Cross-channel and Multi-Channel Retail Analytics

cross channel and multi channel retail analyticsIn todays retail environment, a customer may browse catalogs for merchandise or research for product information online. He may follow this up by a visit to the local store to get a look and feel of the product before opting to purchase it there or order for it online.

As consumer shopping and purchasing behavior take on an increasingly cross-channel nature, multi-channel and e-commerce models are the new norm in retail. Multi-Channel retailing has witnessed a steady growth over the past decade corresponding with the phenomenal growth of the internet. Evolving from simple catalog mailing lists and online shopping, today multi-channel retailing encompasses the latest in social networking and mobile applications as retailers step out to engage with customers on their own turf in new and innovative ways.

UK-based retailer Marks and Spencer launched a mobile site in 2010 giving its customers an opportunity to access its entire product range from their mobile phones. The customer response was overwhelming with over 1.2 million visitors at the mobile site in the first 3 months of launch adding up to more than 10 million combined page views. Orders touched an all-time high in the first 90 days of launch. US retail major JCPenney made its entire product inventory available for purchase on Facebook since December 2010. The retailer has aggregated close to over 1.5 million Likes and uses its Facebook page as a vital tool for engaging its customers as they interact with the brand. By introducing commerce capability directly within its branded Facebook page, JCPenney has taken its customers shopping experience to the next level providing them a seamless integration of social interaction, peer contribution, convenience and access  elements that are expected to transform customer perception about the brand and drive future sales.

With research indicating the significantly higher spend and lifetime value that cross channel customers have in comparison to their single channel counterparts, retailers are making investments in e-commerce infrastructure to leverage on the business potential of multiple channels.

Multi-Channel Retailing: Business Challenges

Multi-Channel retailing involves a lot more than setting up operations on more than one channel. It entails integrating operations across channels and leveraging on cross channel data for decision support to synchronize assortment planning, pricing, inventory management and promotions across all channels.

However, the more common instances are retailers trying to build multiple channels by simply replicating their physical store model into catalog or online. They even have independent or ganizational structures and decentralized hierarchies running respective channels as separate business units. This results in multiple channels that view each other as competition and hit at the same customer base. They eventually bleed at the bottom-line resulting in overall drop in sales and profitability and occasionally damaged brand value.

Consider the following scenarios:

  • A cross channel customer finds a product she wants on a retail website. However when she visits the store she finds that the product is not available. Store staff is unable to provide information on when the product can be procured. The customer has a negative shopping experience and may not return to the retailers network.
  • A multi-channel retailer simultaneously offers catalog, online and order by phone-or-web services. Finding that the bulk of their orders come from online customers, the retailer reduces catalog operations. Orders drop dramatically and studies indicate that most customers who order online do so after browsing products in the catalog.

To avoid such typical situations, multi-channel retailers have to build and leverage cross channel synergies that can deliver consistent shopping experiences across channels.

As a critical first step towards a scalable and robust multi-channel strategy, retailers should invest in advanced BI and analytical capabilities that provide decision support for multi-channel integration.

Multi-Channel and Cross-channel Analytics:

Multi-Channel retailers need to move away from traditional data streams that focus on independent channels to a more holistic view that includes cross channel transactions. Top of the line retail analytics solutions provide Multi-channel operators with cross channel visibility and analytics that can make sense of complex channel activity including order-online/pick-up-in-store, cross-channel order management and fulfillment systems. They help retailers understand what share each channel has in aggregate sales and how promotional activity in one channel impacts another.

In a recent report Gartner draws a distinction between multiple channels and cross channel customer engagement. While a multiple channel customer is one who engages with the retailer simultaneously over more than one channel, a cross channel engagement implies a transaction that may start at one channel and go through a series of decisions ending in a different one. Todays retail landscape is replete with cross channel customer engagement as customers start by browsing catalogs and may end up making a purchase in the brick and mortar store. Gartner advocates a framework where retailers in the initial stages of Multi-channel operations should focus on multiple channels and historical data analysis and gradually build capabilities in real time, cross channel analytics as they progress along the multi-channel maturity curve.

Multi-channel analytics can help retailers understand patterns by which customers search for products online and carefully determine assortments for each channel based on these insights. They can leverage on the strengths of different channels to reduce merchandising and inventory carrying costs while offering customer satisfaction. Leading multi-channel retailer Macys carries a smaller assortment in store but provides customers with the option of ordering additional sizes, colors, and designs through in-store Internet kiosks or catalogs. Wal-Mart carries a much wider assortment of products on its website, thereby limiting the inventory in its stores. Many retailers carry only display models of larger items that take up more floor space allowing customers to check the product in the store and order it from a direct channel if they wish to. Online and in store assortments can be synchronized by intelligent application of customer search analytics and predictive linking between search behavior and actual demand.

Some multi-channel retailers have independent pricing policies designed to optimize each channel separately. But with customers gaining greater visibility to pricing across physical stores and digital channels, retailers can ill afford to have widely varying prices across channels as this may send out a confusing and inconsistent message to customers. The solution for retailers is to integrate data from across channels to arrive at a pricing that is aligned for best results. This is the strategy followed by cross channel leader Best Buy and outdoor equipment retailer REI in the US.

Research indicates that some products such as DVD players and electronic items compete aggressively on price across different channels of the same retailer. Dynamic real time cross channel analytics help retailers determine products that compete across channels on price and design appropriate pricing strategies that take this into account.

Advanced Customer Analytics:

Multi-Channel retail calls for an analytics culture that is totally customer centric. Advanced analytics models bring together customer interaction and transaction data from across all channels and touch points to provide a unified vision of the customer from her search history to the factors that drive her final buying decision.

Key identifiers such as customer name or IDs, promotion codes, order numbers, payment identifiers (e.g., credit card) and cookies should be put in place to help retailers recognize their customers, follow their shopping process across channels and understand how they interact and buy. These multi-channel customer insights can be applied across channels to arrive at improved assortments planning, merchandising, pricing and promotion strategies.

Some customer analytics solutions use clickstream data generated through electronic channels with shopping path analysis data generated through in-store monitoring. They enable retailers to link consumers search behavior with their final purchase and understand key questions such as:

  • How do customers who access multiple channels plan or engage with their shopping?
  • Do customers get the expected brand experience at every touch point with the retailer?
  • How do changes in pricing and promotion across channels affect customers?
  • Do different channels assume greater importance at different stages of the buying process? How should retailers execute strategy in each of these stages?

Retailers pursuing long term plans for multi-channel success such as JCPenney have introduced channel wide changes in processes, roles and responsibilities to bring in cross channel synergies and alignment of decision making across channels. Many multi-channel players like Nordstrom and Cabela’s are focusing their energies on reorganizing teams, bringing in new skill sets and monitoring an enterprise level change management to integrate cross-channel thinking from top down.

Success of multi-channel retailing lies in the retailers commitment and ability to offer customers a seamless, synchronized and high quality shopping experience across multiple channels – from social networking forums, online, in stores, mobile devices and beyond.