Monday, April 27, 2015

What is the Return on Omnichannel?

Retail Pro Integrations

Digital efforts helped Macy’s fourth-quarter sales increase to $9.364 billion, up 1.8 percent from the prior year.

Many retailers are initially very excited to embark on an omnichannel journey. However, once they begin plotting their strategy, many start to wonder if the substantial effort required is worth the investment.

It’s no small task: Inventory processes must be upgraded, websites updated and employees trained. But 50 percent of all U.S. retail sales are predicted to be omnichannel by 2017, according to Forrester, and for many retailers, the concept of omnichannel helps better paint a picture of a repeat customer’s total value. With the probability of repeat customers buying a product between 60 and 70 percent and the prospect of new customers doing so below 20 percent, it’s clear why so many are looking to omnichannel for answers.

Successful omnichannel strategies incorporate several components, often including shipping from a retail store. A CIO might suggest integrating the store’s retail software with a distributed order management system in order to roll out a ship-from-store program, the goal of which would be to double inventory turnover. The CFO might reject the project entirely, citing an increase in shipping costs, resulting in an overall loss. Organizational priorities need an alignment to move forward; it is imperative to leverage the benefits of any part on an omnichannel strategy to solve a current business need.

One popular omnichannel strategy for retailers is buy online, pick up in store. Macy’s expertly integrates the online and in-store experience, which is reflected in its most recent financial results. Digital efforts helped fourth-quarter sales increase to $9.4 billion, up 1.8 percent from the prior year. Among its strongest performers were dresses and men’s and women’s shoes. In those particular departments, Macy’s tested a single view of inventory between stores and direct-to-customer warehouses.

Can smarter fulfillment routing based on the most profitable location result in more balanced inventory and fewer markdowns leading to savings that can offset any new shipping costs? Even though sales didn’t come from the highest-profit departments, they added up to an overall success as new inventory efficiencies were found and radiated sales were made when customers picked up the orders.

Sephora is also a leader in omnichannel strategy. In addition to a successful network of physical retail stores, the brand has a strong online presence and even hosts its own online “BeautyTalk” community.

The retailer integrates online with in-store activity through the constantly evolving Sephora to Go app, allowing customers access to their “loves” list on any mobile device. As customers are encouraged to cross channels with their omnipresent shopping lists, rethinking how sales and costs are attributed across channels becomes a priority. Sephora is looking to evolve the experience, deploying beacons in stores throughout the United States to deliver personalized alerts to shoppers who opt in.

The trend is clear — no matter the evolving processes or technology, the target is on continuing the retail relationship with the consumer across all platforms, channels and mediums. Correct sale attribution, together with tailored retail experiences and customer nurturing, is critical to the strategy. It is no longer just a mobile sale or web sales volume driving development of that channel: It is the retail experience and the brand story. And the rising spend per customer and elevated loyalty metrics are the return on investment measurements for the omnichannel investment.

In the end, this holistic approach to retail enhances the shopping experience, which leads to satisfied, loyal customers. And that’s an investment well worth making.

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