Based on exhaustive interviews with many of the biggest names in UK retailing, Retail Week’s groundbreaking report Multichannel Now is the definitive guide to multichannel in the UK. Here, in an extract from the introduction to the report, its author Joanna Perry sums up the challenges the multichannel world is throwing up for retailers.

The past decade has seen a transformation in the way consumers in the UK transact with, and interact with retailers. The internet has been at the heart of this, but having digested this change to the industry, retailers realise the evolution will continue at some pace driven by customer demand.

Whether it’s setting up new channels, such as m-commerce, or bridging channels to offer services such as click-and-collect or order in-store, retailers are finding the goal posts keep moving.

Multichannel is complicating retailers’ businesses, meaning they are increasingly battling their competitors on a number of fronts. But with change comes opportunity, and some of the latest developments give retailers with stores real ammunition to compete against the etailers that have shaken up the market in the past decade.

Customer first

When asked if they are enthusiastic adopters of multichannel retail, almost all of the executives interviewed, who already have multiple sales channels, agreed they were. But the answer came with a caveat in many cases, that they have no choice but to be.

There is an acceptance by senior executives that they are becoming more multichannel, and offering better cross-channel services because they are worried their customers will go elsewhere if they don’t.

“The whole multichannel thing has been customer-led and if you deny your customers the use of a particular channel you are going to lose them,” is the admission of the director of one grocer.

One executive highlights electricals, music and DVDs as categories where despite a need to stock them in store “you have to be in the online space or you won’t have a business”.

Pace of change

Even with the push for customers, in some of the multichannel laggards, progress has only been made with a change of leadership. When such changes occur, multichannel strategies can appear to change almost overnight. But as more retailers move forward with multichannel such swings in strategy will become uncommon.

We also talk to the executives about whether their multichannel strategy was distracting them from other areas of the business. Many immediately point out the importance of product and price, and say that unless you have these right then returns on multichannel investments won’t be realised.

However, there is a growing feeling that the pace of change in their business is only going to accelerate in the next couple of years as a result of the growing importance of developing and integrating their multiple sales channels. “Click-and-collect is going to dramatically change the way people shop in the next five years. So you can’t be too distracted. It’s absolutely essential that you understand what your customer wants,” says one leading retailer.

Traditional views

Yet despite the advances some retailers have made and changing consumer expectations, there is still some belief at the highest levels in traditional retailing models. “They say if you have a transactional website you can gauge the areas where your shops will do well by the number of transactions in those areas. But, you know, generally speaking, I can judge demand by the number of chimney pots. It never fails,” quips the director of one value retailer, who is yet to make the move online.

It can be easy to write off such views as somewhere between misguided and dangerously outdated. Yet take the case of Primark. It refuses to trade online, but has grown its market share in recent times and in early November announced it would open six more UK stores in time for Christmas.

Similarly, etailers are generally dismissive of the idea that they will need to set up stores to stay relevant. This may not matter if you are an etailer that sells exclusive products, but others are concerned enough that they are beginning to investigate partnerships to give them collection and delivery points on UK high streets.

New channels

Many retailers are beginning to make noises about m-commerce, and there has been a rush to launch mobile applications, but there is still scepticism at the highest levels that the channel will become substantial.

However, the statistics that retailers have been willing to share are likely to encourage experimentation. For example, Asos’ mobile site has been live for only a few weeks at the time of writing, yet already it has seen a highest order value of £1,466, a single item value as high as £445 and 26 items in a single order. Similarly, M&S found that customers were using its mobile site for large purchases that it expected to be placed via a computer or store.

Retailers can see from their web analytics that customers are increasingly accessing their websites using mobile phones and devices such as iPads. They are keen not to be caught out by the growth of this channel, even if they are not willing to invest in it the next year.

For retailers that have been slower to adopt multichannel, and operated very siloed channels, there can be a lag between launching new propositions and perceptions changing. In Ikea’s October annual results announcement, UK & Ireland country manager Martin Hansson acknowledged: “A lot of consumers still believe that the Ikea proposition is limited to self service so we still have some work to do to make our customers aware of our service offer.”

New opportunities

More channels, more markets and more opportunities to engage existing customers are all possible in today’s retail environment. M-commerce might not yet be significantly adding to a retailer’s sales, but what about some of the more subtle changes? For instance, major retailers are increasingly moving to a model where their largest range is online rather than in their stores. Range extensions delivered through multiple channels and cross-channel services means customers can fairly easily have the greatest choice in even the smallest store.

Game’s market share for software in different channels serves as an example of where the battle for domestic growth will take place. Where etailers once entered the market to take on the high street, now the high street has multiple channels and cross-channel services to fight back with. Entertainment retailers such as Game will be looking to ecommerce but also the infant digital channel to raise sales in a stagnant market.

In the past 18 months, international ecommerce has sprung up as a sudden opportunity for retailers to grow. It has transformed the cost model of international expansion for UK retailers.

For fashion retailers especially, the ability to deliver to many countries is a no-brainer. And from there they are beginning to investigate the return on investment of setting up multiple websites to better service growing international customer bases. Looking at the top 100 retailers it is staggering to see just how many markets some retailers have exposure to through the internet.

Pain points

What’s not been appreciated yet is how multichannel might change the things retailers take for granted. What their staff do, where they open stores, and even what they sell will all come up for discussion.

The question of one channel cannibalising another is one multichannel retailers are beginning to face up to. This raises questions about property. And multichannel is also going to impact on store staff in terms of what their roles entail and how they service customers more than they realise.

Finally, even once retailers decide their priorities and set a road map there is the not so insignificant question of multichannel integration. Requiring structural and systems changes, it is perhaps the area where retailers face the greatest risks.

No concerns

One area that barely rated a mention, even when prompted, was on data protection and data security. Despite some high-profile data losses - including from a UK-focused etailer and a mobile phone operator - non-technical directors are confident that their data is secure, and don’t seem worried that integrating their sales channels might pose a data protection risk.

Similarly, payment hardly rated a mention apart from a couple of retailers pointing out the development of mobile payment in Japan being a warning of what’s to come but was too far down the line to worry about yet. But perhaps the area that we would have expected to be talked about more was loyalty, and driving loyalty across channels.

Retailers with stores and other channels seem confident that there is significant cross-over between their websites and stores. One big-ticket item retailer tells us that they have carried out analysis showing that 90% of visitors to their site then visit a store.

But until they have achieved the integration of their channels they desire, many can’t tell just how cross-channel their customers already are, or are willing to be. Changes happening now in this market will be the making, and perhaps the undoing, of big name retailers in the longer term. The decisions they make in the next 18 months will be crucial to their survival and success.

Chapters Include

  • Multichannel integration
  • Delivery and fulfilment
  • Stores and property
  • Mail order
  • Mobile commerce
  • International
  • Marketing and social commerce
  • Multichannel resistors
  • Technological development
  • Partnerships
  • Fashion retail
  • Luxury retail

BUY THE REPORT

Retail Week subscribers can buy Multichannel Now at the specially discounted price of £499, while the report costs £699 for non-subscribers.

To buy the report, visit www.subscription.co.uk/products/mchn or call 0844 848 8858 (UK) or 01858 438847 (Overseas)