The Case to Cross It Up

For any retailer with more than one channel, becoming cross-channel is a critically important way to fully leverage its assets to provide a greater experience to its customers, which ultimately leads to more customer retention, brand loyalty and, of course, sales and profits.

In an effort to highlight and tackle the issues associated with implementing cross channel strategies, Kasey Lobaugh of Deloitte Consulting and Jim Bengier of Sterling Commerce pulled together a Cross Channel Retail Consortium of retail thought leaders that included executives from a cross section of retailers as well as some industry analysts, vendors and yours truly for a day of discussion this past Sunday on the strategy, tactics and challenges of implementing effective retail cross channel experiences for our customers.

Before I delve deeper into my thoughts on the day, it’s probably worth defining “cross channel.” Many times, “multi-channel” and “cross-channel” are used interchangeably, but I don’t think they’re the same thing at all. “Multi-channel” is simply operating in more than one channel while “cross-channel” is leveraging the strengths of each channel to create an overall customer experience that is greater than the sum of its parts. It’s 1+1=3.

Sounds great, right? So, why aren’t more retailers doing it?

Three basic themes emerged from the group:

  1. Lack of executive and board level understanding of the value of customers transacting in multiple channels (and, conversely, the negative affects that occur when customers are prevented from interacting with a brand across channels)
  2. Lack of incentives for various employees, from executive to front line staff, to encourage shopping across channels
  3. IT systems limitations

So, let’s tackle these issues one-by-one.

1. Lack of executive and board level understanding of the value of creating cross channel experiences

The group agreed that getting the buy-in of the CEO is critical. No one believed, and I certainly agree, that a strategy as all-encompassing as creating a cross channel experience has any chance at success without the CEO actively driving it. So, just get the CEO to support it. Easy, right? Not so much.

In my experience, the best way to convince a CEO of the value of any strategy is to show him or her how it will maximize profits. One retailer in the room was able to show the value of customers shopping in multiple channels pretty easily by tracking customer transactions in all channels through a loyalty program. Others were able to do the same in various degrees, but the general concern was the potentially high cost of discounts provided in exchange for such information. (I have lots to say about loyalty programs, but I’ll save that for another post). Janet Sherlock of AMR Research extolled the virtues of emailed receipts as an environmentally attractive and altogether less costly alternative option to harness ID’d transactions. I find that proposal extremely intriguing.

While transactions tell us about customers who completed transactions in each channel, they don’t tell us about customers who researched online to buy in store or customers who took a look at products in store before buying online, and the group longed for an industry standard metric that could be used to assess the amount of sales influenced by the another channel.

Another driver of CEO support is attention to the issue from the Board. One retailer said all it took was a bad experience by one 17-year-old granddaughter of a Board member to get the issue front and center. Funny how life is, isn’t it? Who could imagine that one young girl’s frustration can drive a strategic shift in a major national retailer? But maybe the lesson here is about the importance of getting decision makers’ heads out of the financial spreadsheets and into real-life experiences to help them understand how their companies are (or are not) serving their customers.

2. Lack of incentives for various employees to encourage shopping across channels

One retailer described the challenges of focusing on customer experience at a retailer that is driven by “an imperialist merchant organization.” (There was no way I could write this piece without including that quote.) Merchants, by their nature, tend to care a lot more about product than customers. But in the end, they’re generally heavily driven by sales, margin and turn metrics. There are many cross channel strategies can be implemented to help merchants drive these key metrics.

For example, the web has many selling capabilities that are nearly impossible to achieve in store because of physical constraints. Customer reviews are extremely popular online and customers regularly report using them to make purchase decisions (both online and in store); however, they are very difficult to make available in a physical environment. Some retailers are making them available via in-store kiosks, but the kiosks are a large capital investment to make if they’re not already available. But just about everyone’s got a computer in his or her pocket or purse these days. Let’s make more use of mobile phone technology to give people access to customer reviews, recommendations, wish lists, gift registries, etc. in store while they’re standing in front of the products.

There are also advantages in stores than can be leveraged online. Many retailers have incredible experts in their stores. How can those experts build content that can be used by customers and other employees alike to improve the shopping experience? How about security? Should retailers start to look for ways to accept payment in their stores for web orders when customers aren’t comfortable paying online? Believe it or not, there are still a lot of customers out there who aren’t comfortable using a credit card online, and in this economy there are more and more customers who aren’t comfortable or aren’t able to use credit cards period. But they’re still interested in buying from us, and we should find every way we can to help them do so.

3. IT systems limitations

There’s no question that IT legacy systems cause us a lot of trouble when we try to integrate our customer experiences. But I also wonder how many times we fall back too easily on such an excuse. I’ve written about my Tree Stump Theory previously, and it’s certainly prevalent in this case. We have a lot of compelling reasons why systems prevent us from implementing such key capabilities as the ability to accept returns of online purchases in store. But guess what? Our customers don’t know those reasons, and even if they did, they don’t care. While many retailers have found ways around the returns issues, just as many still have not. Either way, the case to prioritize such efforts should rely on some of the same techniques described above to make compelling cases to the CEO and the incent imperialist merchants.

Pure play retailers, and especially Amazon, continue to grow at rapid rates by pulling more and more market share. Multi-channel retailers have assets in their stores that pure plays don’t, but it’s going to take implementing true cross channel strategies to leverage those assets in a competitively advantageous way. Let’s cross it up!

What cross-channel strategies have you implemented or are considering implementing? What are the barriers to cross-channel in your organization?

Photo credit: Wikimedia Commons



3 Comments

  • By Chris Eagle, September 22, 2009 @ 10:48 am

    I think you (and probably the entire CCRC) start with the presumption that cross-channel is a good thing and that “1+1=3”.
    I prefer to back up a level and not ask “why can’t companies implement cross-channel?” but instead ask “why don’t companies even try to be cross-channel?” At this point in time, there does not appear to be a lot of cross-channel success stories or even compelling evidence that cross-channel is a strategy that consumers desire.
    Marketing a brand is hard enough in the first place. I think most companies prefer not to tackle the task of trying to maintain a clear, single brand identity when operating on several planes. This is not just a retail issue; other business markets like news/entertainment media and stock brokers are areas that seem like they would easily benefit from cross-channel and yet they don’t.
    Until we see some more true cross-channel (and not multi-channel) retail success stories, I expect we’ll continue to see retailers go down the “We’re really a brick and mortar company but we sell stuff on the web too” path (Best Buy, Nordstroms) or skip the physical world all together (Amazon, Zappos).
    If companies truly saw benefit to cross-channel business, or consumers were truly clamoring for these 1+1=3 benefits, then the impediments you list would be a moot point. But, in the meantime, most companies do not see emailed receipts or the satisfaction of a single 17-year old as reasons to make material and expensive changes to their core business strategy.

  • By Kasey Lobaugh, September 22, 2009 @ 9:33 pm

    Chris asks a good question – is Cross-Channel something that consumers desire. He’s right in that ultimately that is the key question that retailers have to answer in order to determine if investments are appropriate.
    However, I would not agree with the statement that there isn’t “compelling evidence that cross-channel is a strategy that consumers desire”.
    Having spent the better part of the last 8 years studying this topic, reviewing findings of surveys, spending time with a large number of retailers, conducting focus groups on behalf of several reatilers, conducting on-line surveys and conducting in-store visits, I personally find the data overwhelming.
    Now, granted, customers may not say ‘I want a cross channel experience’, however, they do expect teh brand to be integrated. They expect consistent prices on-line and in the store. They expect consistent brand image, merchandising strategies, marketing programs and they do expect that that the web channel knows the store exists and the store knows the web exists. (eg. inventory visiblity and product availabilty)
    Additionally, there is real evidence that cross-channel initiatives have positive ROI and impact. Macy’s just today professed at Shop.org’s keynote that for every dollar they sell on-line, the on-line channel is the starting point for another $5.77 in the store within 10 days. This simple fact tells us that their on-line channel is worth 5x in value as the starting point of an in-store transaction. To me this is compelling, from the CEO at Macy’s – their on-line business is more valuable in a cross-channel role than in a single channel role.
    Last year, I spent the better part of the year interviewing retail executives on their perspectives and have aggregated the findings in a research report titled Reinventing Retial. The net outcome of this was a unanimous view from the retail executives I interviewed that Cross-Channel retail is a real, consumer driven imperative.
    http://www.deloitte.com/view/en_US/us/article/27c26426b420e110VgnVCM100000ba42f00aRCRD.htm
    Now, with this all being said, I agree with Chris that cross-channel retail doesn’t mean the same thing to every retailer, and it has a stronger value proposition for some retailers and a weaker one for others.
    Thanks Kevin for insights, and Chris for sharing an important point of view.

  • By Kevin Ertell, September 25, 2009 @ 9:39 am

    Thanks to Chris and Kasey for a good discussion. While Kasey said much of what I would also have said, I have a few points to add to the conversation:
    1. Cross-channel capabilities can be both small and large, and many retailers today are implementing various forms of them. For example, many retailers take returns in-store for online merchandise, and many don’t. From my conversations with many retailers, most of those who don’t take online returns in-store would like to take them because their customers want the ability, but retailers generally mention reasons like IT systems limitations as the impediment. Store operations people, in my direct experience, are very aware of this issue and feel the sting of unhappy customers. However, such issues don’t often reach the boardroom. Hence, my point about the 17-year-old girl, which was less about that specific instance and more about the need to make board members more aware of real-life customer issues that have an impact on customer satisfaction with the brand.
    2. I’m not sure I agree that there aren’t a lot of cross-channel success stories out there. Kasey lists the Macy’s example above and also his report. I’ve seen numerous stories presented at various conferences, and we certainly had some good successes at Borders with capabilities like “In-store reserve” capabilities that allowed customers to put in-store items on hold via a web site interface. There was also real customer interest in the ability to add items to a wish list online and then access that wish list in-store. The problem may be that the cross-channel success stories are being told by and to the same group of e-commerce executives and not necessarily to CEOs and other physical business executives.
    3. Large pure-play retailers like Amazon are starting to take significant market share from many businesses. As those pure-plays continue to improve their capabilities for their customers, physical businesses are going to have to come up with changes in their models in order to compete. Simply trying to compete with the pure-plays on their turf while running the physical side of the business as they always have feels like a long-term strategic mistake (see Defending the Status Quo Kills Companies at http://www.retailshakennotstirred.com/retail-shaken-not-stirred/2009/07/defending-the-status-quo-kills-companies.html). Implementing cross-channel strategies that combine to leverage store patronage to increase the viability of the online site while at the same time using online capabilities to increase the viability of the store presence may be the best way for existing businesses to blunt the impact of impressive new online competition.
    4. Just to clarify, the point about the e-receipts was less about the functionality and more about it being an interesting way to developing ID’d transactions without the expense of discounts that could be associated with a loyalty program. The value of the ID’d transactions is the ability to gain customer data across channels to better understand the entirety of their interactions with a brand and to gain better insight into the value of multi-channel customers.
    Chris, thanks for your comments and for starting an interesting discussion.

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Retail: Shaken Not Stirred by Kevin Ertell


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