Innovative Retail Technologies

MAR-APR 2017

Innovative Retail Technologies (formerly Integrated Solutions For Retailers) is the premier source for innovative yet pragmatic technology solutions in the retail industry.

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Page 14 of 39

Mar-Apr 2017 12 Business Challenges Is Omni-Channel About Competitors Or Customers? This year, retailers placed two challenges in a tie at the top of the list (with 50% of respondents, not pictured) for their top business challenges. One is that a good customer experience in one channel is no longer enough to maintain customer loyalty, and the other is that the way consumers use different channels is unpredictable — but important to understand. At first blush, these two issues appear to focus on the same thing: customers and, more to the point, the customer experience. But digging deeper rapidly reveals that, yet again, it is retail winners who are focused on customers, while their peers are focused on competitors. Retail winners place far more emphasis on understanding the unpredictable ways consumers use different channels, with 60% placing this as a top-three business challenge versus 43% of peers (Figure 1). This is clearly exclusively a focus on the customer. Both performance groups of retailers are challenged by the rise of digital pure-plays and the new kinds of competition these sources bring. This challenge is embodied in Walmart's rationale for investing an unplanned billion dollars into the company's e-commerce experience. But average and lagging retailers' top business challenge is neither of these. Instead, they are most challenged by maintaining customer loyalty. They have reached a point where they understand they risk losing customers — to competitors — if they cannot provide a more seamless experience. However, this isn't the only place where lower-performing retailers emphasize competitive challenges. They are more likely to cite online competitors and their cost models as a business challenge, as well as just flat-out stating that the competition is doing a better job understanding and acting on consumers' cross- channel behaviors. In fact, the percentage of average and lagging retailers that cite this challenge outpaces winning retailers by almost 3 to 1. Amazingly, these differences in perceived business challenges do not come from drastically different views of how omni-channel is impacting retail in general. There are several differences, which we will highlight below, but on the main, retail winners are just as likely as their underperforming peers to have the same view of the primary role of digital channels, the same view of how much store sales are likely to be influenced by digital channels, and, with one notable exception, the data that is most valuable in understanding shopper behavior (outside of sales and demographics). Instead, the retailer participants in this year's benchmark survey reveal what appears to be an industry issue, not one based on retail performance. When it comes to understanding the role that digital has in shaping business challenges, retailers, whether large or small, high-performing or low-, reveal a breathtaking level of naiveté about the role of digital in an omni-channel strategy. Again, there are exceptions. But on the whole, despite making progress in understanding multichannel shoppers, the very progenitor of omni- channel — the rise of digital — seems to be the place where retailers are the blindest. Read on to judge for yourself. As a shopping aid while shopping in the store To educate consumers about lifestyle elements related to our brand To create brand awareness To help consumers educate themselves about our products before they come into stores To drive traffic to stores To manage post-transaction service To transact — to sell products 35% 35% 33% 20% 11% 23% 17% 19% 20% 13% 9% 11% 7% 11% Retailers' Primary Role Of Digital Channels 2016 2015 2014 6% 14% 4% 1% 6% 5% Figure 2: Digital Is About Selling?

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