Monday 19th Feb 2018 - Logistics Manager

The ghost of Christmas yet to come

The analysis of Christmas 2006 is now over. There were the success stories of retailers taking their share of the 40 per cent growth of online sales over the previous Christmas – for example: sales growth at Tesco.com of 30 per cent contributing to one per cent overall like-for-like sales growth; online sales growth of 60 per cent at both John Lewis and Sainsburys; Next Directory sales up 9.3 per cent; and growth at gadget and present provider Firebox an impressive 100 per cent up on last year.

There were also sorry tales too with Woolworths’ €6 million additional courier bill when its operations could not service its online orders and HMV seeing an overall sales decline as it struggled to compete against the supermarkets and the online pure plays. Already this year, Right Price Tiles and Greeting Card Group have become high street victims with other famous names under continued threat.

Through all the stories there was one theme that stood out: the winners from last Christmas’ sales period were those who had successfully combined their online business with the rest of their organisation in a comprehensive Integrated Multi Channel Retail strategy which their customers understood, liked and consequently bought from.

And the same growth is predicted next Christmas with an estimated €15.6 billion up for grabs through online sales. So how ready are you, the retailer, to ensure that you get a piece of the online sales growth next Christmas? Remember, overall retail sales are not growing rapidly, so if you do nothing and don’t get your share of the online growth – which is accelerating to account for a predicted 25 per cent of all retail sales by 2009 – you could actually see your overall sales eroded.

Here are 10 questions you need to ask yourself to ensure that you have the Integrated Multi Channel Retail (IMCR) Strategy required to get your share of next year’s online Christmas sales.

Do you have Multi Channel responsibility at board level? You will need someone who sits on the board to take accountability for your Multi Channel Strategy. This board responsibility will ensure that Multi Channel is placed where needed, high on the strategic agenda, so that ownership and commitment are driven from the top down. This top-level sponsorship will drive channel silos out of your business resulting in your customers getting a consistent experience across channels.

KPI’s that span the channels
Are you measuring your overall business KPIs across all channels? The best-in-class Multi Channel retailers are not concerned with cross-channel cannibalisation. They know the effectiveness of each channel but they have put in place Key Performance Indicators which span the channels. They are concerned with overall net sales, COGS (Cost of Goods Sold), SPV (Sales per Visitor), Cost per Visitor and conversion rate. You need to be measuring the same.

Can your fulfilment operation support your online sales? Over the Christmas 2006 period 24 million parcels were not delivered right the first time which represents a whopping 12 per cent. And four million parcels never arrived at all.

Customers are becoming more demanding and less loyal and with 42 per cent of customers saying a bad online experience would influence their decision to visit – or avoid – a retailer’s ‘bricks’ store, then you need to get your delivery service right.

Think carefully about the supply chain option you are going to use for the peak Christmas period and whether it will match your customers’ expectations. This needs to include pick-ups of returns as well as initial delivery – returns for catalogue purchased items are typically as high as 20 per cent. You need to weigh up the costs and benefits of using your own fleet, a specialist retail home delivery service, couriers or the national postal service. You will also need a contingency plan if your online sales are twice those predicted. What if sales are four times your prediction? or what about 10 times?

What delivery slot window are you aiming at? The current benchmarks are being set by Tesco Direct with two hour delivery windows and Ocado with one hour time slots. As people are shopping more online they will be less inclined to take a valuable day’s holiday to sit in and wait for a parcel to arrive sometime between 8am and 5pm. If you can offer tighter delivery slots this Christmas you will become an online destination of choice. If you can’t operationally set yourself up by Christmas 2007, put your plan in place now for Christmas 2008 and think what you can do to mitigate the situation this Christmas. What about giving your customers the choice online to select to have a delivery to their neighbour or to their local 24 hour convenience store? Sunday delivery options may increase interest in your products as people tend to be more available at the weekend. 

Do you have a single view of your inventory? Online availability checks down to store level will be a service expected by customers within three years. If you can’t get there for this Christmas at least make sure that your supply chain systems or processes are not constraining your inventory to one channel. You must be able to direct a particular SKU to the channel where there is the most demand for it and you need to be able to do this instantly as demand changes.

Is your online range as comprehensive as your store range? With 47 per cent of people saying that if they cannot see an item online then they assume it is not available in the stores, your online range needs to be as comprehensive as your in store range. You should be monitoring your transactional costs and will know which items you would prefer to sell online. These are likely to be your higher priced and higher margin products. However you could be losing out on the 65 per cent of consumers who say they research online before going to buy a product in store if your full range is not online. And don’t even think about having the full range displayed online but only access to a limited range to buy. This will confuse and frustrate your customers. The only thing you can do to drive up the sales of your preferred items online is implement measures to increase cross-selling and up-selling, such as free delivery over a certain value of order or featuring ‘you may also like’ products as an item is added to a basket.

Using front pages and centre screen, which are the most clicked areas of a website, to feature high online value products will also help drive up profits – the online equivalent of putting the value pack of baked beans on the bottom shelf.

Do you know who your customers are and which channels they prefer for research, shopping, and marketing? You will need to effectively manage the customer management cycle. This starts by analysing interactions from both sales and marketing campaigns from all your channels. From this you will gain insights into who your customers are, what they like to buy and how they respond to marketing. Using this insight you can develop customer propositions to deliver, the results of which you will then analyse and so the cycle of continuous improvement goes on. And you can market in one channel to drive sales in another, but remember, with the seamless experience now expected by customers, they may well expect to redeem special offers in any channel that suits them.

Collecting customer data
With regards customer data you need to be clear this Christmas what data you need to collect, how you will collect it and what you will do with it. There is much debate about whether loyalty schemes actually make customers loyal but one thing is clear: they are a great way to collect data on your customer. If the scheme is used across channels they are also a useful method to see how your customers are moving between channels throughout the sales journey.

Have you set yourself up to ensure your share of the growing gift market? The gift market was one of the areas which saw the largest growth online last Christmas with 140 per cent increase.

If you want to ensure you grab a slice of this growing market you need to differentiate yourself from your competitors. Gift wrapping is now de rigueur on websites, so ensure you include it as an option.

You need, however, to think about other innovations you can offer, for example on-line gift lists which can be accessed by friends and family, interactive gift suggestions via live chat to an online sales assistant. Also, do you have upmarket and luxury items in your gift selection to ensure you are capitalising on this area which grew substantially in Christmas 2006? If you get it right Christmas could be an opportune time to up-sell to your customers.

Does your website perform in line with the competition? As you assess your website, remember that people are always only one click away from the competition. The leading retailers’ websites have consistent times to load throughout the day and the week, withstanding all the peaks and troughs of sales that occur throughout. 26 per cent of people are only prepared to wait two seconds for a website to load (or look like it has loaded). And remember if you have third party content on your website your customer expects that to be loaded within the two seconds as well.

Know where you are losing customers
What else are you measuring on your website? You should always know where on your website you are losing the most customers and be continuously putting in place actions to prevent the fall-out. This will improve that all important conversion rate measure. You can then start experimenting with position, size, colour, paths, layout and content on your website to ensure you are maximising the sales potential and giving the customers the most satisfying online shopping experience.

Will you have your plans in place by the end of Quarter One? Finally a sense of urgency is crucial. You will need to work hard in quarter one to ensure your detailed Integrated Multi Channel Retail strategy and plans for 2007 are in place.

This way the required changes to your business can be implemented in time to capitalise on the all important 10 weeks trading time before Christmas. Leave it any longer and you won’t be getting a slice of the €15.6 billion online Christmas cake this year.

Tanya Lawler is vice president, Retail Sector at Capgemini UK plc. She can be contacted by email at tanya.lawler@capgemini.co.uk