Manthan caught up with Chris Petersen, PhD and CEO of Integrated Marketing Solutions.
Chris is a strategic consultant who specializes in retail, leadership, marketing, and measurement. He has built a legacy through working with Fortune 500 companies to achieve measurable results in improving their performance and partnerships.
This week Chris shares his thoughts on the critical elements of competing profitably in the increasingly complex retail marketplace.
MANTHAN: We understand you attended CES this year. What retail innovation did you come across that you were most impressed by?
CHRIS: Like many attending the CES Show, I did not find any “breakout” technology like in years past.
Smart Home and wearable products were abundant and on display across CES. There were also some dramatic displays of new technology incorporated within vehicles, including a self-driving motorcycle. But the most dramatic application of technology from a retail perspective was how the automotive industry engaged prospective consumers with demonstrations of a “connected lifestyle”. The displays were not about the “bits and bytes” of the technology, but getting customers to imagine what it would be like to use simple “Alexa-like” voice commands to access their music library, travel information, and being able to control their travel capsule (used to be simply called a car).
While not breakthrough from a new technology perspective, there were also compelling demonstrations of the progress made in tracking customers in retail store environments. Consumer flow, heat mapping traffic and location analytics will continue evolve and become more important in more effectively planning and managing retail stores.
MANTHAN: What would you say are the top three things retailers need to focus on in 2017, to compete profitably?
1. Omnichannel is the new normal for consumers. They do not think about online vs stores … they are looking for a seamless experience across time and place.
2. It is no long possible for a retailer to compete based on product, price and promotion. To differentiate now retailers must focus on customer experience and engagement across all “touch points”. The differentiation (and profitability) will come more from providing solutions and services, than from products on shelves.
3. The customer is now the POS – Point of Sale. They decide when and where to shop, how to purchase, and where/how they will take delivery. The smartphone is the “customer portal” for retail. As a consequence, mobility is a critical requirement in all aspects of retail – online, shopping and mobile purchase.
MANTHAN: What do you think is the biggest internal hurdle retailers must overcome to start using their data effectively?
CHRIS: For many traditional bricks and mortar retailers data still resides in separate “silos” … online systems were built separately from store based POS systems. In order to be able to execute “click and collect” (buy online and pick up in store) retailers now need real time shelf inventory counts displayed online, such that they don’t disappoint customers expecting pickup at the store in an hour or less.
A similar and important challenge is establishing data across entire “customer relationships”. Retailer systems were designed to track sales of items today … at the cash register. Future store trips and profitability is now based upon building a relationship with that customer, at a level deep enough to be able to customize offers and services based upon their profile and history.
MANTHAN: You’ve stated before that consumers are the new POS. Can you elaborate as to why that concept is essential for retailers?
CHRIS: Omnichannel is the new normal. That sounds simple, but what it means is that the customer is “in charge”, not the retailers. Omnichannel empowers the customers to design, create and manage their OWN experience. They decide when and where to shop. They decide how to research and who they pay attention to.
Consumers literally shop anytime and everywhere … 24/7/365. But most important of all, they decide when, where and how they will buy … and how they will pay. Prior to omnichannel, you had to go to a “place” in order to purchase. That place was originally a store, but also became an online store. The retailer and their POS systems controlled online and physical stores for store checkout. Today, armed with their smartphones, consumers can purchase anywhere at any time … in their bedroom, on the beach or on the plane. The result is that consumers today have unlimited choice, not controlled or dependent upon any retailer.
What retailers must comprehend in an omnichannel world where consumers are the new POS is … the retailer “must be” where the consumer chooses to shop and purchase … and they must EARN THE RIGHT to serve that customer when they purchase and after the sale.
MANTHAN: Can you share an example of a retailer who used actionable data intelligence to make a significant business change?
CHRIS: One of the best examples is occurring right now as bricks and mortar retailers transform to omnichannel. In the past, planning and merchandising was solely based upon what SKUs could be placed and sold in stores. With online as an integral part of the omnichannel strategy, there is much great opportunity for “long tail” SKUs and diversity online. A “virtual shelf” enables the retailer to offer and sell a much great assortment than what is possible with the limits of store stock.
The significant business change is “category management”, which is now much more consumer and solution centric. Over 85% of consumers go online before coming to stores. This enables retailers much better intelligence on what consumers are researching and purchasing so that they can spot trends early and adjust category plans on a timelier basis. The days of vendors “selling in” large quantities of seasonal products is rapidly disappearing. The smart profitable retailers are harvesting omnichannel intelligence on customer preferences and adjusting inventories based on “flow through.”
The significant shifts in category management made possible via omnichannel are dramatic. One of the most critical retail metrics is GMROII (Gross Margin Return On Inventory Investment). As product margins decline with price erosion, the critical component in maximizing GMROII is inventory turns. Actionable business intelligence and SKU level management has enabled proficient omnichannel retailers to significantly expand the number of SKUs offered, with less holding stock, which has increased stock turns that significantly improves GMROII.
MANTHAN: What are the challenges retailers are facing in trying to achieve omnichannel profitability?
CHRIS: Consumers have become omnichannel and they are not going back. Retailers understand that they must become more omnichannel. But omnichannel is NOT cheap! It requires substantial investments in infrastructure, systems, technology, distribution and logistics. And even more important than the tactical operational investments are the investments required in recruiting and training the right retail talent. The staff serving the click and collect area are not just “cashiers”; they must be the most important customer facing representation of the retail brand that creates a superior experience in ways that customers want to come back.
Omnichannel customers are more profitable than regular customers IF they value the relationship and come back again and again. The challenge for most retailers is that their systems and operations were designed to “sell things”, not build and track relationships. One of the biggest challenges retailers face is the lack of quality CRM (Customer Relationship Management) which integrates all touch points across time and place where customers want to engage.
Yesterday’s retail was about selling “things”. Omnichannel is about creating, establishing and maintaining relationships.
Thank you Chris!