Why technology will be key to retail survival in 2012

Online sales continue to grow providing further proof that a strong multi-channel strategy will be key to retailers' survival in 2012.

Retailers had little reason to celebrate following the release of trading results over the Christmas period. But while overall sales figures looked dismal across the board, online revenues mitigated some of the damage, providing further proof that a strong multi-channel strategy will be the difference in staying ahead as consumer spending continues to tighten.

“The companies that are going bust are the ones that haven’t kept up with the latest multi-channel retailing, not offering things like returns to store or click-and-collect services,” said Christine Bardwell research manager at IDC Retail Insights EMEA. “Convenience will be a key driver for shopping online and if it is not offered then consumers will shop somewhere else,” she added.

One big consumer growth area has been a move to click-and-collect – where consumers order online and collect in-store. Sainsbury’s click-and-collect service now represents 25% of all online sales. National retailers need to ensure there are branches near to where e-commerce customers are, so they can develop their click-and-collect strategy, says Patrick O'Brien, analyst at Verdict.

Shutting shop

But at the same time, retailers will be faced with the strategic decision of exactly where to shut stores and where a physical presence could compliment the online offering. In 2008, retailers made as many cuts as they could to the business and focused on the bottom line, by streamlining supply chains improving efficiencies. But there's not much more room to make significant savings here now, which is why they are now looking at store cuts, says Bardwell

“An awful lot of retailers are looking at the number of stores and where they are located. E-commerce will continue to grow and as such they will think how many shops are required and whether they are in the right places.”

For some brands, their flagship stores are likely to be their only physical stores in the future. Bardwell says retailers will have to make them a more social environment, such as Topshop’s inclusion of a nail bar in its Oxford Street branch.

Getting multi-channel right

The big opportunities for retailers will be integrating e-commerce and mobile operations with those of the shop. “This gives high street retailers a benefit above pure play. If they can’t compete with online-only retailers in price they may get the edge on can on convenience and customer service,” says O’Brien.

Pricing transparency and parity between online and in-store will be key.  “When people are using smartphones dual-pricing doesn’t work so well because they can clearly see if the shop is charging higher prices,” said O’Brien.

“Game has released dreadful results and they still operate dual prices. Their online sales increased but at a much lower level than the rest of that market. It should have invested a lot more in developing its online strategy. All retailers focused on content are facing a similar problem. So it was not alone there, but it could have mitigated some of the damage,” he said.

Technology investments

As online and in-store channels becomes more integrated, department stores will also need systems that provide better real-time information about where products are, to control stock and provide visibility online.

Mike Eaton, managing director of Retail Answers, said: “If you are directing a customer to a shop to collect their item, it had better be there. So how do you make sure it is and someone hasn’t strolled in and bought it? Information needs to flow as it happens, with websites checking central databases,” he said.

Big areas of investment are store systems, such as store allocation and warehouse management, and making sure all networks are joined up, he said. “Integration of cross-channel systems is important at the moment, but at the same time that is tough because many retailers don’t have a lot of money.”

Some retailers are using middleware to connect back-end systems for online and in-store, while others will use a fully-integrated system which synchronise shop sales with other channels, he said. Retailers need to put a technology investment plan in place now: “They need to decide where they want to be at the end of this year and the end of next year.”

Mobile channels

Mobile transactions are yet to take off, still accounting for just a fraction of online sales. Consequently some retailers are put off by investing in mobile platforms, as the number of transactions made on this platform is still relatively minor. But these retailers fail to understand that smartphone users want access to mobile sites not just for transactions, but as part of the browsing and research, says O’Brien. A return on investment in mobile sites and apps should be considered in relation to the store’s cross-channel offering.

Other retailers, such as Tesco, are thinking ahead to long-term customer trends by investing in an augmented reality application. However, Bardwell believes augmented reality is still at the gimmick stage: “I can see how 2012 will be an interesting year for augmented reality, but I still think it’s a few years away yet,” she said.

Virtual to physical

But high street retailers aren’t the only ones considering the importance of a multi-channel offering. As high street retailers seek to scale back the number of stores, online-only retailers appear to be increasingly moving into the physical space. For example eBay trialled a pop-up shop in  London over Christmas, consisting of a wall of QR codes for customers to scan with their smartphones. And in an even greater encroachment on traditional retailers’ space, Amazon is currently trialling lockers in London, where customers can purchase an item online and are then given the option of picking it up at a nearby locker by punching in a code.

Online-only fashion business Asos was in talks with one UK retailer about offering a collection service for its products, although that arrangement appeared to fall through, says O'Brien. “Looking at ways of making delivery more convenient – such as by partnering with non-competing retailers – could be a good move for online-only retailers,” he said.

However, for online-only retailers, issues around delivery could be a growing problem, says O’Brien: “Some employers have said that staff are no longer allowed personal deliveries, as it’s too time consuming and puts too much strain on postal delivery services. If that trend continues, online retailers will need to address delivery convenience issues."

One solution points to services such as Collect Plus, which newsagents can sign up to and which enables customers to receive and return products from the corner shop, rather than having to go all the way to the newsagents.

Delivery will be one of the areas of differentiation in 2012, with companies such as Shutl providing a service that pulls together information on all the couriers available to deliver their product, to find the one that can make a delivery in under 40 minutes. At the moment that service is just available in London, but will be rolled out across major cities in the UK, says Bardwell.

“That way, if someone is shopping on the high street and they see a product they like in-store, they can order it on their mobile phone and have it delivered by the time they get back, so they don’t have to carry a lot of shopping,” she said.

As cash-strapped consumers continue to expect more – from online and high street retailers, in price and convenience – the fight for customer market share will rage on in 2012. And in an uncertain economic climate, the only aspect that remains inevitable this year is that online sales will grow, putting online and the right technology investments at the centre of all successful retail strategies.

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We’d agree with IDC on the need for retailers to better integrate e-commerce and mobile operations with those of the shop, but the savvy retailers already go a step further: by providing customers with an in-store online experience. The new multichannel involves having the right apps and also a branded experience for customers when they go online by connecting to the store’s free WiFi. We’ve seen extraordinary levels of interest in our WiFi service from retailers such as Ted Baker because they recognise customers want to be online everywhere nowadays, for instance to upload images of themselves trying on clothes and sharing suggestions on what to purchase. And for a consistently strong connection that won’t frustrate consumers, retailers recognise that providing reliable WiFi is the way forward.
 
Lyndal Newman
Head of Marketing, The Cloud

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Hi Lyndal,

Yes, we completely agree - we call the in-store digital concept  'Online Inside'.

At NRF in New York this year, we have seen some wonderful examples of retailers using wifi in-store, not only to directly improve the customer experience in the store, but also to track  sites the customer visits when in-store - i.e. are consumers looking at competitor or price comparison sites, search terms are they using etc. A company like Tesco can then link this data back to the shopper through their Clubcard for really valuable shopper insights.

The important thing is that the wifi doesn't take bandwidth priority over other store opererations, such as payments for example.

Christine Bardwell
IDC Retail Insights

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Online shopping will never replace bricks and mortar stores, however society has evolved exponentially over the past 10 years and retail needs to adapt to modern connsumerisation.
Cast your mind back to the late 90s when computers were referred to as “towers” and a 400Mhz Processor with 64MB of RAM was cutting edge, the only way to access the internet was via a series of bleeps and clicks with a modem connected to a landline and the concept of computing was very much tethered to a telephone socket.
Fast forward to 2012 and we’re all walking around with multi-core phones sporting GPS, HD cameras and stupendous amounts of memory. We’re online all the time, at work, at home and on-the-move. The younger generations is amused by grooved, black, vinyl discs and mechanical stereo cassette tapes and they can’t comprehend what life was like before the internet.
Technology has created a sense of immediacy and transparency. We no longer feel out of our depth or lost because information is always at hand. The WWW has transformed the way we access and consume information. We don’t want to write letters, let our fingers do the walking through the yellow pages or wait for the library to open so we can flip through an out of date book for information. We know the minute the ink has touched the paper, the moment has passed and is superseded by something new.
Retailers can no longer hide behind the glossy veneer of brand and image. The modern consumer is savvy with an arsenal of knowledge and a network of peers with views and opinions at their finger tips. Consumerisation has transformed society and continues to transform retail. The key is a consistent experience across all channels. Online retail will never replace physical stores. Shopping isn’t just perfunctory, it is social, enjoyable and engaging. What’s changed is now the customer is in control. They want to dictate how they purchase, when they purchase and where they purchase. Retailers need to merge their physical and online channels to offer a flexible and intuitive shopping experience. Retailers continue to differentiate with service and innovate to create added value. Online is not a threat, on the contrary it is an opportunity and the convergence of physical and online retail is the key success.
Paul Kollnig
Pierhouse Retail Solutions

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Online shopping will never replace bricks and mortar stores

errr you sure about that of course it will look at whats happening to the high street shopping is now social... online... i can buy a item and share it with my friends online...  ask their opinion ect

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I disagree. What about the pure play online retailers that are opening pop-up physical stores? Bricks and mortar will always exist because it is the personification of the brand and it's all about the experience, the theatre and the service.

Paul Kollnig
www.pierhouse.co.uk

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Providing a convenient,
competitive choice for the consumer is the foundation of any retail business. However,
in order to continue providing this level of choice in today’s technologically
enabled market place, the retailer must adapt to the consumer’s multi-channel
demands. 

Today’s consumer has the
market place at their fingertips and is much better informed.
They can therefore be far more demanding than they were in the past.  This has made it much more difficult for the
retailer.  It is a challenge for them to
provide convenience, choice and competitiveness across all channels, given the
price wars from the multiples and the influx of online retailers.

The retailer’s biggest
weapon here is in the deployment of innovative technology.  However it cannot just be the old
architectures, bent and throttled-up to suit the latest ideas.  In order to deliver a seamless, consistent,
satisfying consumer experience it must be designed with the new holistic
omni-channel integrated retail enterprise in mind.  

The only way to ensure the delivery
of this enhanced consumer experience is if the entire business operates in true
real-time, against a single database.  This
can be enabled by the adoption of reliable, scalable and affordable broadband
solutions.  These infrastructures will
deliver the efficiency and agility necessary for retailers to compete and lead
in today’s retail world.  

Although this sounds
complicated and expensive, SaaS has made real-time multichannel systems much
simpler and more affordable.  This
technology will ensure a seamless and consistent customer experience across all
retail channels.

Darragh
Fanning, Managing Director, Celtech Software International

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okay so explain the death of the high street? 

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