Professional Documents
Culture Documents
2012 Edition
Contents
Foreward .....................................................................................................1 Note ............................................................................................................2 Executive summary.......................................................................................3 The evolution of communication ..................................................................5 1. Social media be part of the conversation................................................7 2. eCommerce to pursue or not to pursue................................................11 3. Mobile technology play it smart...........................................................15 4. Virtual meets physical the changing face of the in-store experience......19 5. Do likes count? measuring the success of online strategies................23 6. Talent nding those who can...............................................................25 Final thoughts.............................................................................................27 Appendix....................................................................................................28 Contacts.....................................................................................................29
Foreward
and mobile technology to expand footprints, build brands, attract new consumers, and improve operations. Technology and social media have opened the doors to a new world, providing the opportunity for retailers to deliver a fully integrated shopping experience and enabling an expanded reach. Conducted over a three-month period in the rst quarter of 2012, Deloitte led in-depth, one-on-one interviews with leaders of over 20 prominent BC and Alberta retailers. These interviews reveal key strategic and operational decisions that are proving vital to the challenge of responding to the changing consumer in a highly competitive and shifting retail landscape. We have a great admiration for the creativity and determination of these companies, and want to express our appreciation for their involvement in this study. We believe that the ndings in this report will prove valuable to other BC and Alberta retailers and provide some leading practices to other Canadian retailers as they engage the connected consumer.
Note
While advances in retail technology have enhanced the ability of retailers to track in-store and online trafc and glean insights and patterns based on ndings from data analytics, this has also presented challenges. Retailers continue to grapple with understanding not only the consumers themselves, but also how they need to leverage the technological advancements and how this relates to enhancing their in-store and online shoppingexpectations. Gone are the days when front-line retail associates were the gatekeepers of specialized product information. With the aid of the Internet and its many social platforms, consumers are now sharing product and retailer information with each other with the click of a mouse. Mobile devices have added a layer to the retail experience, making it easier than ever for consumers to nd product, locations, and deals, right in the palm of their hand. And, with the wide-spread use of technology today, gone also are the days when one might be able to assume, based on a consumers age demographic, whether they are an avid, recreational, or passive user of this technology. Retailers must now begin to understand not only what the consumer is looking for with respect to product and how they might be using technology to nd it, but also how theyd like to be served while in the physical retail environment and while online. We are proud to have engaged with our industry partner Deloitte to explore the ever-evolving relationship between the retailer, the consumer, and technology in the context of what members in BC and Alberta are doing to better understand the relationships nuances and subtleties, and to more effectively leverage these tools to connect, communicate, educate, and serve their consumers.
Executive summary
There has been a signicant focus on social media, eCommerce, and mobile technology in the media, conferences, and thoughtware, speculating on what the world of retail will look like in three months, six months or one year from now. Technology revolutions in eCommerce and mobile applications enable retailers to reach consumers and markets that they would never touch in a brick-and-mortar world. Social media enables retailers to build a brand and put a face to their organizations that is not dependent on face-to-face interaction in retail locations. The death of the physical store has been prophesized, along with the movement from one channel to multi-channel to omni-channel. Through this study we have come to understand how BC and Alberta retailers are incorporating changes in the shopping culture, technology, and consumer preferences to stay ahead in this ever-changing world. What we have found is extremely interesting outlined in this publication are six main themes, with two common threads that bind these six themes together: First, BC and Alberta retailers understand that, in this new connected world, consumers are demanding transparency, control, and customization. Todays consumers are looking for something unique in the shopping experience that empowers them. Whether the purchase is made through a mobile device, eCommerce site or, in some cases, interactive within the physical store, consumers dont want to be told how they should shop or what they should buy. Second, even though the industry is being revolutionized, BC and Alberta retailers are making thoughtful and calculated changes to their business strategies, rather than big capital spending and knee-jerk reactions to the overwhelming amount of industry buildup. They are seeing it as an evolution of their business model rather than a revolution. Now, are these retailers moving too slowly, and not immersing themselves sufciently in these ambiguous new markets? Only time will tell whether this approach is in keeping with the rate of change that BC and Alberta consumers expect, or whether retailers will lose out in the long run to more nimble competitors. Through this study we hope to provide an insight into the exciting, nerve-racking and evolutionary world of BC and Alberta retailers, and how they are making the most of the connectivity that is being afforded to their consumers while battling the internal logistical and cultural challenges that change brings about. It is clear that a broad and effective online strategy touches each part of the business from Supply Chain to Marketing and Sales and from IT to Risk Management and Finance, and that it is not just a Marketing or IT initiative. Are the leaders of these businesses seizing the opportunities and challenges?
Expanding outside bricks and mortar through social media, eCommerce and mobile technology enables retailers to reach consumers they would otherwise never touch.
2012 Retail Study 3
1. Social media be part of the conversation 2. eCommerce to pursue or not to pursue 3. Mobile technology play it smart 4. Virtual meets physical the changing face of the in-store experience 5. Do likes count? measuring the success of online strategies 6. Talent nding those who can
Within each theme, we note the current state of the retailers we interviewed. We then contrast that information with broader insights gleaned from national and North American-based research. Lastly, we provided insights into what we see as the next steps or next wave for BC and Alberta retailers to move forward in the online journey.
With more people sharing opinions online, Internetbased reviews become more important.
6 Deloitte & Touche LLP and afliated entities.
Owned media
Website, mobile site, YouTube channel, partner content, social content
ed Se
Pu
sh
/p ul
Idea
Paid media
Online ads, ofine ads
Classical integration
Earned media
Journalists, bloggers, social media users
Senior management buy-in Obtaining senior management buy-in and driving the social media strategy from the top down is crucial to the success of the strategy. Lack of buy-in is often the result of inadequate information on the cost and return on investment (ROI) related to social media campaigns. Enacting a major change in marketing or media campaigns without tangible, measurable information is challenging for traditional brick-and-mortar retailers. Ownership Central ownership versus store-based control of the social media channels is a key discussion point for retailers. The discussion becomes more complex when looking at stores owned by head ofce versus franchise models. Who controls the social media message? What level of control is maintained at the head ofce and what autonomy is given to stores? How do you best manage the brand while still giving the stores an opportunity to build their own local online community? For example, the desire by franchisees to use social media to support the community environment surrounding their store is at times in conict with the online rules and regulations of the franchisor. Silos dont work well there needs to be an integrated strategy that is centralized allowing for consistency, but that has the exibility to allow decentralized collaboration.
their existing social communications with brands. Going one step further through implementing a social media monitoring and engagement software adds another lens into the mind of the consumer. Small victories versus big bang investment evolution versus revolution Throughout the study it was clear that the social media strategy that is the most effective is one of trial and error. Launch small campaigns that could include competitions, discounts or freebies and track the effect. How many consumers liked your page? How many consumers redeemed the discounts in-store? How much trafc did it drive to the store? The key with these campaigns is to include a way to measure the effect, e.g., a QR code or a special keyword that consumers have to use. The campaign should be structured such that metrics can be obtained, with the right people in place to evaluate the results. This approach allows retailers to get their feet wet without a major capital investment, thus alleviating the cost and ROI questions and improving buy-in at senior levels of the organization. Once retailers are more comfortable with social media and understand how to best present their brand, they often look to professional rms to support their strategy, launch larger movements where analytical software can be used to quantify the results of the campaigns, and provide insight into the type of consumer engaging with the brand. Managed versus controlled Building an online strategy and framework that supports social media and localization of social media for franchisees is important for companies like COBS Bread, that encourage consumers to engage on Twitter and Facebook. We provide a community-based shopping experience a refreshing experience and we want to keep our customers involved. We want to have each bakery make the right bread at the right time for every customer, and we see social media as a key method to gain feedback and engage with our customers on how to do so, says Aaron Gillespie, Vice President of COBS Bread Canada. It is important for each retailer to understand their culture and the extent to which social media should be controlled versus allowing it to evolve to best meet the needs of the specic store or community. To be truly successful in the social media sphere, companies need to be open to think differently. To be successful, retailers have to be willing to open the doors and let people into the company culture.
Retailers cant overlook the power of advocates closer to home their employees present perhaps the easiest way for companies to engage consumers, or to lose them.
Online, retailers are trying to propel their brands through a means that is aligned to the consumers shopping habits, while attempting to recreate the best facets of the in-store experience.
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We see the retail channels blurring. We send emails to customers with promotions and they can go to the store, use social media or use eCommerce to access the products.
Zaheer Jiwani Senior Manager, Loyalty Best Buy Canada Ltd.
Throughout our interviews the following lessons learned relating to an eCommerce strategy and implementation appeared a number of times: Dene the value proposition Dene what the real value of the online eCommerce experience is for your consumers and your products. Without a clear value proposition, an eCommerce site will not be able to live up to its potential or utilize the technology to its fullest. Two participants have given this some thought and had the following to say: The focus with our eCommerce strategy is to bring the customer in-store experience online, especially as it relates to the education required for infrequent and very important purchases, says Jennifer Bawa, Communication Director at Spence Diamonds. We think the success in eCommerce for our line of business is to empower the customer to customize and personalize what they purchase. This increases the value to the customer and offsets the shipping expenses, says Brian Kerzner, CEO of Rocky Mountain Chocolate. We also found that even online retailers consider their online offering carefully and use technology where it makes the most sense. For example: Our core vision is to make it easier for men to get dressed, and were looking for the best solution to get this done. Technology is sometimes an enabler, but where we even as a mainly online retailer can depart from technology and give the customer a personal touch, we will do that. Flexibility in meeting the consumer at a place that works for him is all-important, says Kyle Vucko, CEO of Indochino. Quick and dirty does not pay in the long run When challenged by executives or external market pressures to deploy an online presence within a very tight timeline, including eCommerce, the companies interviewed often opted for an off-the-shelf or immature Software as a Service (SaaS) solution. This approach tended to have initial success, only to be hindered in the long run by the shortcomings of the software solutions, lack of back-end integration with existing operations, and
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inadequate consideration of third-party integration (e.g., shipping companies). Often, the initial expected cost savings were mitigated by the lack of ability to customize the consumer experience and keep the brand intact. Challenges with shipping integration and having a French language site were the two main drivers to move to a new platform, says Mohammed Mahabub, Chief Financial Ofcer of Jysk. Most companies interviewed commented that they were on their second iteration of either an eCommerce platform or an eCommerce operating model. The decision to move to a second iteration was preceded by thorough research, analysis, and a robust business plan that was vetted by the functional business departments that were, and will continue to be, impacted by the eCommerce strategy. Build the right team with support from the right executive sponsor Numerous companies interviewed indicated that inadequate sponsorship or representation from the business functions impeded their ability to deliver a quality eCommerce experience to consumers. To clearly articulate this strategy, the right strategic thinkers have to be present and lead the project. As eCommerce incorporates numerous business functions, teams should be aligned with an internal stakeholder for each functional area that is impacted by eCommerce, and this person should have access to an expert during certain stages of the initial project launch. This ensures that there is an understanding of the current business processes and how the company tends to operate, as well as an understanding of leading practice and how eCommerce will affect the future state of the organization. eCommerce should not be an IT-onlyinitiative.
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The main reason companies consider developing a mobile app is to use the functionality of the phone not available to a mobile website.
Nikolas Badminton Director of Digital Strategy Tribal DDB
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Call to action To make the most of a mobile site, it should have clear and specic calls to action. When consumers are engaged with a product on a mobile device, there is an automatic increase in intent to purchase, says Amielle Lake, Chief Marketing Ofcer and Founder of Tagga. The view is that mobile commerce will increase in the coming years. This begs the questions on how to drive trafc to mobile. Companies have a hard time transitioning their thinking to a fully integrated marketing approach. Mobile makes that possible. Businesses can connect with a consumer from any media channel by creating mobile engagement avenues such as QR codes, SMS, Facebook, etc. Mobile is most powerful when viewed not as a channel, but as the device where all channels converge. Mobile is the ultimate consumer engagement tool, says Lake.
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Consumers think of shopping whether it is online, in-store, or on a mobile device as one experience.
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Retailers who have the foresight to combine the sensory experience provided by a bricks-and-mortar store with the extensive information and accessibility offered by virtual stores are likely to lead the way.
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3 4
Deloitte Store 3.0TM The store is dead. Long live the store.
Deloitte Driving protability through your store associates: The make or break factor for retailers, June 2010
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The experience can go well or quickly sour, making a consumer an advocate or a critic of a brand, with the power to share the experience with his or her global network of friends.
Observing the entire experience According to iQmetrix, a company that develops products that bridge the gap between physical and virtual retail channels, the four main stages of the shopping experienceare: Technology also plays a role in supporting associates with sales and service, as meeting the demands of an increasingly ckle consumer can require careful integration of consumer and product data. Ideally, information is aggregated across sales channels to capture the consumers full prole and purchasing history. Easy access to detailed consumer information can better equip sales associates to be informed and to provide a customized experience.5
Deloitte Store 3.0TM The store is dead. Long live the store. Deloitte Global powers of the consumer products industry 2011, Getting back to growth
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The shrinking store and the endless aisle The brick-and-mortar store itself will continue to evolve. With the increasing emergence of eCommerce, store footprints are likely to become smaller, and stores within stores will replace conventional departments, providing a more intimate and personalized customer experience. In response to tighter margins, some retailers may edit their store portfolio and reduce store counts. Stores supported by a multi-channel supply chain will likely carry less inventory while continuing to offer buyers a wide selection. With the company eCommerce website acting as a store and potentially carrying more SKUs the retailer must consider the implications on inventory, and on the bottom line, once packaging and delivery charges are factored into the equation. Inventory allocation and management While stuff nearby will still play an important role in retailing, in a multi-channel strategy inventory, allocation and management are increasingly not driven by the channel. What location is best for the consumer? When a store is out of stock, why not sell the product at checkout and ship it directly to the consumers home? Does the store need to carry every SKU in every size? Not necessarily. Why not have 15 styles on hand and the highest inventory-turn sizes, but dozens more available through a kiosk or for sale at the checkout? This would address the long-tail economics of low demand: the consumer can place an order in the store, then the product can ship directly from the vendor. The impact on inventory carrying costs could be dramatic. A different way of thinking about merchandise and inventory might be to select brand assortments for brand alignment, not by channel (see following chart). Then, the decision is made about owned or drop-ship inventory positions: of the owned inventory items, which ones should be housed in stores and which in fullment centres? In this model, the merchants are accountable for merchandising and inventory productivity, not channel productivity.7
Store assortment
The store merchants decide what assortment should be sold in the store
Direct assortment
The direct-to-consumer merchants decide what assortment should be sold in the catalog or on-line
assortment Full
1 2 3
ned invento ry Ow
Assortment
1 2 1 3 2 3 1 2 3
The brand merchants decide what products should be offered by the brand. (Note that the size of the assortment is larger than the traditional approach.) The difference between the full assortment and owned inventory will be available to drop-ship direct from vendors, but will not be owned, due to slow inventory movement. The entire assortment is available through every channel, but may be fullled either direct or through the store. The merchants decide what should be available in stores and what should be housed in fulllment centres.
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Retailers in the study are now testing different things to see what will work. They understand that social media is not as risky as expected in terms of capital expenditure but they still want to see apayback.
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In retail, it is the Wild West, but you need to take chances that arequalified.
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One of the keys to success is creating consumer intimacy by creating relevant interactions.
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Retail leaders who truly embrace and revel in an ambiguous future will be those we profile in our retail study in years to come.
26 Deloitte & Touche LLP and afliated entities.
Final thoughts
Our study has revealed that BC and Alberta retailers are in the game when it comes to social media, eCommerce, and mobile, but most are not leaders. Larger retailers are ahead of smaller independents, but winning this game does not depend on size. Recognizing the opportunities and embracing the challenges will separate the winners from the losers. Most importantly, leaders who truly embrace and revel in an ambiguous future, who build a culture of experimentation and adaptation, who are prepared to drastically alter legacy channels, and who give a real voice to the consumer will be those we prole in our retail study in years to come.
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Appendix
Denitions
As retailers, the industry and marketing rms often associate their own denitions with mobile and social media and sometimes group all of these activities under the eCommerce or online umbrella. We have applied the following denitions to this study to differentiate between the various retail activities/strategies.
Term
eCommerce
Denition
Conducting sales outside of the normal bricks-and-mortar locations. Could be via the companys website, posting articles on eBay or mobile applications that consumers download to their smartphones or mobile devices. Mobile technology could refer to technology that companies use to reach out to their consumers smartphones, and it could also refer to changes that companies make internally to make their employees more productive or to change the customer experience in the stores, e.g., loading POS software on iPads and allowing sales associates to conduct a sale on the mobile device in the store. Companies could have an online presence that is limited to a website with biographical information, such as store locations, store hours, coupons, and investor information. Their online presence could also include a page on Facebook or a Twitter feed. An online presence that is limited to information sharing generally does not impact the back-ofce operations, and is primarily aimed at interacting with the consumer. An online presence could also include eCommerce.
Mobile technology
Online presence
Mobile technology and online presence. Includes websites and media campaigns on platforms such as Facebook, Twitter, foursquare, etc.
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Contacts
For further information, please contact:
Note
The authors would like to acknowledge the writing talent and insights of Laurin Henderson, Deloitte BC retail team member.
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www.deloitte.ca
Deloitte, one of Canadas leading professional services rms, provides audit, tax, consulting, and nancial advisory services through more than 8,000 people in 56 ofces. Deloitte operates in Qubec as Samson Blair/Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an Ontario Limited Liability Partnership, is the Canadian member rm of Deloitte Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member rms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member rms. Deloitte & Touche LLP and afliated entities.