• January 15, 2016

The Heart and Lungs of Retail II: Building an Omni-Channel, Data-Rich Experience

Find part I of this article here.

Building an Omni-Channel Experience

Companies like Amazon, iTunes and Net-a-Porter conduct all their business online. Traditional retailers, however, have an added challenge. They have to transition from being solely brick-and-mortar businesses to providing an integrated omni-channel experience that is able to leverage new technologies.

Andrew Clarke, VP of Hewlett Packard Enterprise in Asia Pacific and Japan, comments, “If you’re an existing incumbent, can you adopt that sort of solution and become a leader? I think there are far more traditional retailers who have failed to step up to that than there are those who’ve embraced and found a solution.”

The main difficulty, he explains, is not simply building e-commerce sites or providing mobile apps, but in understanding consumer psychology. An individual consumer will have the same core values no matter where or how he shops; he might be price-sensitive, creative, or brand-conscious. Retailers must be conscious of this and maintain their value proposition regardless of the sales channel.

In addition, retailers must also be aware that the sales channels each operate in a different environment. Although the consumer is fundamentally the same individual with the same core values, he or she might behave differently depending on the circumstances.

“The moment of my purchase, the space I’m in at the time, the channel that I’ve chosen because of that environment, does subtly shift some of my values. There are times when I expect things to be responsive, quick and dynamic so that I can close a transaction fast — for example, if I’m in a cab and need to order something for my wife’s birthday. But if I go into a shop, I expect to engage with the product in a different way,” explains Clarke.

Ultimately, customers expect retailers to provide goods and services that are relevant to their lives and personalities; in other words, for retailers to know and understand them. This means providing targeted value propositions like Amazon has done, but also removing barriers within each channel by providing facilities such as easy and accurate catalog search functions.

Data Analytics: Small Tweaks, Enormous Changes

One effective way for retailers to establish an understanding with customers is through loyalty programs, which have existed for at least 20 years — if not throughout history. Clarke cites Tesco as having done this very successfully.

“Tesco’s Club Card is very famous. They’ve been around for at least 20 years. They’ve been cited as causing real loyalty and so forth. And when you strip them back, mostly they’re a small bribery tool: ‘I’ll give you some money back if you keep coming back.’ They’re very similar but actually lower value than airline loyalty schemes, in many ways. But one of their real purposes is to get people to say, “I was here and I bought this,” to capture information which you can then analyze”.

Capturing customer loyalty can make a massive difference to profits, which makes data analytics especially useful as a way to get to know customers.

“Ultimately, it’s a place where — if you’ve got the right information in the hands of the right decision-maker, presented to them in a timely, effective way — you have the ability to make one basic point improvement on your margin. And at scale, that’s worth a lot of money,” Clarke suggests.

The result is that data analytics has become a very important and sophisticated part of retail, and has become much more refined in the past few years, resulting in game- changing consequences.

As for social media, Clarke says it helps the consumer as much as it does retailers, in terms to gathering data about a product or service.

“Looking at social data to help inform is crowd-sourcing at its very nature. Companies can use some sort of sentiment analysis and synthesize them to give me a sense of what everyone says. And individuals use this data to help them with their decision-making process.”

“It’s that analytical air. Big data turns into small, precise data and small, precise actions that move the needle just a little bit – but frequently enough – for a lot of customers. That’s the art of the process. And that’s where I think the real innovation is. And that’s the flair that really separates a company like Amazon from the others.”
— Andrew Clarke, VP of Hewlett Packard Enterprise, Asia Pacific and Japan

The Future of Retail

In order to stay ahead, retail companies use every tool at their disposal to create brand stickiness, which might be difficult to do in low-margin, undifferentiated commodity markets such as grocery and petrol. Even so, some companies have managed to find a niche and create a strong base of loyal customers.

Clarke cites Whole Foods, a healthy food grocery store in the US, as an example. “Whole Foods presents a very strong brand proposition, and it’s an $8 billion or $10 billion business. It’s not small scale by any stretch. And it’s created a very strong affinity by innovating what it offers, by being true to its core, which is in selling the very best fresh food. So you do get a very sticky customer base, people who would drive out of their way to shop”.

Nevertheless, whilst highly-differentiated industries like fashion thrive in the new style of IT and attain brand loyalty globally, commodities sellers find it more difficult to make use of new technologies.

“For example, grocery has struggled the world over to make online grocery work. It is a low margin business. I can think of far more applications of making life easier by wrapping technology around it. But in the end, if you deliver avocados and they’re not fresh, they’re not the ones I would have picked in the store, I’ve lost faith in your brand. And it’s very, very hard to make that work,” Clarke concludes.