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Omnichannel Retailing: Merging Technology and Consumer Insight
Claus Ebster's keynote address at the Store Conference 2018 emphasizes the importance of omnichannel retailing, highlighting the need for retailers to embrace digital technology and focus on customer experience. He discusses strategies for brick-and-mortar stores to compete against online giants, including community engagement, differentiated store design, and integrating online and offline experiences through techniques like click and collect. The address also underscores that while technology can enhance shopping, it should not overshadow consumer insight and needs.
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Omnichannel Retailing: Merging Technology and Consumer Insight
- 1. Omnichannel Retailing Merging Technologyand Consumer Insight Claus Ebster Keynote Address at The Store Conference 2018 Athens, Greece
- 2. July 30, 1997 Myfirst online purchase
- 4. Online purchases haveincreased significantly European Union B2C E-Commerce Revenue in Billion Euros Source: Statista (2018)
- 5. The trend isthe same in Greece Source: Hellenic Statistical Authority (2017)
- 6. Embrace, don’t resistdigital technology
- 7.
- 8. Focus omnichannel strategieson the customer
- 10. Category killers putsmaller retailers under considerable pressure
- 11. The hunters arenow the hunted
- 12. There are manyways, brick-and-mortar stores can fight back…
- 13. Forge strong tieswith the local community
- 14. Trader Joe’s isdevoted to the local communities where it operates
- 15. Differentiate your storethrough design and visual merchandising
- 16.
- 17. Treating brick-and-mortar storesas a showroom Ordering online
- 18. Multichannel: Provide offlineand online channels Webshop Physical store Phone Vending machine Social media Mobile Virtual assistant/ Smart speaker Customer
- 19. Omnichannel: Integrate physicaland digital channels to provide a seamless experience Customer
- 20. Online stores offermany benefits… Wide selection Low prices Valuable content
- 21. … but sodo brick-and-mortar stores sensory & experiential marketing
- 25. Physical stores provideinstant gratification
- 26. Omnichannel creates ablended experience PHYSICAL STORE Sensory Marketing Experience ONLINE SERVICES Content Convenience
- 27. Store design &visual merchandising can help
- 28. Store design &visual merchandising can help
- 29. Store design &visual merchandising can help … but omnichannel retailing goes beyond it
- 30. Click and collectintegrates offline and online
- 31. 2/3 of customersmake additional purchases …when they pick up click and collect items
- 32. Shoppers frequently usetheir phones Source: Skrovan/RetailDive (2017) How shoppers use mobile phones in stores
- 33. Engage with shopperin-store through their mobile phones Target Store App
- 34. Amazon now pursuesan omnichannel strategy
- 35. Amazon acquired WholefoodsMarket By ChadPerez49 [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons
- 36. Amazon promotes brick-and-mortarstore online
- 37. Amazon has openedbrick-and-mortar bookstores & uses digital techology By Steve Morgan [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], from Wikimedia Commons
- 38. Amazon Go A storewithout cashiers: Amazon uses digital technology offline https://youtu.be/NrmMk1Myrxc Watch video:
- 39. Digital technology canenhance the shopping experience
- 40. Disney uses digitaltechnology to enhance the in-store experience in its Bibbidi Bobbidi Boutique Watch the video: https://www.youtube.com/watch?v=oH9bvoI--n0
- 41.
- 42. ① Optimize your physicalstore for your omnichannel strategy
- 44. ② Beware of privacyconcerns
- 45.
- 46. ③ Use technology toprovide value for the shopper
- 47. McDonald’s self servicekiosks provide little value for the shopper
- 48. The Starbucks appdoes Shoppers can order on their own smartphones before they enter the store
- 49. Zara’s QR codesprovide value for the customers
- 50. Put the customerat the center, not the technology.
- 51.
Editor's Notes
- #3 July 30, 1997. On that day, more than 20 years ago, I made my first online purchase.
- #4 Four books at a total of $129.75. I was recently reminded of that by Amazon‘s purchase history, which records such facts seemingly for all eternity. In the decades that have passed since then, I have worked with many stationary retailers, helping them optimize their stores. While working on these brick-and-mortar stores, my own online purchases have, however, increased significantly. More and more so. And I‘m not the only one.
- #5 As you can see from these statistics, business-to-consumer e-commerce in Europe has increased steadily and now reaches 250 billion euros.
- #6 In Greece, the trend goes in the same direction. According to the Hellenic Statistical Authority, in 2017, more than 1/3 of Greek Internet users have purchased products or services online. And this number continues to grow. In some industries, like books or electronics, the proportion of online sales is very high, in others, like groceries, it is still relatively low. But it is growing across the board. I don't need to tell you of the challenges this poses to physical stores.
- #7 In my talk, this morning, I would like to make a case why it is essential for stationary retailers to embrace digital technology.
- #8 I also want to show, how you can capitalize on your strengths as physical retailers by adopting strategies that are often referred to as omnichannel retailing.
- #9 Most importantly, when you consider such strategies, I want to encourage you, not to forget about the customer along the way.
- #10 For me, retailing is personal. I grew up with it. When I was a little boy in the 1970s, my father opened one of the first DIY stores in Austria. As a boy I was of course immensely proud of it, but the opening of such a big store also drew a lot of criticism. Primarily from small retailers like mom-and-pop hardware stores. Of course, our large store with its huge range of goods, was a formidable competitor for these smaller stores.
- #11 And it wasn't just us. In many retail sectors, big box retailers opened and put smaller retailers under a lot of pressure. Bookstores, fashion, consumer electronics. You name it. There is a reason why Americans call these big box retailers category killers.
- #12 But times have changed. Ironically, the hunters are now the hunted. The category killers are now under attack themselves. Of course, ladies and gentlemen, this is not the end of physical retail stores. There are many ways, brick-and-mortar stores can fight back.
- #14 One way is to forge strong ties with your local community. This is what independent bookstores in the United States have done. Independent bookstores were severely decimated first by big box chain stores like Barnes and Noble and later by online retailers. But, surprise, surprise, they are going through a resurgence. From 2009 until 2018, the number of independent bookstores has actually increased by about 40 percent. And this increase can be primarily attributed to their focus on their local communities.
- #15 Chains can do this as well. One of my favorite retailers is Trader Joe's. Trader Joe's is a grocery chain operating in the United States. They are tremendously successful and there are many reasons for this but one of the reasons for their success is their devotion to the local communities. Each of their more than 470 stores adapts both its store design and its range of products to the community in which it operates.
- #16 Another way to successfully compete with online stores is through store design and visual merchandising. Much of the Store Conference is devoted to these topics and I very much look forward to all the amazing ideas and concepts we will hear about in the next two days.
- #17 There are, however, some aspects of online competition, that necessitate strategic responses, that go beyond these approaches. One of them is showrooming
- #18 What I mean is that annoying tendency of shoppers to treat physical stores as a kind of showroom, where they see the product, touch the product, ask a lot of question about the product — and then order it online. Annoying it may well be. But I'll admit to my sins. I do the same.
- #19 If you can't beat them, join them, some physical retailers have thought and opened online stores in addition to brick-and-mortar operations. In its simplest conception, this means to provide shoppers with a variety of physical and online shopping channels. A physical store, webshop, social media, etc. Retailers often call this approach multichannel retailing.
- #20 A more sophisticated strategy is omnichannel retailing. Not only can customers interact with the company in a variety of different ways, but the various channels are also connected. They are integrated. The goal is to create a seamless shopping experience for the customer. Omnichannel retailing can be a powerful strategy because if done right, omnichannel retailers provide the best of both worlds, the online world and the offline world.
- #21 There are good reasons why online stores have become popular with consumers: First, many of them offer a wide selection of products, much larger than the range of goods physical stores can offer. Second, prices online tend to be lower because of the more favorable cost structure inherent in online retailing. Third, the best online shops provide shoppers with valuable content. Think about online product reviews and online product videos, to name just a few.
- #22 Physical, brick-and-mortar stores might not have Amazon's 400 million products, they are not open 24/7, and competing on price might be hard. But well-managed and well-designed physical stores have important advantages too: Most importantly, they allow customers to touch and feel the products. They communicate with the customer through the senses. The lights, the colors, the scent and the sounds. The best of them are masters of sensory and experiential marketing.
- #23 They create an atmosphere where shopping is a pleasure, an adventure, a thrill. Like this sumptuous palazzo in Florence where my wife and I love to buy perfumes.
- #24 Or M&M World,…. .
- #25 where our little nephew could spend a whole afternoon.
- #26 These unique atmospheres can't be matched by any online shops.
- #27 And let's not forget, physical stores also provide us with instant gratification. No need to wait for a parcel to arrive tomorrow.
- #28 By integrating the physical store with the virtual online world, omnichannel retailers can create a blended experience. The sensory information and unique shopping experience are provided by the physical store. The useful content and the convenience through online services. But online and offline channels don't just coexist, they interact with one another. Omnichannel retailing is more than just encouraging customers to shop across channels so that customers who only shop in stores also start shopping online — or the other way around. This is only a first step.
- #29 But of course, store design and visual merchandising can help in this regard. A sign in the shopping window to alert customers of the store website, ….
- #30 …markers on the floor, …..
- #31 …or stickers on the merchandise. They are all useful and certainly worth a try. But omnichannel retailing can go beyond that.
- #32 One of the most popular forms of online-offline integration is click-and-collect. Shoppers order online and subsequently pick up their merchandise at a store. Admittedly, only a minority of online buyers currently use click-and collect but the numbers are rising.
- #33 And what’s best, click-and-collect encourages unplanned in-store purchases. In a study that we conducted for an Austrian electronics retailer, we found that about 2/3 of customers make additional purchases when they pick up their click-and-collect items. The visual merchandising techniques you will hear about in the other keynote addresses can do their magic once the shopper is inside the store.
- #34 Yet more sophisticated forms of omnichannel retailing have been made possible by the almost universal use of mobile phones. Obviously, the phones stay on when shoppers enter a store. Shoppers use their mobile devices to research products, check prices and download coupons.
- #35 Increasingly, retailers actively engage with shoppers through their mobile phones while shopping. They provide store apps that the shopper can use while inside the store. These apps, like this one here by U.S. discounter Target, guide the shopper through the store and they serve up targeted advertisements and promotions. They also provide product related information. At least to a certain degree, this can help keep shoppers off the general Internet where they might be exposed to competitive information.
- #36 The opportunities afforded by omnichannel retailing and the advantage that physical stores have in this regard are evidenced by none other than Amazon. More and more the online retail giant is opening brick-and-mortar stores. These stores are of course integrated with its online operations.
- #37 A couple of months ago, Amazon acquired Wholefoods Market, an upscale grocery chain. …
- #38 Soon enough, before Valentine's Day, ads appeared on my Amazon page. These ads offered me a coupon to buy bouquets of red roses at Wholefoods Market. Very romantic – and a very lucrative omnichannel tactic for Amazon.
- #39 But Wholefoods isn't Amazon's only move into the over-the-counter retail sector. The company has also opened brick-and-mortar bookstores. What's interesting about these stores is that they take the digital world inside the store. The books offered are selected based on an algorithm. This algorithm takes into consideration metrics like preorders, reviews and sales figures based on demographics. Beneath each book there are digital signs, which display online customer reviews of that book. They supplement the customer experience with useful content from the online realm. Now, if you're a book lover like me, this might not be your favorite bookstore. But I think it's still an impressive example of sophisticated omnichannel strategies.
- #40 Let's come back to Amazon one more time. A few months ago, the company opened its first cashier-less convenience store. The customer identifies himself with a customer card when entering the store. He then takes whatever products he likes from the shelves. A sophisticated system of cameras and sensors on the shelves records which products the customer has taken. The most convenient part for the shopper is that he doesn't have to wait at checkout. There is no physical checkout. He just walks out the door and the total amount is debited to his Amazon account. Now, I have a spy at Amazon. Or actually, more like a former student who works there. He tells me that Amazon considers licensing this technology also to other retailers for use in their stores. Who knows, maybe that's an opportunity for you.
- #41 Let's come back to Amazon one more time. A few months ago, the company opened its first cashier-less convenience store. The customer identifies himself with a customer card when entering the store. He then takes whatever products he likes from the shelves. A sophisticated system of cameras and sensors on the shelves records which products the customer has taken. The most convenient part for the shopper is that he doesn't have to wait at checkout. There is no physical checkout. He just walks out the door and the total amount is debited to his Amazon account. Now, I have a spy at Amazon. Or actually, more like a former student who works there. He tells me that Amazon considers licensing this technology also to other retailers for use in their stores. Who knows, maybe that's an opportunity for you.
- #42 Then again, not every store needs to be cashier-less. But many stores can profit from the integration of digital technology. The integration of digital technology at the point of sale can increase shopping convenience, like in my previous example. However, it can also be used to enhance the shopping experience.
- #43 This is what the Walt Disney Corporation does in its Bibbidi Bobbidi Boutique, where little girls can feel like princesses. The transformation into princesses is made possible through an augmented reality application that superimposes princess gowns and decorations on the little girl. The same technology is also increasingly used in virtual fitting rooms in fashion stores.
- #44 This is what the Walt Disney Corporation does in its Bibbidi Bobbidi Boutique, where little girls can feel like princesses. The transformation into princesses is made possible through an augmented reality application that superimposes princess gowns and decorations on the little girl. The same technology is also increasingly used in virtual fitting rooms in fashion stores.
- #45 Technology has made great advances and omnichannel solutions are a feasible option for many stationary retailers. But let's not forget one important point: Technology can never be a replacement for solid consumer insight. Understanding the psychology of our buyers is as important as ever. Ultimately, omnichannel solutions can only be successful, if they keep the shopper in mind. Let me make three suggestions that can serve as food for thought for your own omnichannel activities:
- #46 Optimize your physical store for your omnichannel strategy. One of the functions of good store design is to facilitate operations. Another one is to make the products and services visible to the shopper. Both of these store functions also apply to omnichannel retailing. It's certainly essential to have the right technology in place, the right store app. But so is store design that complements these efforts.
- #47 For example, if you implement a click-and-collect program, design a designated area in the store to make the program convenient, comfortable and convincing for your shoppers. Here is an example of a waiting lounge for store pickups that was designed by Walmart. It’s nothing fancy but it has popularized Walmart’s click and collect program and it makes the program visible to other shoppers. In many stores, Walmart now even has curbside areas for pickup because research had shown that shoppers prefer them, particularly for grocery pickups.
- #48 2) Beware of privacy concerns. In the current climate, consumers have become increasingly concerned about the ways companies handle their data. Yes, consumers want the convenience and personalization that big data provides, but they also want assurances of privacy and responsible handling of that data.
- #49 Some time ago, Tesco installed hundreds of hi-tech screens that scan the faces of shoppers as they line up at the check-out. These scanner screens are able to detect the age and sex of the shopper and they serve target group specific advertisements. This was back in 2013 and today face detection is able to identify not only the sex and age of the shopper but the individual shopper himself. Technically it’s possible and this technology could be used to suggest products geared at the specific preferences of particular shoppers. But already back then there was an uproar because many consumers felt – rightly or wrongly – that this was an unacceptable intrusion into their privacy. Apparently, shoppers are willing to identify themselves online but getting them to step out of anonymity in a physical store is much more of a challenge. It’s not impossible but clearly an issue to keep in mind when forging omnichannel strategies.
- #50 3) Use technology to provide value for the shopper. Ultimately, your omnichannel strategies will succeed, not because you employ the most sophisticated technology. It will succeed because you provide real value for your customers. Technology alone is not the answer. So, don’t use technology for technology’s sake. Let me show you what I mean. I’ll take an example from the food and hospitality industry.
- #51 In many markets, McDonald’s has introduced self-service terminals. Instead of ordering food and drinks at the counter, guests now order at a terminal. They enter their order at the terminal. Afterwards, they usually have to wait a few minutes. Then they pay and pick up the food at the counter. Using technology has helped McDonald’s make distribution more efficient. It has allowed them to reduce the number of service staff members, which has resulted in cost savings. However, from a marketing perspective, I think, that program is not that big of a success. It doesn’t give me an additional incentive to go to McDonald’s. As a consumer, it doesn’t make my shopping faster, easier or more enjoyable. It just replaces human interaction with a computer screen.
- #52 Now compare this with another player in the same industry: The coffeeshop chain Starbucks. In the United States and in the United Kingdom, Starbucks has implemented an omnichannel solution that at first glance seems very similar to that of McDonald’s. Customers can order their double shot vanilla lattes or their iced soy cappuccinos electronically. However, there are a few key differences from McDonald’s. First, they are not forced to do so. Technology is not foisted on them if they don’t like it. Second, they can order online on their own smartphones before they enter the store. This eliminates waiting times in the consumers’ busy lives. Their cappuccinos will be ready when they arrive.
- #53 Here is my last example of what I consider a successful omnichannel measure: Global fashion retailer Zara has added a QR Code to the price tags of their clothing. …
- #54 When you scan the QR Code it leads you to a landing page listing the product’s manufacturing details. The page also gives shoppers information on the different colors and sizes available in the product range. Of course, it’s also possible to order online. Since Zara’s merchandise is branded, this prevents a direct price comparison. The use of QR codes provides real value for the shoppers. What I like best is the fact that shoppers don’t need a dedicated app to scan the codes. They can just use their phone. On my iPhone, it’s incredibly easy: I just point my camera to the code and that’s it. Of course, Zara also has a dedicated store app that offers even more features and benefits. But even someone like me who is not a key customer can easily reap the benefits omnichannel can provide. Again, just like at Starbucks, it’s me, the customer at the center, and not the technology.
- #55 Ladies and gentlemen, it’s high time for me to wrap it up and move out of the way for Kirsty Kean’s fascinating presentation on visual merchandising.
- #56 But before I do that, let me reiterate one last time: Put the customer at the center of your omnichannel strategy and not the technology! Thank you very much. Efharisto (right hand on heart)