The smell of the perfume, the drape of the fabric, the grain of the
leather--these sensory experiences are about the only advantage that
brick-and-mortar retailers have over online stores when trying to sell
merchandise.
Unfortunately for traditional stores, today's shopper carries a
smartphone that allows her to scan the price tag in the store and then
buy the same thing online for less. The phenomenon, called
"showrooming," causes store managers to harrumph about the "scan and
scram" shopper.
But what if physical stores had both: the sensory experience of a
boutique plus the click-click shopping efficiency and seemingly endless
inventory of Amazon.com? What if a sales associate could use a mobile
device to order a garment in a different color or size right when the
shopper is in the dressing room?
Many of the bellwether retail companies, such as The Home Depot,
Lowe's, Macy's, Nordstrom, Sears and Staples, are spending millions of
dollars on IT to bring online capabilities into stores. The tactics
include adding in-store Web kiosks, arming sales associates with
mobile devices such as iPads, and (paradoxically) encouraging shoppers to use their smartphones in the store.
But this approach is only one step toward an even more ambitious goal
that pundits call "omnichannel" retail, which unites physical stores,
e-commerce, mobile and social selling into one seamless experience for
the customer.
For Sears, that means customers can order products online and pick
them up in stores. They can have online-purchased items shipped to them,
and can return unwanted items at stores. They can get text messages
alerting them to special deals, or use Sears smartphone or tablet apps
to manage their shopping lists or find product reviews.
"Technology plays a massive part in delivering an integrated customer
experience, so we're doing a lot more around servicing you as a
customer and delivering products the way you want to be serviced," says
Keith Sherwell, senior vice president and CIO for Sears Holdings.
Consider the role technology plays in how Sears works with a customer
looking to buy a lawn tractor. That customer could start with his
desktop PC to research which tractor is best for his yard, using the
Yard Guru buying guide at Sears.com. Or he could use the Sears app on
his smartphone, or in the store at a Web terminal or while working with a
sales associate who might have one of the more than 400 iPads and iPod
Touches deployed as part of a chain-wide pilot program.
Sherwell says Sears calls its approach "integrated retail," which in
the past few years has required upgrades in both its IT infrastructure
and its organizational thinking.
The CIO won't disclose how much money Sears Holdings has invested in
omnichannel efforts across its brands, which include Kmart, but he
acknowledges that hundreds of millions of dollars have been spent in
hardware, software and infrastructure upgrades.
Those upgrades include adding Wi-Fi to improve smartphone
connectivity in the stores. Sears is also experimenting with iPads and
iPod Touches to give sales associates greater mobility and flexibility
when helping customers. And it's retraining associates "to understand
this integrated retail model and all the tools available to them,"
Sherwell says.
How far along is Sears in its quest for integrated retailing?
Sherwell says that "we're already most of the way there...and it's going
to get better."
The New Normal
For decades, brick-and-mortar stores were information deserts, devoid
of customer-facing technology, while consumers raced ahead, shopping
online and adopting smartphones, says Greg Girard, analyst at IDC Retail
Insights (a unit of
CIO's parent company). Now, he says in a
report, "the most successful strategy to defend stores from becoming
showrooms is to bring them into the mainstream of omnichannel commerce
and transform them into centers of omnichannel orchestration."
The term "omnichannel" creates some confusion, though. "A lot of
people will right away start thinking 'multichannel retailing.'
Omnichannel retailing is different," says Daniel Burrus, founder,
president and CEO of Burrus Research Associates. "Omnichannel is
integrated, the other is not. An omnichannel approach provides a very
consistent experience regardless of the customer touch point and
supports the brand and a uniform brand experience."
Retailers have a growing number of channels through which they can
reach consumers--smartphones and tablets, websites, physical stores,
kiosks, social media and smart TVs--and they have tended to manage each
one as a separate activity. But customers now move fluidly between those
channels.
"A consumer might research a product online, look at it up close in a
store, solicit opinions from friends via social networks, use a mobile
phone to check competitors' prices, but ultimately buy it in-store using
PayPal on their phone," says Jeffrey Grau, an analyst at eMarketer.
"What will matter most is whether the experience was smooth. If the
retailer disappoints the shopper during any of these channel handoffs,
it will reflect poorly not only on that channel, but on the brand as a
whole."
A Long Journey
But the retail industry has a long way to go before it gets to that
full-fledged omnichannel experience. "True omnichannel is really rare,"
says Cathy Hotka, who runs a retail IT consultancy.
The obstacles to reaching that goal are both technical and
organizational, she says. Many retailers built up their online
operations as separate organizations--and in some cases, actual separate
dotcom companies--so their physical stores and their Internet sites
have different IT systems that may not work well together. As a result,
some retailers still manage their online and offline retail inventories
differently, and some even have different pricing policies.
"Retailers also still struggle with who should get credit for a sale.
So if you get something online and I return it to the store, does the
store take a hit for a customer having taken it back? You'd think for
2012 that would be solved," Hotka says.
Meanwhile, some retailers don't have an accurate view of their actual
inventory, which is a huge problem for omnichannel practices, Hotka
says. It means a sales associate can't scan a barcode to search the
company's online inventory for an item in a desired color or size when
it's out of stock at the store. It also means that the retailer can't
offer same-day pickup for online orders, and in-store consumers can't
easily access the store's online reviews to help them decide on a
purchase.
"Retailers understand they have to get everything sorted out and
integrated, but that doesn't mean they are. There's a lot of this work
that has yet to be done," she says.
That work isn't cheap. "You're talking about hardware, networking,
security, interoperability, multi-protocol networks. It's a lot to make
sure they have the bandwidth they need today--and think about the kind
of bandwidth they need tomorrow," Hotka says.
In a Wall Street earnings call, Nordstrom announced plans to spend
nearly $1 billion over five years on upgrading its digital operations,
which gives an indication of just how expensive the task really is.
Nordstrom--which analysts say is a leader in omnichannel
retailing--has distributed 6,000 handheld devices (modified iPod
Touches) so store employees can ring up customers in the aisles and
email them receipts, just like at Apple stores. It has had a single
inventory-management system supporting stores and the online business
since 2009. And it has a mobile shopping app that lets customers scan an
item's barcode to check on its availability and browse styles based on
personality types.
"It's about meeting and exceeding customer expectations no matter how
they choose to shop," says Nordstrom spokesman Colin Johnson.
Kasey Lobaugh, a principal at Deloitte Consulting, says investments
like that are bringing the retail industry closer to omnichannel. "We
should envision a time when every customer is constantly connected, when
they can be in the store and online at the same time connected by their
mobile device, so then the two shopping experiences aren't disparate,"
he says.
Some consumers are already there: According to Deloitte's survey of
2,598 smartphone users, 58 percent use their smartphones to shop. And 61
percent of those who use smartphones to shop use them while actually in
a store. Some 52 percent use them on the way to the store, while
another 45 percent use them on the day or night before shopping.
That usage pattern seems to correlate with sales, too, according to
the survey. It found that 72 percent of the smartphone owners who used
their devices on their last shopping trip actually made a purchase that
day, compared to 63 percent of those who didn't own smartphones or who
didn't use their devices while shopping.
Merging the Digital and the Physical
"When you start to treat [the experience] as a singular organization
rather than channels, and you think about inventory as a singular
concept versus store or online, it unlocks a ton of value for consumers
and for the retailer as well," Lobaugh says.
"It's really the convergence of the digital and the physical. That's
really omnichannel. But you have to get over the paradigm that the
online business is about a Web page and a disparate experience and
mobile is just a website on a smaller device. It's more about the
capabilities to drive the experience."
This new way of thinking creates tremendous pressure on the
technology organization, because convergence of the digital and the
physical means the IT department--indeed, the whole company--needs to
think differently about its technology.
"It has to fuel the business, not just online shopping, so the entire
stack of IT systems has to be re-evaluated," Lobaugh says. "You have to
invest for a world in which digital is a fundamental for every point of
contact. Omnichannel is ubiquitous. It's so fundamental to a retailer's
future strategy."
That message is heard loud and clear at Ahold USA, the $24 billion
parent company of several regional grocery chains, including Giant Food
Stores, Martin's Food Markets and Stop and Shop, as well as the online
Peapod store.
"Customers are going to define how they want to shop, and if we're
not enabling that, we'll become irrelevant," says John Dettenwanger Jr.,
CIO at Ahold USA. "To me, omnichannel is really about omnipresence. It
really flips the view from 'What's the advantage to us?' to 'What's the
advantage to the consumer?' We try not to silo this as a
brick-and-mortar or Internet issue. It's about creating a more seamless
environment for the consumer."
Some of Ahold's stores have deployed Scan It, an in-store scanning
device, and Scan It Mobile, which works with personal smartphones. The
tools allow shoppers to scan and bag groceries as they shop, so they can
just pay and go rather than waiting at registers to check out. Scan It
users also have access to budgeting tools and exclusive offers.
Dettenwanger says that's just the start of what's coming. Shoppers
soon will be able to order items, such as deli products, from their
smartphones and then pick them up at the store. Someday they'll be able
to access store maps on their smartphones so they can easily find the
row and shelf location of the items they want. They'll be able to view
online 3-D images of items, so they can check out ingredient lists and
nutritional items from anywhere, just as they would while picking up the
actual item in the store. And they'll be able to create grocery lists
by using their smartphones to scan barcodes of items they have at home.
Further down the line, Dettenwanger envisions rolling out a Guess My
Order program, which will use customer data to help build their shopping
lists--and help build brand loyalty.
"People are creatures of habit, and we can predict what you'll need
to buy, so it will look at your history and it will tell you want you
need," he says. "If we take that insight and turn it into real value,
that's where it's really different. It's not just pushing stuff at
[customers]; that's not what they want. They want more help. And from a
consumer perspective, I'm in a busy world and I'm going to go where I
get the biggest help."
Dettenwanger acknowledges that there are challenges to getting there.
He says the company needs to standardize and modernize its
technology--a task that has been pushed to the forefront because of the
pressure to move toward omnichannel retail. And then there's determining
how and when to roll out new capabilities to customers, who, despite
their penchant for smartphones, still need time to digest all the
possibilities.
"There's a change-management aspect with our consumers. [Retailers]
have spent many years training them to act in one way, so we have to be
judicious in how we roll capabilities out so we don't overload them too
quickly and so it doesn't become confusing," he says.
That is the art behind this push toward omnichannel: using technology
to enhance a customer's experience and drive sales without creating a
clunky or cumbersome process.
Craig Young, vice president of IT for Verizon Wireless, says the
company has been working toward omnichannel for several years, following
an "Aha" moment when its own study found that more than 60 percent of
customers were researching products online before heading into a store
to buy.
Young says Verizon Wireless wanted to take the online research that
its own customers were doing at the company's website and provide it in
useful formats to in-store sales representatives so they could be as
helpful as possible to shoppers. That's crucial, he says, because 80
percent of Verizon Wireless items are still sold in stores.
Now a sales associate will know, for example, what phones a customer
recently viewed. In the future, as the company gets deeper Facebook
integration, Young says the company will pull in information gleaned
from social media sites to further tailor interactions to each customer.
In the past several years, Verizon Wireless has invested in its CRM
tools, data warehousing and standardized pricing and inventory, all of
which created a strong base from which to launch into omnichannel, Young
says.
When the company is setting up new systems, he says, it has an eye
toward omnichannel. For example, Verizon Wireless developed its
Iconic Sales Portal
two years ago. It was initially designed to handle the anticipated high
demand for the iPhone 4, but now it can be used to support high-volume
sales during launches of new iPhones or Android phones. Young says the
portal serves as a platform for uniting retail stores with shoppers
using online, call center and indirect sales partners. "It was a
consistent and seamless customer experience," Young says.
That's the kind of shopper experience that retailers are aiming for,
experts say. "You're seeing technology as the strategic enabler. You
have to be everywhere your customer is, and you have to serve that
customer on every device that customer wants to use," says Tom
Litchford, vice president of retail technologies at the National Retail
Federation.
Case in point: In fiscal 2011, the CEO of Home Depot added
interconnected retail to the $70 billion home-improvement retailer's
list of core principles, which up until then included just three
others--a passion for customer service, being the product authority for
home improvement, and disciplined capital allocation driving
productivity and efficiency.
"We'd like to serve our customers whenever, however and on whatever
device they'd like to use to buy from us," says CIO Matt Carey, who
came to Home Depot from eBay in 2008 to help deliver on this vision.
Carey points out that the company now allows customers to return
online purchases to stores and to pick up items bought online at
stores--features that Carey says "people have come to expect, the table
stakes."
Carey is pushing beyond basics, too, moving closer to true
omnichannel retail by deploying mobile apps that tell customers where
they can physically find their desired products in the store and
offering computer users visibility into store inventory and pricing so
"you're not wasting a trip to the store, you know it's there." Home
Depot also lets stores to see each others' inventory so they can
immediately help in-store customers locate what they need, even if it's
in another location.
In late 2010, Home Depot rolled out 34,000 handheld devices with
inventory lookup and voice communications capabilities for the sales
associates. These devices are also used for remote checkout, for
example, when stores need to quickly move lines of shoppers preparing
for hurricanes, or when associates are helping customers buying
Christmas trees from outdoor lots.
This year the company is rolling out 25,000 "junior versions" of the
handheld devices, which will give more associates access to the core
functions, specifically inventory lookup and voice communications.
In both those cases, Home Depot is using Motorola hardware with
applications primarily developed in-house, according to company
officials.
As IT-enabled shopping experiences continue to evolve, Litchford sees
retail as on the edge of a technology frontier. Ahead, he sees
retailers engaging customers in whole new ways. A customer watching a
smart TV that shows a leather jacket on an actor will be able to click
the screen to find out where it's sold or will send a tweet that
triggers a response from the customer's favorite retailer with some
suggested items.
"Maybe they know me personally because I'm in their loyalty program,
and they can go get the sales associate who helped me last time," he
says. "Then there's all the
augmented reality, companies playing with [virtually] putting clothes on me."
That's already here. This spring, Bloomingdale's launched a virtual
try-on window outside its New York City store, where passersby who stop
in front of the window see an image of themselves wearing one of six
pairs of sunglasses. (For more, see "
Augmented Reality Helps Customers Visualize In-home Installation.")
Welcome to the future, Hotka says. "It's nothing short of a complete, fundamental disruption of how shopping works."
