Tag: CXO

What omni-channel capabilities do you really need to enable business success?

Technology plays a crucial role in omnichannel in tying the back office with the front-end infrastructure. Retailers need the ability to manage their resources, inventory, and suppliers, and connect them all the way through the retail value chain for understanding how they should deliver products and then identify key customer insights in the pre-and post-purchase experience.

To enable that, there are some key capabilities for omni-channel – the basic building blocks:

There are some key capabilities that the retail business needs for being truly Omni-channel and some basic building blocks with respect to:

1. How do you impact your customer?
2. How are your supply chain and operations set up?
3. Do you have the right software, underlying technology, and infrastructure to enable analytics that can drive new insights through the retail value chain so you can respond to your customers’ changing demands and desires in the omni-channel experience?

Omni-channel capabilities must provide rich customer data and insights across contacts, channels, sales, lifecycle, and more to serve as the cornerstone of all Omni-channel efforts.

Key elements (as seen in the building block diagram above) are –

• What are you doing in terms of messaging?
• How are you integrating services?
• How are you managing your lists to direct the customer experience?
• How are you enabling to show content and search all the way through your experience, design, and the personalization you are driving through analytics?

How do you meet the customer’s expectations in terms of a seamless experience?

One area to address this is the ability to plan inventory for the new challenges of the omni-channel environment where you are not wholly sure where your demand is going to come from and how your customers want to receive your products. Omni-channel inventory management processes depend upon balanced planning and robust analytics to effectively scale the supply chain efficiency to serve the new omni-channel customer in today’s Omni-environment.

To enable these analytic engines and to improve customer experience, organizationally one of the key requirements is that companies need to break down the silos for omni-channel success. In traditional retail, there are silos set up that control – the development and the buying of the products, the channels of distribution, and how do you actually support your customer’s purchase. Companies that can group leaders across the functions and the silos to share teams and to share incentives, will have the most success in meeting customer needs in today’s new omni-channel environment. An agile approach to breaking down silos is necessary for omni-channel success.

Logistics & Supply Chain Management are two of the main aspects of technology investments that are an important enterprise infrastructure to better facilitate the omni-channel experience effectively.  Retail businesses today have more trading partners with fewer common currencies, languages, and regulations. Costs incurred through longer cycle times, increasing raw materials and labour costs, and a tightening freight environment are encroaching on profit margins. Fulfilment is often hindered by poor distribution strategies. The success of a global supply chain’s omni-channel upgrade is now dependent on:-

1. Visibility
   • Gain overall visibility into every channel
   • Weighing benefits of production locations
   • Reduce overheads and inventory
   • Manage risks effectively
2. Agility
   • Highly interlinked world economy
   • Volatile demand across markets
   • Quickly trace and proactively manage
3. Data Integrity
   • Key data needs to be centrally controlled and available to every channel
   • Data such as products, promotions, customer information, and order histories

With today’s customers being more powerful than the purveyor of goods, out-of-stocks are unacceptable; customers will go elsewhere. You should be able to offer your customers universal inventory availability – any item, anywhere, anytime!

In order to deliver this, one strategy gaining momentum is cross-channel fulfilment. Retail technology should be able to leverage store inventory and personnel to fulfil store and online orders, recapturing sales that would have been lost due to out-of-stock conditions. This enables the business to sell through select store merchandise at higher margins based on specific criteria such as end-of-life products.

A global leader in apparel retail has replaced over 40,000 cash registers to enable their omni-channel strategy to work by leveraging stores as online order fulfilment centres, equipping store personnel with web-enabled tools to check product availability across other nearby stores and place orders, and tap into all available inventory in real-time in order to meet demand, boost sales, reduce markdowns, and increase inventory productivity across all channels. The retailer has reported that this has helped the company’s overall sales grow by $1 billion each year over the last 3 years.

Investing in the right retail software solutions would enable you to integrate planning systems for all channels and connect front-end order management to back-end technology infrastructure. Not having to take a markdown and not having to build more warehouses is every merchant’s dream! And having the right technology that not only fulfils this, but also secures future investments in enterprise technology is every Technology Officer’s dream!

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As consumer spending moves to digital, retail CFOs must develop new strategies for managing CAPEX and OPEX.

Shopping has never been easier for consumers. But for executives behind the scenes, digital advances have created complexity. It takes an omnichannel approach to meet these new consumer demands, requiring companies to retool their strategies and operating models in areas such as marketing, merchandising, store operations, and IT.

Omni-channel — the seamless integration of physical and digital worlds to create an outstanding, cohesive shopping experience.

As the Covid-struck retail world has digitized hastily, the tools and structure of retail organizations have changed dramatically. Numerous retailers have significantly reorganized their merchant and marketing teams to consolidate or coordinate their online and store strategies across the organization. Retail software providing information technology organizations, once considered back-office utilities, have concurrently become strategic business partners.

These changes, in turn, have driven multiple new capital requirements. This creates a unique set of challenges for the CFO in migrating from historical investments to expenditures that will better support e-commerce and omnichannel enablement that will help reduce the overheads incurred from having more stores, carrying extra inventory, and relying heavily on single-channel distribution capabilities.

A greater return on capital in the Omni-channel era necessitates the need to adopt a multi-pronged approach and new ways of thinking.

The Seamless Omni-channel Customer Experience is not just evolving, it is expanding.

The growth of digital commerce is far outpacing traditional retail. This trend seems sure to continue as retail emerges out of the pandemic impact increasing the competition and putting additional pressure on their margins. Consumers can now shop through various channels, often using six or more touchpoints before making a purchase. Retailers broadly agree their organizations must deliver a consistent experience across each touchpoint.

Virtually all omnichannel capabilities require technology investments. Most are not channel-specific but instead impact the entire technology infrastructure. CFOs, however, are still determining how to best define the impact of these investments’ on sales by channel, which then makes measuring return on capital that much harder to calculate — especially at the channel level, due to lack of clarity around performance and management accountability.

As channels have blurred, time-tested retail metrics have lost some of their meaning and value. For example:

• Same-store sales: Online purchases, ship-to-store, and ship-from-store omni-channel practices can skew this number beyond its original intent
• Gross margin return on inventory investment: Crossover makes it more difficult to measure the productivity of various inventory deployment strategies
• Returns percentage: Returns are no longer contained within a single channel

Each channel yields data that makes it easier to track customer behaviour, and marketers are using emerging sales attribution models to better allocate marketing spend. These models — single-channel, last-click, multi-touch, multi-channel, and the like — could be adapted for broader use in informing capital decisions as well. By getting more specific about where and how sales originate, finance teams can better estimate the real margins and profits from different touchpoints. This will lead to more informed decisions on how to deploy scarce capital.

Enabling omnichannel strategy through technology and measuring the impact

Capital allocations should align with business strategy, but technology changes so rapidly that it is tempting to take a wait-and-see approach. Delays, however, could put a retailer at a competitive disadvantage. Unified inventory management systems and integrated distributed order management systems are examples of platforms that harmonize order fulfillment, regardless of channel. Mobile investments can help retailers combine new digital strategies while providing experiences unique to mobile.

Other investments include:

• Customer journey and touchpoint mapping
• Managing web properties for optimal customer experience
• Global payment and content management systems
• Process and technology investments to support cross-channel fulfillment

The question is, which options are the most advantageous, and how do you measure the impact? In an omnichannel environment, parsing out returns and costs across the business becomes trickier:

• Sales: Intertwined channels make attribution difficult
• Cost of goods sold: Costs may differ by channel
• Operating cost: Costs spill over to multiple channels due to fulfillment complexities
• Depreciation: Rapid innovation makes it hard to determine how long technology will remain relevant, and it is often unclear whether new digital innovations will have the impact projected in the feasibility study.

The ongoing demand for investment coupled with less predictable returns on capital creates tensions for CFOs that will continue to increase as more consumer spending migrates to digital.

An approach to taking the lead

To implement a successful omni-channel strategy, retail CFOs should consider the following strategies:

1. Build a cost model based on Customer Acquisition Cost: With multifunctional teams and omni-channel, it is no longer possible to focus on channel-wise profitability. Instead, the paradigm needs to shift to the customer as the profit centre irrespective of the channel. This could be then related to customer groups and demographics and then linked to brands arriving at a mix of brand X customer profitability which could justify the investments in those segments.
2. Think “multi-dimensional” when making omni-channel investments: First, a company should lay out a long-range, cross-functional omnichannel vision and strategy. This basic building block is often overlooked and can therefore reflect a problematic absence of a common definition of “omni-channel” among the senior leadership.
3. Enable timely decision-making with the right capital governance:
   • Assemble key operational and commercial stakeholders: Understand interdependencies and downstream impacts, then create a cross-functional team with clearly defined roles to participate in decision-making.
   • Gather data that sustains a multi-dimensional approach to investing: Leverage advanced analytics for insights on how investments will affect the consumer and operating models.
   • Consult with all teams who may be impacted: As channels and technologies become more integrated, so should the team involved in the capital decision-making process. ned within a single channel
4. Shift to cloud-based platforms: Rising IT prices and emerging business models such as SaaS, PaaS, IaaS, and others can reduce the capital outlay and allow CFOs to revisit capital allocations by converting their IT expenditure to an operating expense that is readily scalable with the business and supports an omni-channel environment.
5. Expand your digital knowledge: In an EY survey, 58% of 769 finance leaders from across the world said they need to better understand digital, smart technologies, and sophisticated data analytics. To remain a strategic leader in the omni-channel age, retail CFOs must continually broaden their personal knowledge of technology to be able to show how the technological landscape is evolving and what strategic investments will support growth.

Striking a balance

The transformative effects of digitization in retail will continue in the foreseeable future. The finance teams will need to redeploy capital from stores and inventory to riskier, hard-to-measure investments in new enabling technologies and related processes. As the leaders of finance organizations, retail CFOs will need to develop new tools, techniques, and skills to stay at the forefront of this revolution while still delivering attractive returns on capital.

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By now the concept of omni-channel or the word itself might not seem as strange as it first appeared to be. It is extremely rare to engage in a conversation today involving retail technology without encountering omni-channel used as a noun, an adjective, or even a verb. As challenging as it may seem for business owners to envision the benefits, for CEO’s the question is simple – how do I make it produce results for the business?

As a pioneer in this space we are delighted to share our knowledge of the subject acquired through several years of discussions we’ve had with retail leaders particularly since the time ‘omni-channel’ first appeared on the retail horizon. This domain knowledge includes the trends, the drivers, the business benefits, and the role of technology all within the context of omni-channel as highlighted by companies that are leading in the specific realms of their initiatives. 

Omni-channel Initiatives in the Spotlight! Omni-channel has quickly become the norm for retailers who aspire to deliver the following benefits to their end customers through the adoption of this unified O2O strategy:

1. Buy or reserve online and pickup in-store – Customers can reserve or buy items online and choose to try or buy them at the store. This drives traffic to stores and helps to upsell and cross-sell increasing the revenue per square foot.
2. Endless Aisle – Allows you to see inventory across stores from any store. Place orders across stores for customers to pick up, or to be delivered. never saying ‘no’ to the customer
3. Ship from Store – Ability to receive web orders directly to stores, and have them picked, packed, and delivered from the store. Particularly useful for slow-moving or aging inventory
4. Inventory Visibility across Channels – Customers have to ability to check the in-store availability of items before leaving their homes

CEOs invest in Omni-channel strategies to achieve the below goals:

To grow revenue with existing customers: Customers shop and communicate with a brand on their own terms through various channels, often using six or more touchpoints before making a purchase such as a brand’s website, reviews, social media, and marketplaces. Retail CEOs broadly agree their organizations must deliver a consistent experience across all touchpoints. The experience could cover areas like consistent pricing, promotions, catalogues, loyalty programs, and member benefits. Channels are the arms and legs of the brand that bring the experience to the customer. This experience should be highly personalized, connected, and unified. Done right, this helps customers trust a brand and want to shop again.  

To bring in new customers: Increasing adoption of smartphones and tablets has driven change in customer behaviour and expectations. The heightened connectivity enables a 24×7, 360-degree relationship between the customer and the brand that the customer will come to expect. Revenue growth for the retail industry is driven by the combination of online and web-influenced sales. However, retailers’ ability to capture this growth is dependent on the evolution of current operating models and technology to feature a seamless cross-channel shopping experience that allows online traffic to drive sales in brick-and-mortar locations. 

To Improve inventory turn: Driving traffic online to the store is always a great idea as it allows customers to interact with the brand through people product, place, and promotion in a high experience environment. It also allows customers to browse and creates upselling and cross-selling opportunities. If deployed properly omni-channel technology also allows customers to choose products from any store and have them delivered as well as create an online shopping experience within a store. I am sure everyone will agree that doing returns and exchanges in stores is much easier than online, this is also an opportunity to engage positively with customers and help them shop more. all of these initiatives will help store inventory to move faster and as better data is available to re-stick smarter.  

To optimize the channel mix and asset deployment: As the omni-channel strategy is implemented, if good data analysis is done, a lot of decision-making information will be available to the CEO to decide on the deployment of his/her assets. Data about customers buying preferences by channel/ by brand/ by location/ by time/ and all related to customer profiles. This will allow the CEO to decide on where the physical stores should be located, what brands they should carry, how many staff are required at what timings, what size of store as well as information on online traffic for the same parameters and the need for promotion across these channels.

The case for Omni-channel enablement – Retail leaders in the omni-channel movement are gaining a competitive advantage in the marketplace by providing high revenue customers the connectivity and service they demand. 

Increased revenue from multi-channel shoppers: While 40% of consumers purchase more from retailers that provide a personalized shopping experience across channels, there is an exponential return on the budget you invest in personalization as retail CEOs who invest in personalization can realize upward of $20 in return for every dollar invested.

Omni-channel’s customer focus yields loyalty-based revenue: 65% of consumers have cut ties with a brand over a single poor customer service experience resulting in companies losing an average of $62 billion annually. Retailers who provide this exceptional experience can earn rewards worth approx. $823 million in incremental sales annually in the form of additional purchases, churn reduction, and word-of-mouth purchases over a 3 year period for a company with $1 billion in annual revenues. 

Emerging trends become mainstream: Customer expectations fueling the omni-channel movement, especially with the advent of Covid-19 and the resulting lockdowns and other restrictions, particularly those on human interaction, has made it mainstream as trends in e/m-commerce, tablet, and smartphone usage, and social networking continue to proliferate.

Retail CEO’s KPIs to measure the progress of their Omni-channel retail business – As a general rule, CEOs need easy access to a few key performance indicators that allow them, at a glance, to monitor how healthy the business is at a given point in time. Business leaders need to keep up to date in real time (or as close as possible) so that they can have the actionable insights needed to make adjustments to their priorities. Some examples of important KPIs that retail CEOs should keep an eye on with their executive KPI dashboards are:

1. Conversion Rate – the number of people interacting with the brand through the various channels v/s the number of individual purchases.
2. Sales per square foot are calculated by dividing the net sales by the amount of sales space.
3. Sales per employee/category – helps retail CEOs identify valuable sales data with reference to sales as per product category, sales per employee, average sales per transaction, and sales per shift of the day. It helps make better employment decisions and planning.
4. Online traffic and foot traffic – Digital traffic is measured with the help of a POS system which indicates how many shoppers are visiting your online store. Foot traffic is fundamentally measured by physically keeping a track of every customer walking into your store or with the help of cameras.
5. Inventory turnover – also known as Stock Turn, it refers to the times in a particular period you are selling the inventory and replacing it. It can be calculated by measuring the cost of goods sold by the average inventory.

In order to identify and track the right retail KPIs, retail CEOs need to invest in an advanced omni-channel retail management POS solution. We hope this information can help you move ahead in your strategic thinking by formulating, evaluating, or even implementing your own omni-channel strategies. Stay tuned to know more about enabling omni-channel strategy through technology and measuring the ROI for greater retail success. 

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