Keith Anderson is Vice President and Senior Analyst of RNG DIGITAL, the digital advisory practice at RetailNet Group, specializing in ecommerce, integrated online-offline retailing, shopper insights & marketing, social media, and mobile commerce.

An industry analyst and strategist for global retailers and CPG companies including Walmart, Target, Best Buy, P&G, Colgate-Palmolive, Unilever, and Coca Cola, Keith’s insights on technology and retail have been featured in Financial Times, Forbes Magazine, Shopper Marketing Magazine and the Denver Business Journal.

Q) Where are retailers today in terms of online and offline integration?

A) Online and offline integration in the retail industry is actually an idea that has been around for a while now. If you go back 10 years, most retailers, particularly in the USA, ran e-commerce models. But these operated as silo systems. Merchandising and buying were done separately, marketing was not coordinated and promotions and offers were run independently for online and offline channels. And though there was talk about integrating the multiple channels, there was not much headway in this direction.

But today’s shoppers are connected and online 24/7. They see a retailer as a single brand and expect unified experiences from them, irrespective of whether its an online or offline interaction. This means, integrating online and offline retail business models is no longer an option but an absolute must.

Q) According to Forrester, by 2016, half of all consumer purchases will incorporate some online or mobile component, whether it’s comparison shopping, ordering, customizing or paying. Do you see all future shopping becoming a ‘hybrid’ of multiple channels? How is this likely to impact pure-play e-tailers like Amazon and Zappos?

A) In apparel retail and other sales driven categories, many retailers that originated online are adding brick and mortar stores to their e-commerce infrastructure. Piperlime, a GAP brand, started online but added brick and mortar stores to further its reach and footprint. Bonobos is another online apparel retailer that has migrated to brick and mortar stores.

However, it’s a different story with an e-commerce leader like Amazon which deals in easily available consumables as opposed to store brands. As things stand now, there is no huge incentive for Amazon to open its own stores as it has the luxury of using other retail outlets as its showrooms. Besides, Amazon has also explored options such as ‘pick up points’ and ‘Amazon lockers’ across cities in the US and UK, to service customers more effectively.

However, not having its stores can have its own disadvantages for pure play e-tailers. For instance, when Amazon launched its Kindle range of e-readers it was available only at its website. This did not work well as customers wanted a physical experience of the product before purchasing it online. Amazon had to tie up with big-box retailers like Walmart and Best Buy to sell the Kindle. Later, these retailers decided not to carry the Kindle any more.

But despite these challenges, Amazon is unlikely to open stores unless they can do something truly unique. They know how much excess retail capacity there already is in the US and many other developed markets, and they’ve shown a resistance to putting customer service staff central to the Amazon shopping experience. Still, an Amazon store, especially to showcase its strategically important Kindle family of devices, is a possibility.

Q) Despite the huge growth in online and e-commerce, the vast majority of retail sales still occur in-store. Do you see this trend changing in the immediate future?

A) Until 2020, almost as much as 70% of the retail revenues will continue to move through brick and mortar stores in the US, UK and most developed retail markets. Our research and analyses indicate that there are many categories that have a natural affinity for online retailing – such as low weight, low cube products. CDs and DVDs are a great business online as they are typically in the range of $15-20, light-weight and easily shipped in a rectangular box. Categories such as consumables (groceries, health & beauty and personal care products), on the other hand, are not viable for e-commerce. Too often irregularity of shapes or sizes and leakage can make home delivery of these products complex. In the last six months to a year, Amazon has been under tremendous pressure to up the profitability of its consumables lines.

Brick and retail stores will remain the corner stone for every incumbent retailer over the next eight years. However, it must be noted that in emerging markets like China, e-commerce and non-store will overtake the growth and development of store retailing. This is primarily because modern Chinese shoppers grew up with technology and e-commerce and will continue to engage along these channels far more than traditional brick and mortar retail. In fact, established retailers like Walmart are making significant investments in non-store based operations in China.

Q) Managing an integrated, agile inventory pool is critical for multichannel retailers to optimize costs and manage lean, agile operations. What are some of the retailers that are successfully managing to do this?

A) Modern shoppers have greater flexibility in ordering products – using any device and in any environment, handheld, online, in the store or on the go. As a result, they have increasing expectations from their shopping experience and retailers’ fulfillment mechanisms have to make the cut to match up to this reality.

For retailers, this calls for a high level of integration of inventory systems and data. Store-based retailers initially offered a traditional national shipping model to support their e-commerce business. This means that retailers had a dedicated Distribution Centre (DC) from which they shipped products to individual households. Soon they recognized the potential of using their website to support store sales. This led to the current practice of ‘Ship to Store’ or ‘Site to Store’ which works to the advantage of retailers. Shoppers who come to stores to pick up online orders, usually make additional purchases to the value of 20 – 30 % more than their original billing. This is one of the key reasons for the growing popularity of the ‘Ship to Store’.

Q) What are some of the hottest trends in ‘ship to store’?

A) Traditional fulfillment methods were taking retailers as long as five to seven business days to reach customers from the DCs. So the next step that retailers began to explore, particularly those like Nordstrom which have to allocate different sizes and colors across their store base, was to make their in-store inventory visible to online shoppers. Now online shoppers can actually see products that are available at their local store for immediate pick up, , or order online from a store across the country for delivery in a few days. So a retailer with overstock because its inventory planning was inaccurately forecasted could now use the slow moving SKUs to support online orders.

Another aspect that is becoming hot in inventory management is ‘shipping from store’. As Amazon continues to consolidate operations in high density urban areas with increasingly convenient shipping and delivery options, leading retailers are looking at ways to compete. Many like Walmart and eBay are using their in store stocks to fulfill online orders and enabling them to offer same day pick up or even 90 minute delivery. ‘Shipping from store’ is increasingly viewed as a key competitive leverage that a brick and mortar retailer has over pure play e-commerce players. It does enable retailers to capture unrealized demand by making their in store inventory transparent and visible to online shoppers nationally, it sells faster and helps to avoid markdowns. Ship from store also helps retailers to increase their inventory turns, reducing stock on hand and eases working capital blocked as inventory. Macys, Toys R Us, Sephora and Nordstrom are some of the other examples of retailers following this model.

Q) One of the principle obstacles to online and offline integration is believed to be retail organizational structures that are unable to adapt to these needs and retail enterprises which operate brick and mortar and online as silo operations. Do you agree?

A) This is true because at most retailers, e-commerce is still considered as a threat and is viewed as subordinate to the brick and mortar store. The fact that customers are expecting online shopping far more than ever before is the single factor driving retailers to look at e-commerce as something far more significant than just as a mere extension to their stores. Retailers who have been most successful in moving the needle in online –offline integration have embedded technology or e-commerce expertise from the board level to the executive level. These are the retailers that have been making several moves at executive levels. Here are a few examples.

Tesco, moved their CIO Philip Clarke to the position of CEO. This year, Walmart named Neil M. Ashe Executive Vice President and CEO, of its global e-commerce business and later added Marissa Mayer (CEO of Yahoo) to its board. Such executive changes really help retailers to drive change from the top down. I have seen more temporary project oriented teams emerge in the last 18 months than in my entire career. Some of these teams are focused on multichannel strategy and integration or digital shopper experience.

Q) To synchronize and integrate online and offline retail, how does analytics impact retailer strategy?

A) The extent and depth of data required for a collaborative and integrated online-offline operation is possible only if retailers have built superior analytics capabilities. Advanced analytics can help provide retailers with the background on a shopper’s online activities and help to actually make the 360 degree view of the customer a reality for retailers.