Brands are only slightly pregnant
How brands are missing opportunities for traffic, sales and profits in e.shops and cross-channel services
By Oliver Kirchhof & Guido Schild
The online share of fashion sales in Germany, UK and France has passed the 10% mark and is headed for 20% – does that mean bricks & mortar will have lost 20% in like-for-like sales by 2020? Wherever you look, online is taking its share of the more or less stagnating European consumer market. The question is: Will your bricks & mortar stores win or lose in the scenario that’s unfolding?
Based on the various studies and company information available, we estimate European online fashion sales passed €40bn in 2013 – that equals the total fashion sales in France. The lion’s share is going to Internet pure players like Amazon, Zalando, Asos & Co., with mail-order companies (Next, Otto, LaRedoute) and department stores (John Lewis, Debenhams, Galeries Lafayette) only recently catching up.
To see how bricks & mortar can compete against Internet pure players, we need to look at the leading multibrand retailers: with “cross-channel” or “multichannel” services, they are making significant inroads. Customer convenience cross-channel are the magic words, and multibrand retailers are starting to show how it all works. “Online product availability by size and colour in consumer’s favourite downtown store”, “order online and collect in store” or “order in store and deliver to your home” are just three examples of cross-channel services consumers are beginning to appreciate.
How good are brands’ cross-channel strategies?
Much has been published about brands’ own online e.tail, and all of Europe’s top 30 brands have recently launched their own e.shops. Best practices of Burberry, Ralph Lauren or Esprit demonstrate how e.shops have become an essential part of the consumer experience and can be a major sales channel.
But, regardless of whether brands are latecomers or early birds, e.shops still represent a small sales share, and dedicated divisions have a low strategic priority. Just a handful of European brands have made a strategic e.tail commitment and achieved an online share of sales exceeding 5%. No wonder many current studies rank the quality of brands’ online appearances so low, in terms of usability and customer service.
If you review the top 30 European brand e.shops you will find some good practices. But when it comes to building a competitive edge with cross-channel services, our diagnosis is “slightly pregnant”. Brands operate online and offline, without utilising the advantages of cross-channel opportunities.
Too many cross-channel gimmicks without a business case
Brands may be late e.shop adopters, but that’s no excuse for launching without basic services that have grown to become consumer expectations. Brand CEOs argue that their e.shops don’t aim to compete with wholesalers, but that’s no excuse for providing poor consumer experiences. How can it be explained that 80% of store-locater functions don’t list partner stores or resellers? Esprit points the way to the future: Consumers can go online and look up product availability according to size, colour and bricks & mortar location.
A glance at cross-channel features of multibrand retailers reveals “click & collect” or “return online purchase to store” have become no-brainers in consumers’ expectation. Multibrand retailers set the benchmarks, yet so far less than a handful of brands have managed to follow their example.
Although brands are investing in cross-channel, many have opted for loud, fancy and complex concepts rather than efficient solutions. We question whether investments like the following serve as more than marketing gimmicks and really contribute to in-store or online productivity:
•Adidas has redefined store opening hours and window-shopping. At some of its Neo stores, consumers can order what they see and like 24/7 on huge screens mounted in the store windows.
•Oasis has placed iPads in its changing rooms, allowing consumers to order and ship home directly, avoiding queuing at the checkout and carrying shopping bags.
•C&A merchandise hangers in Brazil show the Facebook ‘likes’ of specific articles.
These features may serve customers’ desire for playfulness, but they are a store manager’s nightmare. We rank them among the many cross-channel pilots that lack a business case and in fact undermine productivity.
•Product returns in Neo shops grew to 80%, because most window-shoppers simply tried out the window for fun?
•Oasis customers occupied the changing rooms for 20 minutes to finish the iPad registration and purchasing process?
•C&A customers mixed up hangers as a prank or by accident and store staff spent extra hours ensuring the merchandise on each hanger had the correct number of “likes”?
Brands have an edge: Cross-channel capability
A look behind the scenes reveals that many brand e.shops are not as profitable as the full-price store channel. Brands have learned that creating an online presence and acquiring online customers is a costly undertaking, as is operating full-price stores on high streets. But an efficient cross-channel strategy benefits both channels.
Given the expectations of today’s consumers, an e.shop or retail flagship without sufficient cross-channel service is only slightly pregnant. In fact, cross-channel can be the competitive edge in a brand’s e.strategy. Cross-channel services are the opportunity to lead against internet pure players. Ten years ago consumers “accepted” a brand’s mediocre online experience, but would you buy a car today without air-conditioning? Just because brands still fail to offer cross-channel services doesn’t mean customer expectations won’t keep growing.
So don’t give up on the 20% online market – utilise your 1,000+ POS potential. You may not have access to product availability in your partner’s stores, but that doesn’t have to stop you from offering consumers click-&-collect services, provided you and your partner stores develop pragmatic delivery and return processes.
Efficient cross-channel as a key success factor
Cross-channel challenges store efficiency. Whether virtual windows in changing rooms, click-&-collect or QR-code shopping – all have one thing in common: They generate additional processes, complexity and costs in an already challenged e.shop and retail business model.
With wholesale, concession, own stores, franchise and outlets, a brand’s distribution is typically already more complex than that of a multibrand retailer. So a brand’s strategic task is to go cross channel:
•With simplicity instead of complexity
•At low cost instead of with gimmicks
•Leanly, but in line with consumer expectations
Based on a decade of working with some of the best cross-channel companies in mail order, we have identified ten simple key success factors.
1. Efficient consumer orientation
Transparent brand distribution, with store locators providing an overview of all brand POS, own stores and resellers
2. Efficient consumer travel
Manage expectations, provide online consumers a “product in-store availability” function to drive store traffic and avoid frustrated visitors
3. Efficient traffic generation
Offer free “reserve online, try and buy in store” services and incentivise the store visit
4. Efficient shopping trips
Offer “shop online and collect at third-party pickup” on consumer’s way to shop or work
5. Efficient merchandising
Be consistent with prices across the channels, but offer “online only” and “in-store only” merchandise for flexibility in marketing and promotions.
6. Efficient buying/ sourcing
Offer special online and special in-store collection, but only as special makeup products, instead of broadening collections
7. Efficient return management
Offer “buy online and return in store” to provide a state-of-the-art return process while securing follow-on sales in store
8. Efficient customer loyalty
Integrate in-store and online loyalty programmes, promote and incentivise the advantages of cross-channel shopping
9. Efficient offline online shopping
Create “3-minute online shopping” apps for in-store use and incentivise store employees to guide their customers online
10. Efficient online promotion
Promote in-store the extended customer experience of online shopping, incentivise registry
To sum up, if there could be just one piece of advice: Take the simple path and recapture some of the 20% online sales – or even more with a superior consumer experience.