Tag Archives: omnichannel

Four demands driving new levels of strategic collaboration

By Chris Petersen and Adam Simon

The transformation from sales transactions to collaborative networks
The traditional supply chain was based upon a sales transaction model of brands selling products to distributors, distributors to resellers and retailers. Once the products arrived at the retailer’s doorstep, it was their responsibility to warehouse it and sell it through to the customer. In this traditional model retailers did work with brands and distributors, but those relationships were primarily transactional negotiations based on product, price and promotions to sell products.

The traditional retail model and the economics have changed. What is driving the change are customers who have “escaped the traditional funnel”. Today’s consumers are not bound by channel, place or time. They expect unprecedented choice of products, where they shop and how they take delivery. Traditional retailers do not have the infrastructure, resources, the inventory required, or enough of their own trucks to deliver to individual customers.

To survive, retailers need more than products and “box movers”. To thrive, retailers need a collaborative network of partners who can help strategically address rising customer demands, enabling a shift from sales transactions to customer relationships.

Customer demands driving the retailer’s need for strategic collaboration
It’s a great time to be a customer. It’s a very challenging time to be a profitable retailer. The simple economic reality is that only the world’s largest retailers can attempt to offer end to end solutions that meet omnichannel customer expectations. Even a retail giant like Walmart cannot afford to carry all of the inventory required for the millions of products now online. And, the ecommerce giants Amazon and Alibaba built their business by collaborating with an ecosystem of partners for overnight delivery and customer services.

Let’s be clear. Collaboration is not “free”. Two-day shipping is not free. Home delivery is not free. Retailers cannot afford to “solve it all”. Retailers must selectively find solutions to remain competitive, and where possible, find partners who will work collaboratively to build solutions that optimize the retailer’s relationships with core customers.

There are four core customer drivers in today’s omnichannel market place where retailers must find collaborative solutions:

  1. Choice – Solutions to deliver on customer expectation for more product range

Almost all retailers are expanding assortments online in order to offer competitive choices. A wider range of products equates to inventory, which is one of the most costly retailer investments. Increasing assortments requires strategic relationships with distributors for both the inventory and warehousing to store it. However, it is the convenience of last mile delivery to the customer’s door which is requiring most retailers to strategically search for collaborative solutions like drop shipments from brands and distributors.

  1. Convenience – Solutions that let customers have it their way

It is one thing to offer the products online, it quite another to be able to offer the convenience of “real time retail”. The majority of customers expect to “see” not only what is on the store shelf, but the delivery time for products not carried in store. This requires strategic collaboration with brands and distributors to share new levels of data, and participation in joint fulfillment. Customers are increasingly purchasing from retailers where the returns process is fast and convenient, creating a growing need for cost effective reverse logistics.

  1. Customized – Customers demand for solutions requires partnerships

Customers are increasingly looking for more than products at a price, they want customized experiences and solutions that fit their lifestyle. Case in point, smart home and IoT products. Customers want and need services that assist in configuring and installing products. Even retailers like Best Buy with a “Geek Squad” are strategically collaborating with services and installers to increase bandwidth required to meet consumer demand for customized services.

  1. Connected Customers expect communication before, during and after

Today’s purchase is a journey, not an event. Customers expect to research online, and have online follow them to the store. They also expect real time information on the status of orders, pickup and delivery. With multiple partners stocking and delivering products, this requires new levels of information that must seamlessly connect and be available to customers. The best of breed not only collaborate with customers during the sale, but connect with customers after the sale on satisfaction and future services.

Replacing the 4Ps with the 4Cs Requires Collaborative Partnerships
The traditional 4Ps of Product, Price, Promotion and Place have been transformed by todays empowered customers. To meet the rising expectations for the 4 Cs of Choice, Convenience, Customized, Connections will require competencies and resources beyond the bandwidth of most retailers. Future success will require more than product sales today. Retailers now must strategically collaborate with partners in ways that will enable them to create, and sustain relationships that transcend the sale of a product.

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Chris Petersen and Adam Simon are collaborating on a series of blogs that explore the rise of strategic collaboration and new customer centric ecosystems. This blog series will culminate with a worldwide panel discussion at the ContextWorld CES CEO Breakfast, where a global Brand, Distributor and Retailer will share their perspectives on strategic collaboration.

If you are interested in more information on this CES event, contact tgibbons@contextworld.com.

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When ecommerce dominates, do you compete or collaborate?

By Chris Petersen and Adam Simon

There is a tipping point coming where ecommerce will overtake traditional retail sales. That critical mass is not as far off as many might think. Doug Stephens recently published some interesting forecasts on the growth of ecommerce, particularly the top 3 giants. Based upon the recurring annual growth rates of 12 to 35% for the large ecommerce players:

  • Ecommerce will be 25% of total US retail in 6 years, and may exceed 30% of the UK
  • Amazon, Alibaba and eBay will control 40% of global ecommerce within just 3 years
  • Within just 15 years ecommerce will overtake traditional retail sales accounting for more than 50% share of consumer sales

This is highly relevant in the Middle East with the takeover of Souq.com by Amazon, and the recent price-slashing at the beginning of this month. Other than being swept away by the tidal wave of ecommerce giants, what are the choices for brands, distributors and traditional retailers? Continue reading

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The Future of Retail – An ecosystem of strategic collaboration

By Chris Petersen and Adam Simon

Consumer demands are driving a retail renaissance, not an apocalypse
In reviewing world headlines regarding store closings and retailers filing for bankruptcy, it would be easy to conclude that a retail apocalypse is upon us. If you only look through the retail lens of “stores”, many bricks and mortar store formats are struggling. But through the eyes of today’s consumers, it is no longer a question of shopping stores versus online. Customers simply don’t see “channels”, or separate physical from digital shopping.

Customers expect a seamless experience across time and place, with multiple choices of how and where to acquire their purchase. It is these rising consumer expectations for “real time retail” that are outstripping the capacity of individual retailers, distributors and vendors to independently deliver. The future of retail is quite literally becoming a transformation of the traditional linear supply chain into an ecosystem of strategic collaboration.

Innovations are increasingly the product of strategic collaborations
The e-tail giants of Amazon and Alibaba are increasingly viewed as the great innovators and disruptors of retail. Both have driven innovation focused on customer centric choice, convenience and personalized service which has disrupted traditional stores. However, not all of these innovations are internally driven and executed. Both e-tailers collaborate extensively with vendors and resellers in a “marketplace” in order to expand breadth of assortments, without undo inventory exposure and risks. Amazon has even collaborated with the very traditional US Postal Service in order to gain weekend delivery and capacity, and last week announced a collaboration with Kohl’s for the reception of returned goods.

The wave of strategic collaboration is not limited to ecommerce. In its race against Amazon, Walmart is collaborating with a host of partners for assortment breadth, fresh produce and last mile delivery. Walmart’s newest pilot involves partnering with August Home smart devices to enable a Deliv delivery driver to have one time home access to put the groceries in the refrigerator. A unique aspect of this service is the customer can remotely control and watch the delivery real time on the Wi-Fi web cam. It is too early to tell if customers will opt in for this level of in home service. The crucial point is that this level of differentiated, personalized service would be inconceivable without strategically thinking “outside of the box [store]” on how to collaborate with the right combination of partners who can create and deliver it.

Today’s consumer dynamics drive demands that few can solve alone
Today’s omnichannel consumers are quite literally shopping anytime and everywhere. In addition, their purchase has become a journey across both time and place. Regardless of where the purchase takes place (in home, online or on phone), customers now expect a seamless experience with personalized service on how and where they take delivery. Even the very largest retailer, distributor or vendor does not have enough trucks for the “last mile”.

The new dynamics of executing retail dynamically in real time requires technology, systems, expertise and resources beyond the capacity of a single retailer, distributor or a vendor. There are a host of new “retail” issues driving demand for strategic collaboration:

  • Long tail breadth inventory – Who holds the inventory, where and at what cost?
  • Drop shipments – Are forecasts accurate to enable overnight fulfillment?
  • Inventory “everywhere” – Who owns it and who has the risk if it doesn’t sell?
  • Real time availability – What’s required to show store stock plus virtual options?
  • Customer experience – If more SKUs go online, who owns experience and pays for it?

A new partnership and blog series focused on Strategic Collaboration
Chris Petersen and Adam Simon have collaborated on a host of projects and retail events. As they jointly explored omnichannel and digital transformation of retail, clear patterns began to emerge. Omnichannel is the consumer normal, the execution is inherently expensive. Relatively few retailers or vendors can afford all of the infrastructure, systems and costs associated with inventory and fulfillment. They also discovered that many of the innovative retail breakthroughs are in fact a function of strategic collaboration, which in turn is creating a new ecosystem.

As strategic collaboration evolves as a new ecosystem for retail, there are many more questions than there are answers. Over the course of the next 12 weeks Petersen and Simon will share their findings and discussions with leading vendors, distributors and retailers regarding their views of strategic collaboration, including:

  • What are the best practices and pitfalls of strategic collaboration?
  • What are the parameters and guidelines for collaboration?
  • What do you look for in a strategic partner?
  • What are the criteria and requirements for success?
  • How do you measure results?

This blog series will culminate with a worldwide panel at the ContextWorld CES CEO Breakfast where a global Vendor, Distributor and Retailer will share their perspectives. Please contact us for more details on the event or to register!

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7 Critical retail questions requiring new metrics and collaboration

by Chris Petersen, CEO at IMS

At the most basic level, retail is a simple business about selling products for more than the retailer paid for them. Historically, retailing was based upon selling from shops. And even when retailers opened virtual stores online, the core metrics have been most focused on sales, revenue, margin, growth, and market share. In today’s real-time retail marketplace, the customer is now the new POS – Point of Sale. Customers determine where they purchase, how they pay, and where they collect. Retailer, distributor and even vendor systems were not designed to track “flow” to the consumer. Today’s consumer expectations are creating new business questions that will require new data, metrics and benchmarking. Continue reading

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Is Amazon’s bid for Whole Foods a big blunder, or another brilliant Bezos strategy?

In the past couple of weeks, the news from the United States has been filled with headlines about Amazon’s pending acquisition of Whole Foods.

Amazon’s current bid for Whole Foods is the largest acquisition deal attempted by far. CEO Jeff Bezos is paying a premium price ($13.7bn USD) for a marginally profitable retailer who has not been growing. And the price may go higher if other suitors consider higher offers for Whole Foods in order to block Amazon’s acquisition of a nationwide retail food store chain.

As omnichannel shoppers continue to seek convenience of home delivery, a major obstacle has been the vexing problem of the “last mile” – moving quality fresh food from the warehouse to the customer’s house. Will this be the magic marriage that enables Amazon to leapfrog the competition? Or is Amazon’s move to owning stores a recipe for failure by reaching too far beyond its core business?

In this piece, we explore the pros and cons of the Amazon deal with a perspective by Context’s Global Managing Director Adam Simon, and omnichannel strategist Chris Petersen.

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Reasons why Amazon’s acquisition of Whole Foods is a recipe for failure – Adam Simon

  1. Amazon’s business model is ecommerce, not running stores

Amazon has built a tremendously successful model based upon online ecommerce. It specializes in warehouse, distribution and logistics to deliver items directly to consumers. Aside from a couple of pilot stores, it has no experience, team or systems in place to turn around a chain of 440 bricks and mortar stores with relatively flat growth and marginal profitability. Rather than be saddled with a retailer’s legacy systems and real estate, Amazon would be better off growing its own version. Or it could have acquired a chain with smaller format stores which would have better fitted the click and collect model.

  1. Whole Foods is upscale pricing and not consistent with Amazon’s strength for the masses

The standing cliché is that when people shop at Whole Foods they spend their whole paycheck. By design, Whole Foods offers very unique items and fresh organic foods at premium prices. Amazon is aggressively competing with Walmart in the US who is focused on the mainstream and value pricing. Whole Foods product range and high prices do not offer Amazon a competitive advantage in acquiring stores with broad customer appeal. Whole Foods brand and pricing is also inconsistent with Amazon’s own “Fresh” approach already in market.

  1. Mixing Amazon and Whole Foods cultures are like oil and water

Previous Amazon acquisitions like Zappos were designed to expand categories (shoes and apparel) but were also consistent with and built upon Bezos philosophy of “customer first” and ease of use. It’s not that Whole Foods is anti-customer, but the stores and culture were built around product differentiation and segmentation. The management philosophy and pay scales of Whole Foods are quite different from Bezos’ empire in Seattle.

Why Amazon’s acquisition of Whole Foods is brilliant retail disruption – Chris Petersen

  1. Bezos is investing for 2024 … the play for Whole Foods is not about grocery stores

If you follow Jeff Bezos the CEO of Amazon, he operates with a long-term vision. He has discussed how teams are in the process of planning the first half of 2024 today. Dennis Berman from the Wall Street Journal perhaps best summarized the Whole Foods acquisition:

“Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.”

To underscore the value of an Amazon total integrated play, Whole Foods 440 stores gives Amazon to refrigerated warehouses within 10 miles of the about 80% of the US population. That kind of reach goes a long way of delivering fresh food the last mile to your door.

  1. Whole Foods enables Amazon to rapidly disrupt with its ecosystem

The Whole is greater than the sum of the parts [pun intended] and the parts of the Amazon ecosystem are formidable. Amazon has 100 million Prime members. Imagine what they could offer Prime subscribers in terms of preferred discounts and services in 440 stores. Amazon just announced a $20 version of an Alexa device built for ordering food and getting recipes … a perfect recipe for the Whole Foods concept and persona of fresh and organic.

  1. A core category of all households and the Prime subscription model is “food”

Half of Walmart’s core business is food and consumables, and it drives more than 100 million customers through its doors every week. It makes perfect sense why Amazon would buy grocery stores as opposed versus another type of retailer. As far as Whole Foods notoriously high prices, Amazon is the world’s best at shrinking supply chain costs and negotiating with suppliers. What better way to launch retail stores than to go after a category that drives weekly traffic and is synonymous with a subscription model augmented by Alexa and Dash reorders.

The future of retail is “hybrid”. Bricks and mortar retailers have been racing to build an online presence. Ecommerce realises the need to build a physical presence to complete the customer experience and establish an outpost for the last mile, especially in categories like food.

Will the Amazon big bet of 13.7 billion USD on grocery stores pay off? Chances are we won’t have to wait 7 years to find out. The “food wars” are already underway and we have a ring side seat.

It’s a great time to be a consumer! A very challenging time to be a retailer bridging both the digital and physical world.

 

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Filed under omnichannel, Retail, Retail in CONTEXT

TCG Retail Summit – Top Themes for Future Retail Success

Guest blog by Chris Petersen, IMS

The TCG Summit represents a very unique gathering of top European Executives from across Europe. This year’s TCG summit, which was held at the end of March in Berlin, was particularly noteworthy in terms of the dominant recurring themes for future retail success, not only for technology, but all categories of retail. Even though the audience was primarily technology retailer and vendor leaders, innovations highlighted were less about the application of technology in the retail store, and much more about adapting to the most disruptive force in retail today – the omnichannel consumer.

Omnichannel is the New Normal
The underlying theme present in most of the presentations and panel discussions was omnichannel.   The TCG Summit in fact kicked off with Christophe Biget’s presentation focused on “innovation throughout the customer’s journey”.   From “walking in the customers shoes” to “customer centricity”, thought leaders were squarely focused on today’s consumer as a driving force of change in today’s retail.

If anyone had any doubts about omnichannel, it was key topic in almost every presentation and follow up panel discussion. The consensus in many discussions seemed to be that retailing is now moving beyond “omnichannel”.

“Experience is your product”
A top theme of both the presentations and panel discussions was focus on the customer experience as a key differentiator.   Jeffrey Sears from the Modernist group perhaps captured it best with his concept that “your [retailer] experience is your product”.   For traditional bricks and mortar retailers, the DNA now required is creating exceptional store experience as the new differentiator producing disruptive results. Despite all of the disruption from omnichannel, no one was predicting the demise of the retail store anytime soon. Many of the discussion panelists called out the need for new levels of partnership between vendors and retailers to “bring products to life”, particularly in stores.

Indeed, smart home products were frequently mentioned as the “poster child” for requiring hands on customer experience in store.   Smart home products are the growth category of the future that technology retailers are poised to lose … IF retailers don’t deliver an exceptional experience that connects products to the consumer’s life style.

Engagement – Yes we can!
The other underlying theme for future retail success is that retailers must develop internal DNA focused on customer engagement.   In the product centric past, it was enough to build stores, run ads and wait for consumers to come shop.   In today’s omnichannel world, consumers are very proactive and in control of their journey.   To be successful, retailers must focus on innovative ways to move from a passive display to proactive ways to engage customers where they are and how they want to purchase.

Perhaps the highlight presentation of the TCG 2017 Summit was from Nilesh Khalkho, CEO of Sharaf DG. Khalkho provided an amazing visual journey of Sharaf DG’s mantra of “Growing through Differentiation” in an omnichannel environment.   This journey included numerous examples of how retailers, especially technology retailers, will survive and prosper by truly differentiating on customer experience, engagement, and service.   The Sharaf DG story was a highlight that became a “Yes we Can!” rallying cry for what is possible in transforming technology retailing.

The Bottom Line – Results still Count
It is one thing for an executive team to say they are transforming to omnichannel, it is quite another to be able to execute omni-presence, experience and service 24/7/365.   There were a number of speakers and commentaries on the tremendous investments required to be able to create the experience and engagement demanded by today’s consumers.ETCG-Flashback-2017-43-2

As Adam Simon from CONTEXT highlighted, investors in tech retail are still looking for a return on their investment.   But achieving that return will require more than fiscal, operational expertise.   The successes, and the future of technology retail will require innovation on how to leverage talent in new ways that generate connected, customer relationships based upon a differentiated customer experience.

The bottom line for the future retail success – future success will not depend upon the sales transactions made today, but rather upon the customer relationships earned through engagement and services that will generate customer lifetime value.

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Filed under Connectivity, Home automation, IoT, Market Analysis, Mobile technology, Retail, Retail in CONTEXT, Smart Technology

Allez Les Bleus in Tech Retail!

Last week at Paris Retail Week I met a number of French people who all repeated the same mantra to me – you are so innovative in retail in the UK. Well sacré bleu this is French negativism at its worst. The reality is the French are darned good at inventing new retail concepts – the hypermarket was an invention by Carrefour in the 60’s; international food retail was pioneered by Carrefour and Auchan in the 1970’s and 80’s; recently Auchan piloted the shop and collect drive-in format which was taken forward by Leclerc. And if you look at the area of retail which really interests us, a trip around Paris should remind any Brit that French creativity is not to be ignored in tech retail, and particularly connected objects.

Here is what I saw on the Paris Retail tour and in a visit yesterday to some additional stores:

  • the new Orange store in the Champs Elysees – you walk into a store with VR demonstrations on Samsung Gear headsets happening as you walk in (or at least you did last week, this week they were sadly missing) – this is a tech destination showing off smart home, health, connected car, fun gadgets, and a workspace for repair. The layout is airy and modern, the displays very Apple. My only disappointment was that the “coach” experience did not work as it should and I was left to wander round by myself. This concept store being rolled out all over Europe is part of an omnichannel strategy linking the on and offline journey of the customer. 8/10
  • Fnac Connect is on the Champs Elysees and has a small selection of connected objects and a large space dedicated to mobile phones. There is little visibility of store staff and it has not moved on since it was introduced nearly two years ago. But it is there and is being invested in as new stores are being rolled out over France in the Connect format. Inside the main Fnac store on the lower ground floor was excitement – the first display of Oculus headsets, on sale only in Fnac stores. I was underwhelmed as they were piled high next to a similar pile of HTC Vive. This is the biggest opportunity for tech retail to bring in the crowds as the Orange store has proven with the Samsung Gear and as clearly highlighted in our consumer survey on VR 7/10
  • Darty – I went to the Beaugrenelle store as I had read that it was a concept store for them. It has a dynamic welcome with a connected back to school campaign, and had a very full offer of connected objects ranged over multiple gondolas and displays. There is no doubt that Darty means business with connected objects. But what is still missing is the engagement with shoppers. What does it all mean? You are left to work it out for yourself. 7/10
  • Boulanger’s flagship store in Opera was our last visit and was a true delight. The welcome was a huge smile from the security guard – very un-Parisian. The prominent space on arrival is the collection point for the click and collect goods. Evidently this is a new generation omnichannel store. The gondolas were beautiful, airy and the signage was clear. The connected objects range was not as great as Darty but the store makes you want to shop and find someone to explain. Even as we left, the cashiers smiled at us. Boulanger has brought the warmth of the North of France to Paris and that is an unforgettable plus 9/10

On this visit I did not go to Lick, another specialist store for connected objects which we have covered previously in our Paris visits. The news is that Lick is extending its reach through a recent link-up with BHV to bring the flair of connected objects to this rather old-fashioned department store. I also saw the flagship Publicis store on the Champs Elysées which has introduced a connected objects offering (placed between champagne and wine on one side, and perfume on the other). I am not sure that they will get much traction from this as the selection of products was small and eclectic, but the overall conclusion is that the French are experimenting with tech retail, and for that I give Paris 10/10 – allez les bleus!

 

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