woman looking out window

Customers expect a seamless experience across physical and digital retail environments. And “a good customer experience in one channel is not enough to maintain customer loyalty," researchers for Miami-based Retail Systems Research (RSR) wrote in a report released yesterday.

The most successful retailers, defined as those exceeding the industry average of comparable store/channel sales growth of 4.5 percent, "maintain a relentless focus on the customer."

They also acknowledge “the way consumers use different channels to make their purchase decision is unpredictable, but important to understand," RSR Managing Partners Brian Kilcourse and Paula Rosenblum note in Omnichannel 2015: Taking Time, Money, Commitment And Technology.

A Decade of Change

The report is RSR's ninth annual look at the business drivers, opportunities and organizational constraints surrounding cross-channel processes and technologies in retail.

"Over the nine years we’ve conducted this benchmark, its nomenclature has morphed from multichannel to crosschannel to omnichannel. Based on our findings last year, we hypothesized that for consumers, all these titles were meaningless, and regardless of how a sale is consummated, to them it is simply 'shopping, redefined.'” the analysts explained.

Based on responses from 101 retailers between June and August, the report was sponsored by hybris, a Zug, Switzerland-based SAP company that sells enterprise multichannel e-commerce and product content management software.

From Edgy to Expected

The number of retailers who rate omnichannel customers as significantly more profitable has dropped by 50 percent in just three years. "That’s a staggering statistic and it has had tremendous implications on the industry," Kilcourse and Rosenblum note.

It indicates omnichannel has gone from a competitive advantage to a minimum level of investment — "from differentiating to table stakes."

Customers today fully expect consistency across channels. For retailers, this goes to the very core of how they do business.

"Very few (less than 5 percent) of respondents recognized that these are survival needs. But they are. It’s almost like asking the question: 'How great is the opportunity for having lighting and heat in your stores?' The answer is, it’s a significant opportunity, because without it, you won’t survive . Again, we did offer this as an answer alternative, with no takers. However we can’t emphasize the importance enough."

Physical and digital channels have converged as far as customers are concerned. And retailers who have yet to embrace omnichannel need to face reality.

Many of these laggard retailers — while complaining that customer expectations outpace their abilities to deliver cross-channel experiences — are "rushing to re-align their organizations, implement new technologies, and generally do what early adopters did: 'brute their way' to crosschannel consistency," the report states.

3 Key Findings

The report found:

  1. Maturity in digital commerce does not equate to leadership in an omnichannel world. In fact, retailers who have been involved in desktop e-commerce longer tend to lag later adopters in omnichannel technologies, presumably because they don’t have the flexibility and nimbleness to add features and functions quickly, with a minimum of cost and pain.
  2. The influence of digital channels on in-store sales continues to rise. Thirty-six percent of apparel retailers report between a quarter to half of their store sales are influenced by digital channels, and another 38 percent report more than half their store sales are similarly influenced.
  3. Despite the recognition of digital influence on store sales, fewer than half of respondents report synchronization of any process, from advertising to inventory visibility, across their selling and product information channels.

Better DX Needed

The degree to which retailers are challenged by customers' digitally enabled shopping behaviors differ, but "there is no question that all are affected," the report states.

Even so, 20 percent of retailers report that they “don’t know” what effect the digital channels have on store sales — underscoring a technology problem that could be addressed with better digital experiences (DX).

"Retailers who cannot associate non-transactional path-to-purchase attributes from consumers’ digital shopping behaviors to sales transactions in the store will continue to lack an understanding of what consumers are doing, let alone why they are doing it or how likely they are to do it in the future," according to the report.

So what's the purpose of all these channels anyway? The most successful retailers view things a bit differently than other retailers, the research found.

graphic showing primary role of digital channels in a company's overall strategy

Kilcourse and Rosenblum warned retailers that the percentage of sales influenced by digital channels continues to grow, noting, “This becomes clear when thinking about enterprise-wide customer visibility.”

“Two years ago, this was all about understanding purchase history. Now it has morphed into a more forward-looking path-to-purchase preference, and is likely to soon also incorporate data gleaned from in-store tracking technologies. This will allow retailers a more complete picture of shoppers, from occasional purchasers to avid advocates. The opportunity is enormous for those who take it.”

Advice for Retailers

How can retailers address the realities of an omnichannel world?

  • Recognize cross-channel retailing is the new normal
  • Use analytics to track, measure and understand cross-channel customer behaviors
  • But never forget the importance of consumer privacy
  • Rely on technologies that are both easy to use and easy to change
  • The greatest potential risk is doing nothing

"The industry is moving faster than it used to, and those who don’t take an educated risk run the true risk of falling into irrelevancy," the report warns.

The Omnichannel 2015: Taking Time, Money, Commitment And Technology benchmark report is available for download (registration required).

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Title image by Ryan Pouncy.