Joining the retail technology dots to become the "connected store"
Holiday season notwithstanding, we’ve got international expansion on the brain, knowing what a key initiative this is for many online retailers especially as they plan for 2013. Last month, we featured market expert and e-commerce veteran Angela Kapp in a Shop.org and NRF member's webinar to discuss what retailers need to know to breakthrough in the world's largest online market: China. Today, we are following up with the fourth installment of our series with Jim Okamura to discuss his firm’s study on global retail cross-channel capabilities. Our earlier editions touched on the study's top level findings, as well as how retailers are leveraging "research online, purchase offline" and "click and collect" capabilities.
We now focus on the concept of the "connected store." We asked Okamura to explain how the definition of “connected store” has evolved; how U.K. retailers are leading the charge among their counterparts in other parts of the world; and the impact of well-trained store associates in combating showrooming and enhancing the in-store customer experience.
What is the "connected store"? And what value does this concept add to the customer experience?
For the global study, we included factors such as in-stock visibility at store level, self-serve purchase tools, store associates’ knowledge of online, handling of store out-of-stocks through e-commerce inventory, and digital access in store for both shoppers and associates. In reality this is a tough question to answer because the definition is changing so quickly. In recent analysis with our Ebeltoft Group partners we did a special analysis of the Connected Store (across a total of 8 countries and 43 retailers) to determine the current state and to classify the types of in-store digital initiatives and how they add value to the customer experience. The four types of connected store initiatives that we identified are:
- Brand Image/Buzz/Excitement - e.g., interactive windows or digital walls
- Rich Content - e.g., QR codes, touchscreens, product reviews
- Product Assortment Extension - e.g., buy online from self-serve or associate device
- Customization and In-store CRM - e.g., mobile loyalty programs “push” to store or in store
There is lots of room for debate on the different types, but unquestionably we are still in the early stages of connected store – and hence the subtitle of our global study, The (Un)Connected Store. The examples of connected stores are not impacting significant sales volume yet. But we remain very bullish on connected store capabilities such as visibility of store inventory and store-to-web transactions and we’re excited to see more retailers roll out these capabilities to better serve customers.
In your study findings, the “connected store” area appears to be the least developed across all of the capabilities that you surveyed. What's holding back progress?
Lots of factors play into the rather slow pace of change. Connected store strategies are nascent, especially across large store networks. More companies are in the planning stages than roll-out, with many tests or small scale implementations in the field now. To fully roll-out connected store capabilities across a large network of stores requires the right infrastructure across technology, process and people. And often that can be years in development before any customer-facing capabilities are implemented. So while many executives feel they are behind the curve when it comes to digital capabilities integrated into the store experience, most are barely out of the gates. Connected stores are progressing, but it’s very early, and should be interesting to watch as they mature for many years to come while these barriers erode.
Among retailers you studied around the world, only those in the U.K. collectively have reached "advanced" status for the connected store. What can other markets learn from U.K. retailers?
You have to keep in mind the challenging economic environment and deep competition in the U.K. - under these circumstances, e-commerce has thrived. Some U.K. retailers looking for a competitive edge have been more apt to affect the store experience through digital tools. The U.K. has surpassed the U.S. market on many measures of digital retailing maturity, so it should not be surprising to see some sectors, such as specialty fashion retailers, be ahead of their U.S. counterparts. For example, check out the case study in our report on Oasis, an apparel retailer in the U.K., as they are often cited for their digital “in-store” innovation. We’ll see over time if their boldness pays off, but they are getting a lot of credit for being ahead of their competitors. We have to believe that this is top-down driven from senior executives who feel the risk-reward is worth it. While this is just one example, I believe that we’re still approaching this point for many retail executives in the U.S.
There's been a lot of talk about "showrooming" - customers looking at products in the store, then buying online. During your study, did you encounter any retailers who are actively tackling this phenomenon via well-informed, connected store associates and other measures to entice the customer to buy from them rather than a competitor?
Our study validated what we suspected – i.e. that multichannel retailers’ ability to counteract the showrooming trend through trained, digitally-connected associates is very limited at this stage. From our audits, only one in four retailers’ store associates were knowledgeable about their online channel, and fewer than one-half are using the website as an in-store selling tool. So, in general, most retailers are not combating showrooming through these means. We expect to see more retailers provide the tools and training to store associates; some as early as this holiday season but more likely in coming years. This could be the battleground that many store-based retailers will need to win in order to be convenient and stay relevant to the digitally savvy shopper. In some retail categories, the ability to quickly adapt their stores to this shopper behavior will sorely test some incumbent retailers.