Omni-channel: Fix it in the mix

I’m just back from the intimate little affair known as the National Retail Federation’s “Big Show.” Of course if you’ve ever been, you know that it is, in fact, far from intimate. The multi-day extravaganza in New York’s Javits–from the Hebrew, meaning “non-existent mobile connectivity”–Center features thousands of attendees, hundreds of exhibitors and buzz-words aplenty.

In many sessions, barely a minute could go by without a speaker uttering “omni-channel” this or “omni-channel” that. Yet the attentive listener would quickly conclude that not only was there often more heat emitted than light shed, there was also a fair amount of out-and-out hooey and semantic mumbo-jumbo.

Let’s get a few things straight, shall we?

First, omni-channel is no different from what many leading retailers have been investing in for years: the vision of a customer-centric, anytime, anywhere, anyway, seamless experience across channels and touch-points. Call it “channel-agnosticity”, “frictionless commerce” or “multi-channel integration”, it’s all more or less the same. Customers don’t care what you call it, they care what you do with it.

Second, the point is not to simply add more channels. The “omni” part of “omni-channel” is about being intensely relevant in all the channels your customers care about and making the experience frictionless for her as goes through her decision journey. I heard one executive say they were the best omni-channel retailer because they sold in more channels than anyone else. That’s very misguided thinking.

Third, participating in, or being pretty good within, all the channels that your customers employ is not enough, nor is having a decent experience across all channels for your average customer.

Winning in omni-channel is all about the mix. The mix of customers you serve. The mix of products and services you offer. The mix of media employed to drive engagement and loyalty. The mix of channels where consumers can learn and transact. And so on.

To be sure, there are some foundational ingredients of winning in this evolving omni-channel world. Possessing a single view of the customer and the ability to uniquely identify, track and reach individual customers regardless of where and how they engage with you is critical. Without breaking down organizational silos (and the culture, incentives and metrics associated with them) you won’t get very far on your transformation. Making your entire brand’s inventory available to the customer at all points of sale (supported by easy, channel of choice returns) is rapidly becoming the price of entry.

Yet without the capabilities and commitment to treat different customer differently, your omni-channel strategy risks being an also-ran.

Many of the NRF’s Big Show presenters and vendors were pushing ingredients. Ingredients are essential, as is a good recipe. But the customer wants the finished product. And it’s the mix, that perfect blend, that really makes something special.

Fix it in the mix.

My Top Ten Blog Posts of 2013

As I take a break until the end of the year, here’s a recap of my top 2013 blog posts, in order of popularity.

1.   Neiman Marcus & Target: A glorious failure.

2.   JC Penney: Trouble on the home front.

3.   Math is hard, for JC Penney.

4.   Sears: The world’s slowest liquidation sale.

5.   JC Penney: Gloat edition.

6.   The multi-channel customer is your best customer. Duh.

7.   No pottery, no barn, no crates, no barrels.

8.   The world’s first omni-channel executive.

9.   Blaming the hole.

10. Silos belong on farms (redux). 

On a special note, my most viewed post of the year was actually from 2010. Fail better got a huge boost from being featured in Seth Godin’s Krypton course. Thanks Seth!

Thanks as well to everyone for reading my blog, challenging it, promoting it and just simply paying attention to my ramblings. It means a lot.

May you and those closest to you enjoy a wonderful holiday season.  Namaste.

 

 

 

 

Mr. CEO, tear down this wall!

It’s not hard to find literally hundreds of articles imploring brands to adopt a multi-channel–or as is fast becoming de rigueur, “omni-channel”–strategy.  I’ve written my fair share of them.

Typically these articles provide helpful hints or highlight core capabilities one must embrace to achieve this recommended state of retail nirvana. In fact, at last week’s CRMC conference in Chicago, speaker after speaker delineated the usual suspects.

We must have a 360-degree view of the customer. We need to become channel-agnostic. We must leverage actionable customer insight to drive personalized interactions. Our customer experience should be seamless across touch-points. And so on.

All good stuff to be sure. Yet the cold hard truth is that while these components are all quite necessary, they are simply not sufficient.

The unfortunate reality is that all the Vice Presidents of Customer Insight and all the Directors of CRM and, for that matter, all the whatever you want to call your new leader of cross-channel initiatives, can do an exemplary job and it won’t get you there as long as a few other conditions exist.

If your brand is still fundamentally organized by channel rather than customer, you will only get so far.

If your company’s senior leadership is rewarded by channel performance, more than brand and customer-driven metrics, you face an insurmountable challenge.

Without the walls between channels being torn down–without the Board and Mr. or Ms. CEO making customer-centricity THE driving force of your customer growth strategy–all the well-intentioned efforts of an enlightened few will fail to gain essential traction.

So Ms. CEO tear down those walls!  What are you waiting for?

 

 

 

The world’s first omni-channel executive

The world’s first omni-channel retail executive was probably me.

In 1999 (not a typo), in a shockingly rare moment of forward thinking and risk taking, Sears’ senior leadership decided to launch an enterprise-wide initiative to glean how e-commerce and digital technology would alter our business model and to design a strategy to meet customer needs “anytime, anywhere, anyway.”

Millions of dollars were allocated, full and part-time resources were assigned from various business and support functions, a big name consulting firm was hired to help with systems integration, governance structures were created, and yours truly was plucked from the relative obscurity of running a small division to become the Vice President of Multi-channel Development & Integration.

Over a 15 month period, our renegade bunch of retail futurists executed a ton of analysis, unearthed scary findings (we had over 200 different 1-800 numbers!), delivered PowerPoint presentations bursting with jargon and coined memorable catch-phrases (my favorite: “silos belong on farms”). We also gained a deep appreciation for the barriers erected by organizations steeped in product and channel-centric thinking and behavior.

Once we wrapped up our work–and having blown through something like $7 million– we couldn’t point to many immediate high ROI recommendations. But our work did lead to an acceleration of investment in sears.com, building systems to create a single view of the customer and the formation of a central CRM group that yielded a lot of actionable customer insight.  We also developed the confidence to make pioneering investments in critical cross-channel capabilities such as ordering on-line and picking up in-store.

Personally I gained a very firm understanding of what is required to design a customer-centric strategy and implement a frictionless, channel-agnostic experience–which I was able to leverage once I moved on to the Neiman Marcus Group and in the years since I’ve been a consultant.

The purpose of this story, however, is not to regale you with my multi-channel bona fides.

The real point is that despite all the recent fervor around omni-channel this and omni-channel that, if you were really paying attention at any time during the past ten years or so, it has been blindingly obvious that digital technology was going to dramatically change the retail customer experience.

If you were really paying attention, you would know that Sears (and others) were publicly discussing the higher spend and engagement rates of multiple channels shoppers as early as 2003.

If you were really paying attention, you would know that companies like Nordstrom have been investing heavily in channel integration technology and processes for nearly a decade.

So if you are just starting to take customer-centricity seriously now–if you are peppering your earnings reports, industry conference presentations and investor meetings with little anecdotes about cross-channel customer behavior and the omni-channel blur as if this all just started happening–all this proves is that you were not paying enough attention years ago.  One has to wonder what other game-changing stuff you are years behind on.

Of course as Seth reminds us: “The best time to start was a while ago. The second best time to start is today.”

Leading through innovation starts first with awareness. Which needs to be followed with acceptance.

It’s a choice what you decide to pay attention to. And it’s a choice to act and to act boldly. Ultimately nothing matters without action.

It’s later than you think.

Merge ahead

More and more, your web presence is the front-door to your brand, not just a sales channel.

More and more, mobile, and all things digital, blur the lines between e-commerce and brick-and-mortar.

More and more, your channel-centric thinking–and organization, metrics, incentives and budgeting–are becoming barriers to meeting the customer where she is.

More and more, your mission, if you choose to accept it, is embrace the world of channel hop and focus on delivering a frictionless customer experience.

Merge ahead.

Or risk being side-swiped.

 

 

The multi-channel customer is your best customer. Duh.

This is the 3rd straight year that I’ve attended a National Retail Federation “Big Show” session and a senior retail executive takes the stage and proclaims that the multichannel–or “omni-channel” if you want to be trendy–customer spends more than a single channel customer.

In fact, they say–pausing to create a little extra anticipation as they prepare to bestow another morsel of massive insight–the more channels she shops in, the more she spends.

I then scan the crowd and notice dozens, maybe hundreds, of my fellow attendees furiously taking notes. I check the Twitter feed and there is a sudden burst of activity as these pearls of wisdom. Must. Be. Shared.

From where I sit, if you care about such things and this is actually news to you, it only proves on thing. You haven’t been paying attention. At all. Let’s hope the boss doesn’t find out.

The reality is that Sears and JC Penney were reporting that their multi-channel customers outspent single channel customer by 3 or 4X nearly a decade ago.

At Neiman Marcus we reported the same phenomenon in public statements in 2006 and 2007.  Lots of other brands have said essentially the same thing over the last several years. Look it up. I’ll wait.

So now that we know to be skeptical about how NRF selects its speakers–and you’re aware that you need to up your market research game–so what?

First of all, it might be better to state things this way: your best customer is a multi-channel customer. The distinction being that if someone is already a good customer they are more likely to start engaging with you in other forms (web, mobile, social, etc.). Understanding cause and effect, and segmenting your customers by pathway to profitability, is well worth the effort.

Second, stating facts about customer behavior isn’t a strategy. You aren’t going to win in an increasingly omni-channel (see how trendy I am!) world unless you fully embrace customer-centricity, are committed to treating different customers differently AND you have a clear idea of how each channel or touch-point delivers a remarkable customer experience.

So if you are just learning to appreciate the multi-channel customer and are thinking about an omni-channel initiative, I’d get started.

And I’d hurry. It’s later than you think.

 

8 things that are wrong with your omni-channel strategy

Read anything about retail, attend a conference, get pitched by a consultant, evaluate a new software product, and chances are you hear “omni-channel” mentioned early and often.

So with geniuses like me throwing the term around ad nauseam, let’s get specific about what is probably wrong with your current strategy and what you need to do to go from meaningless words to remarkable action.

  1. Focusing on semantics rather than strategy. I’m often asked what’s the difference between “multi-channel” and “omni-channel” and my answer is typically: “Not much and who cares.” The point is having a strategy that reflects how customers shop today. The point is designing a value proposition that fights and wins in an increasingly blurred channel world. The point is delivering a compelling customer experience day in and day out. Call it whatever the hell you want. It’s what you do that matters.
  2. An appalling lack of customer insight. If you are blessed with a killer offering and virtually no competition, go straight to #3. But if you don’t work at Apple or Google, chances are you need an actionable customer segmentation. Chances are you need far better insight around consumer behavior. Chances are you need to be able to differentiate your target customers by needs and value. If you don’t have the data to treat different customers differently, you are at a huge disadvantage.
  3. Your mileage may vary. On one side, you have pundits screaming that if you aren’t “omni-channel” today you will be out of business tomorrow. On the other side, there are those that find that sentiment preposterous; just look at Amazon, they don’t have retail stores and they are doing fine. The truth is that every brand’s situation is different. An omni-channel strategy as an abstract concept is useless. An omni-channel strategy that reflects the reality of YOUR consumers, YOUR competition and YOUR current and future capabilities is all that matters. You aren’t Amazon. You aren’t Nordstrom. You aren’t Macy’s. Take what you like from some of the leaders and leave the rest.
  4. Screwed up metrics. Ask a retailer about their  “same store sales” and “gross margin rates” and “sales per square foot” and the growth in their brick and mortar stores compared with e-commerce sales and you are inundated with data and commentary. Ask them about growth in key customer segments, segment profitability, traffic conversion or retention rates, cross-channel browsing behavior and the like, and you are probably met with silence or meaningless babble. What gets measured gets done. But if you are focused on the wrong data you are going to do the wrong things.
  5. A dumb organization structure with dopey incentives. Most of the time I was at Neiman Marcus our then CEO would get on analyst calls and talk about our “compelling multi-channel strategy.” We included similar words in our annual reports and investor presentations. In reality, we were organized by channel, had no meaningful truly customer-centric efforts and all the top executives had incentives to maximize their own fiefdoms. Silos belong on farms. If are serious about “omni-channel’ you need to set a structure that reflects customers first, and channels and/or products, second. You need to pay your people on those things that truly advance key customer segment growth, engagement, loyalty and advocacy over the long-term.
  6. Confusing the vehicle with the destination. Yes, the web can be a sales channel, but for most retailers it is mostly a tool. Having a social media or mobile strategy is critical, but only as a means to your customer growth strategy ends. If you don’t know where you are going, any road will get you there.
  7. Failure to ship. The era of months of intensive market planning, controlled testing and the big reveal are over. In case you haven’t noticed, things move a lot faster today, communication channels are increasingly blurred, and customer desires are far less predictable. Trial and error works far better than spectacular planning and flawless execution. Better to ship often and fix it in the mix.
  8. Neglecting relevance. Retailers are great at talking to themselves. And passing to where the receiver used to be. And wallowing in me-too-ism. And going big and easy, rather than small and challenging. Treat different customers differently. Make it relevant. Extra points for remarkable.

The obvious obviousness of omni-channel

Sitting in sessions at last month’s NRF annual conference I might have thought a drinking game had launched where you would down a shot every time someone said “omni-channel” or uttered the phrase “seamless integration.”

Speaker after speaker–as well as subsequent press coverage–rattled off buzz-phrases, statistics and factoids regarding multi-channel consumer behavior as if this were some big new discovery or insight.

All this proved was one inescapable fact. There are two types of retailers in this world: those that have been paying attention and those that haven’t.

If you’ve been paying attention all of this has been obvious for years. If not, you are suddenly awakening to the cold harsh reality that you are behind. Perhaps way behind.

Any brand that has taken the time to understand consumer behavior already knows that consumers think brand first, and channel second. Any retailer that analyzes their customer data understands how digital commerce influences brick and mortar sales–and vice versa. Any company that has been willing to look, appreciates the large degree of cross-channel behavior that has been evident (and growing) for years.

It’s been more than 5 years since retailers like JC Penney, Sears and Neiman Marcus stated publicly that customers that purchase in 2 or more channels outspend single channel customers by a factor of 3 to 4X. In 2006–nearly six years ago!–my team did an analysis that showed that more than 50% of Neiman Marcus’ total sales (and a higher percent of profit) came from customers that purchased in multiple channels within a 12 month period.

The proliferation of robust mobile devices–smart phones and tablets–add more touch-points, new functionality and serve to further blur the lines between channels, while creating the need for more frictionless integration.

There is a big difference between a new reality emerging and your becoming aware of a reality that is already there.  And it’s dangerous to be confused about that.

Obviously.

 

When the last 15 years happens to you

If you are in retail, the last 15 years or so have brought enormous change. Let me call out a few profound shifts:

  • Winning business model bifurcation: Price and dominant assortments at one end (Wal-mart, Amazon); remarkable experience and assortment curation/product differentiation on the other (Nordstrom, Louis Vuitton). The result is death in the middle.
  • Digital retail: What started as an electronic catalog is now not only a high growth channel approaching 10% of many categories’ sales–and much higher if the product can be delivered digitally–but an increasingly important medium for promotion, interaction, customer reviews, price checking, etc.
  • The constantly connected–and inter-connected–consumer.  As more and more consumers are armed with powerful mobile devices the notion of anytime, anywhere, anyway retail has become a reality–and expectation. Social networking, product review sites and pricing apps are creating greater and greater information transparency. The brand is no longer in charge. The consumer is.
  • The omni-channel blur. Most of your customers will engage with multiple touch points in their decision journeys. As mobile commerce grows–and it becomes easier for consumers to seamlessly move between various applications to gather product information, check prices, confirm inventory availability, get product reviews and the like–the notion of distinct channels breaks down. It’s a frictionless, compelling experience that matters, not making each of your channels better. New ways of consumer engagement, new ways of organizing your business, new ways of measuring and incentivizing become mandatory. Silos belong on farms.

While it is true that remarkable new business models sometimes emerge quickly and unexpectedly, most winning concepts that have gobbled up market share from industry incumbents did not come out of nowhere.

Amazon launched in 1995. The off-the mall and specialty formats that have made life difficult for the Sears’ and JC Penney’s of the world have been important competitors since the late 1990′s. Anybody paying any attention to customer data during the last 10 years has known that the so-called “multi-channel” customer outspends a single channel customer by a factor of 3-4 times.

With the benefit of 20/20 hindsight it’s clear that many Boards and many retail executives were asleep at the wheel. They failed to gain sufficient awareness of the competition and seek truly actionable customer insight. They failed to accept what was happening. And of course they failed to act. And now it’s too late.

So here’s the new reality. While many of the companies I mentioned–and countless more I’m sure you can offer up–had some 15 years to see what was happening and make the necessary changes, chances are you will have less time. A lot less time.

So I guess the question is: what are you going to do to make sure the next 5 years don’t happen to you?

 

Let’s get digital…digital

The first wave of digital retail was either about brands with a history in catalog merchandising putting up a basic e-commerce site (Williams-Sonoma, Lands’ End) or pure-plays picking off products categories that early adopters could readily embrace (Amazon). The market dealt harshly with models that could not execute a basic direct-to-consumer formula, targeted a product category that wasn’t ready for digital prime time (RIP pets.com) or a combination of both.

As consumers became more comfortable with buying on-line–and retailers got better at deploying new technologies–other categories made sense for pure-plays (Blue Nile, Zappos) and traditional retailers ramped up their multiple channel strategies. For most, this second wave was largely a silo-ed approach with the e-commerce and the bricks and mortar divisions pursuing related, but mainly independent, strategies.

In the most recent third wave, a few retailers (I’m looking at you Nordstrom) understood that most of their customers were interacting with their brand across multiple channels and touch-points. They accepted that brand trumps channel, that digital was transforming their business forever. They declared that silos belong on farms and began investing in a more integrated, customer-centric experience, leading with digital more often than not.

In the next wave, the blended channel is the only channel. The distinctions between devices, channels, touch-points and media begin to blur. Differences with little distinction. Or differences that lead to extinction if your core value proposition can be delivered better, cheaper, faster digitally.

Clearly not every product category is going completely digital. Groceries looks pretty safe. Cars too.

But failure to understand how digital transforms the customer discovery, engagement, purchasing, retention and advocacy process is a prescription for your brand’s demise.

So let’s get digital. Let me hear your actions talk.