Through a special arrangement, presented here for discussion is an excerpt of a current article from Retail Paradox, Retail Systems Research's weekly analysis on emerging issues facing retailers.
At the inaugural meeting of the Cross-Channel Consortium, a highly engaging discussion came to the conclusion that moving to a cross-channel strategy means fundamentally "rewiring retail" - with wide-ranging impacts that span channel operations, organization design (with a heavy emphasis on IT and merchandising), technology infrastructure, and even assortment strategies.
Put together through the efforts of Jim Bengier at Sterling Commerce and Kasey Lobaugh at Deloitte Consulting, companies represented included IBM, AT&T, Virtucom, Shop.org, Best Buy, Borders, Limited, and Target. The discussion reinforced some of RSR's findings about cross-channel over the last year:
Multi-channel is a retail paradox: E-commerce is still a grade-school kid compared to the venerable and well-established chain store, so even though it's been around a long time as part of the Internet age, it still needs focus of its own. Only the strongest companies are going to be good at managing the friction that comes from growing a single channel, while developing synergies across channels. Participants agreed - there was a very long discussion about all of the challenges that fall out of this friction, everything from finding resources to focus on e-commerce as more processes get pulled back into the main organization, to what mobile commerce will mean for this friction in the future.
Fulfillment is a differentiator: For now, I would add. Infrastructure and inventory challenges hold retailers back from a truly flexible fulfillment capability - the whole "buy anywhere, fulfill anywhere" paradigm. The first retailers to pull that off will succeed in defining customer expectations for how that will work for all retailers.
Following online pure-plays won't get you there: Online pure-plays are focused on building such fantastic online experiences that consumers never miss the store. Winning multi-channel retailers recognize this, and are focused on building powerful cross-channel capabilities (in effect, putting the fact that they have stores as front and center to the customer relationship). Unfortunately, lagging multi-channel retailers haven't cottoned on to this distinction - they are blindly following online pure-plays' innovations in the hopes of building their online channels, while ignoring one of their greatest strengths - stores.
The biggest thing that I took away from the day was that going "cross-channel" is so much more than bringing those "online renegades" back in-house. A complete re-think of product strategy is needed. Kasey Lobaugh summed up the example nicely: a true cross-channel retailer will think about all the potential products it can sell, identify which of those play in all channels, and which play in specific channels - and how products might transition from one category to another. That's a far different assortment strategy and process than an online group running out and adding new products to its online assortment independent of stores, or one that forces a subset of what is carried in stores into the online channel.
Discussion Questions: What are some key hurdles for retailers plotting a cross-channel strategy? In particular, what do you think of the "friction" that develops from growing a single channel while developing synergies across channels? Is a rethinking of product strategy required for many brick & mortars to succeed with their cross channel strategies?