above what we’d expected and engagement is growing all the time,” says Molineux. “I think that next year we’ll have a clear (social networking) strategy based on what’s happened so far.”

Strategic changes

But while understanding the customer is at the heart of the multi-channel concept, strategic changes are also required, says SAP’s Owen. For example, many retailers are very good at sales reporting in stores and analysing a store’s physical catchment area. But most are still not overlaying sales on the internet channel onto the catchment areas for their stores. So it’s hard to understand what effects online strategy have on consumers in those catchment areas. Is the internet cannibalising stores or enhancing sales?

“Not many retailers are doing that, but there are a few exceptions. I have heard that John Lewis have put some reporting in that allows them to do geo-location of internet sales.” Owen says SAP is currently helping retailers in the Nordic region and the Netherlands to develop this sort of capability, to analyse buying behaviour and so optimise assortments in stores and online.

But for many retailers, the most pressing problem is that money is tight. Russell Dorset, sales and marketing director at Maginus, believes the answer is to start small, rather than contemplating either spending a lot of money ripping out existing systems or trying to link systems that were not designed to work together and probably never will very well. Maginus clients include electronics retailer Jacob’s, which has 17 stores and has created a multi-channel solution which encompasses online operations, the call centre, category management and accounting systems.

It’s clear there is also much to learn from the way that the most successful pureplay retailers manage to develop customer relationships without physical interaction. The point is, a retailer that can meet customers in person ought to take advantage of that and to take multi-channel interaction to a new level, using
all the information captured in all face-to-face and electronic interactions to develop propositions tailored to individuals. Chris Webster, vice-president, head of retail consulting and technology at Capgemini, says Capgemini has been doing some work in this area: “You can do things like look at the footfall of the customer on the internet to build propositions back to them, potentially in
real-time,” he explains.

In the meantime, if other retailers still have to put up with living in an imperfect world, does it really matter? Surely a retailer can still develop a great proposition with the tools it has at its disposal, even if they aren’t all integrated?

“For certain business models and certainly when you’re talking about the value end, yes, but I think as soon as you start moving towards your more
differentiated brands, I would argue that model is not sustainable,” says Aurora’s Bovill. “The UK market is very tough, we’re not seeing true growth, so it’s a market share game. The other thing is that your customers expect a consistent experience across all the places where they touch your business. I think customer expectations have changed even in the last two years.”

And another issue that has always hung over multi-channel retail is still important: fulfilment. Consumers will soon want a multi-channel real-time order tracking solution, says W&MB Consulting’s Blackwood. “I think that in the last 12 to 18 months this need to have a truly integrated proposition and a single view of the customer to support it has now become front of centre,” concludes Capgemini’s Webster. “With e-commerce increasing its share of retail, the need to have your proposition seamlessly aligned behind those channels is very clear. That’s where we are, at the start of what will be a very interesting decade.”

“It’s all to play for,” says Bovill. “There’s a real opportunity to deliver a multi-channel proposition that sets the benchmark for the industry.” Well, we’ll believe it when we see it. But surely that won’t take another 12 years? Will it?

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