- 3 Nov 2010
Multichannel – it’s here to stay
By Alan Morris, Managing Director of Retail Assist
Of late, multichannel retail has been discussed in a way that suggests it is something of a new phenomenon. This is largely due to the advent of online stores and mobile technology. Certainly, E-commerce and M-commerce are the latest additions to the multichannel mix and are fresh and interesting avenues for retailers to explore. However, the concept of multichannel existed long before the first online shopping basket or mobile app were twinkles in an excited developer’s eye. The simple way of defining a multichannel retailer is that they sell to the public via more than one distribution channel – through mail order catalogues, bricks and mortar stores, online, and via mobile technology; the latter two being the most recent, and currently fastest growing channels.
Another common misconception surrounding multichannel is that retail always starts with a bricks and mortar presence, but again that’s not true. If you look back at the history of Sears in the United States, who have long been established as a retail giant, they opened their first store in 1925 to complement their catalogue channel, which they launched in 1886.
The key benefit for retailers of being multichannel is that it gives them more opportunities to get their product in front of customers whom they wouldn’t have been able to reach with a single channel. This allows them to increase revenues and profitability, which is fundamentally what being in business is all about. Customer loyalty is one of the biggest challenges in today’s retail market regardless of whether you’re a single or multichannel retailer, therefore the more opportunities you have to get customers engaged with your product, the bigger your advantage. Consumers are now bombarded with so many messages persuading them to buy that, if retailers don’t take this seriously, they’re effectively conceding defeat to the opposition.
Integration is one of the primary challenges to multichannel retailers in the eternal battle for customer loyalty. When a customers makes make contact with a retailer – whether it be online, via a mobile application, via a catalogue, or in store – it’s important that they are treated in the same way; and that the high level of service that a customer receives face-to-face is replicated via other channels. To provide that service, the retailer must have the right product in the right place at the right time. That may be an old retailing cliche, but it’s absolutely critical. For example, there’s no point in having a fancy website that seemingly allows the customer to buy products if the items never turn up. That bad experience wouldn’t just put off the customer from visiting the website again, it would probably also deter them from shopping in the retailer’s stores on the high street, or using their catalogue. So whilst multichannel retailers are able to get to more customers, the chance of getting it wrong is also greater.
Furthermore, retailers must either fully invest in each new opportunity presented, or not enter that route to market at all. For example, if a retailer with two hundred high-street stores suddenly thinks that adding a website is going to increase sales, it may be right, but it will need someone to manage that web site just as it would need a shop manager to manage a ‘bricks and mortar’ store. A transactional website has got to be seen as an integrated part of the business, and the nuances of that part of the business have to be understood.
It is by no means my intention to deter anyone from considering multichannel retailing. In terms of whether it is the right approach for retailers, I think it certainly is. However it’s absolutely vital that they plan how multichannel is going to work for their business and how they’re going to deploy their resources. These resources include products, people, marketing and IT systems, and need to be spread across each channel.
IT acts as a facilitator for retailers, in the sense that it makes processes better and can improve business practice. It’s not true that without IT you wouldn’t have bricks and mortar retailing, because this existed and was part of the retail landscape many years before there were computers. However, internet shopping and mobile retailing have obviously been facilitated by technological advancement. Retailers have sometimes been classified as being late to adopt different technologies; historically they have tended to try a development when it was no longer cutting-edge and its real advantages had been proven. For example, when the internet was first used to sell products and services, not everybody had a home computer, so many thought this route to market wouldn’t take off because there weren’t enough computers out there. Nowadays, retailers who have adopted this technology and are managing their online stores well are making a great deal of money.
In terms of where multichannel is going, it’s very difficult to say. If we wound the clock back ten years to the year 2000 and were asked to forecast the technology that would be in use in 2010, at best, we might have got it approximately right. What’s important is that IT providers should always be looking at their product from a retailer’s perspective and understanding how the product underpins multichannel retailing. This is because, however it may develop over the coming months and years, multichannel is here to stay.