Can Customers 'Experience' Online?

Can online retailers compete against the customer experience given by large brick and mortar retailers? Ask anyone from a fresh faced B-school hopeful to CEOs/CMOs of large retail corporations, one of the first scores for traditional brick-and-mortar retail as against online is the customer experience that stores provide. However this is soon becoming a myth with online retailers vying against each other to provide customers unique experiences. From packaging to exclusivity to great customer service, these retailers are leaving no bastion unique to brick-and-mortar retailers. 

Take shoe retailer Zappos for instance, which is making waves with its levels of customer service. While the retailer promises a free and within four days delivery, it manages to deliver the shoes the very next day. How is that for customer delight! Zappos is currently pioneering the call center service where their employees are free to engage with customers in their own friendly style and not adhere to any script. Also employees are given a free rein behaviorally as long as they make the customers happy. For those familiar with the voice-service industry and its standards, this is nothing short of revolutionary.

Be it great customer service or wow-ing with branding & packaging, online retailers are turning every trick in the box to make an impact. Retailers like Everlane ship some of their apparel in chic and silken style, with premium packaging that makes as much of a statement as the clothes itself.

Let us take the example of an in-store experience that might be hard to mimic, say like a personalized bra-fitting done at lingerie stores. I give you True & Co, an online lingerie start-up that has a smashing online bra fitting service and get this, a 'Bra App'. Both the online fitting and the app are as useful and as close to the real thing, as they are quirky and stylish. 

 Last but not the least, you have the online retailers that give you exclusivity and customer engagement like 'by invitation only' sites like Gilt. Gilt gives its members access not just to some exclusive brands, but also at exclusive prices which are sometimes 60-70% discounted. With lots of insider perks and facilities to reserve products for frequent purchasers, how is this any different from that friendly clothing store down the street, many years back, where your parents and their parents bought clothes for generations. 

All these examples are testimony to how online growth is outpacing store growth rates. In the first quarter of 2013, the online retail economy grew at 13% compared to a mere 1% offline. With improving levels of customer experience online, ecommerce and mobile are becoming not just alternate, but mainstream channels, poised to leap forward in terms of growth and potential. Retailers would do well to explore, balance, and innovate in these channels if they wish to stick around for the next couple of decades.

(Image: https://trueandco.com/)

Retail word of the day: Showrooming

A couple of years back, I had the opportunity of meeting someone in the senior management of Best buy. He told me quite frankly that one of his key challenges was that he was afraid Best buy was becoming a showroom for Amazon. In essence what was happening was that customers analyze/examine a product in brick-and-mortar stores and end up buying it online for cheaper. This can be a huge challenge for a specialty retailer in consumer electronics like Best buy which invests heavily in customer-experiential concepts such as geek-squad, only to end up losing business online.

I later discovered that this phenomenon had a word and it was called Showrooming. Showrooming is proving to be costly to multiple brick-and-mortar retailers in recent times with large online giants like Amazon typically profiting from it. The most recent example is that of Target deciding to stop carrying the Amazon Kindle, the reason for which is said to be showrooming. Following Target many mass retailers gave Kindle the boot.

(Image: http://www.forbes.com )

Cross Channel Assortment

This one is a bit academic. I wrote this white paper a while ago and have finally gotten down to posting it here.

Multichannel retail is exploding, with practically all Tier 1 retailers reporting a significant growth rate in digital channels, primarily web-based, compared to traditional channels. However, a majority of retailers lack an in-depth understanding of customer cross-channel shopping activity, leading to suboptimal per-customer revenue. The effect of retailers endeavoring to be present across multiple channels and making sure that they come across as a single entity to the consumer across channels is the essence of cross channel retailing. While this is good news for the consumers, retailers face multiple challenges in rendering this ‘seamless experience’ promise, one of them being the planning of assortment and managing inventories for these multiple channels. While ensuring the breath and depth of the assortment in such a way that it is enticing to today’s spoilt-for-choice customers is a challenge, ensuring that this is done at reduced costs to maintain competitive edge is another challenge.

Till date retailers are still grappling with how to understand customer behavior in a cross channel environment. Use of business intelligence technology can turn this around and significantly add to profitability.

Cross Channel Retail

Cross-channel retail is often mixed up with multi-channel retail. However cross-channel is far more evolved than just being present in multiple channels. The idea behind cross-channel retail is that a consumer needs to have a consistent experience with a retailer across the multiple channels that the retailer is present in. That means having the same marketing message, pricing, and customer service everywhere — in store, print, mobile, email, online, catalog or call center. Cross channel also means that the consumer can continue his association with the retailer in one channel from where he left off in another channel, seamlessly.

Impact of Cross Channel Retail

• Cross-channel shopping behavior is causing retailers to invest in technologies, particularly business intelligence (BI) technologies to differentiate in today’s competitive environment.
• This better understanding of the customer forms the basis for catering to different customer segments through the effective use of retail technologies.
• Inability to understand the importance of zealously managing assortments across multiple retail channels is creating a level of customer service risk for retailers.
• The need for customer-centric merchandising is pushing retailers to explore customer segmentation across channels.
• With the advent of cross channel retailers are forced to move from being product-centric to customer centricity.

The gap between retailers’ understanding of consumers and consumers’ behavior in the market pace is markedly different. Consumers understand and are aggressively using cross-channel shopping avenues. Unfortunately, retailers who have presence in multiple channels are significantly left behind in delivering what customers need, and face the possibility of greater market share erosion as pure play competitors, such as Amazon, expand assortments into newer and newer categories. This is the reason why retailers, such as Best Buy, have been unable to ride the changing wave and succumb to becoming showrooms for Amazon.

Cross Channel Assortments

Now let us look at assortment planning and merchandising for todays cross channel shoppers. The challenge of delivering the right product to the right location at the right price was present even when there were singular channels. Now with the advent of multiple channels and the customer crossing over and continuously using these multiple channels, assortment planners and merchandisers need to start viewing the enterprise more holistically.

Customers today want a streamlined and consistent experience across channels and a wide selection of merchandise to choose from in every channel they shop with. While planners and merchandisers should still plan for and merchandise for each of these channels differently keeping in line with the aesthetics and defining attributes of the channel, they must still look at integrating assortment planning at an enterprise level, since the expectations of the customer in each channel is the same.

Again retailers who have empowered themselves with BI profit here, since they know their customers’ demands and shopping patterns and how to maximize their shopping experience. Overall an integrated planning approach that flows down from the corporate level keeping in mind the financial goals of the organization, but at the same time not losing track of the pulse of the customer is key in a cross-channel environment. At the end of the day a core assortment needs to be planned at enterprise level, in line with customer demand in every channel. It is only the rendering or fulfillment pattern that would differ across channels.

Challenges

Here are some of the typical challenges faced by merchandisers and planners in a cross-channel environment.

• Choosing of a core assortment in every channel and expanding further categories in accordance to each channel’s demands
• Different kinds of fulfillment options in the various channels

• streamlining the assortment planning process to reduce markdowns and improve the appeal of the products
• consolidating multi-channel inventory to reduce costs
• enhancing the accuracy of allocation
• redistribution of inventory across channels to improve availability

Solution

• At the same time, the extended assortment should be evaluated for varying types of fulfillment options. Carrying up-sell items in a store with limited shelf space may not be possible or make sense from an inventory risk factor. But offering this same merchandise on a retailer's website or through a POS and drop shipping the item direct to the consumer creates a richer shopping experience for consumers, and minimizes risk and inventory carrying costs for retailers.
• inventory planning systems that provide retailers with the tools to logically pool inventory across channels

• accurate allocation and redistribution of the inventory based on real-time analysis of trends
• The integration of planning and execution capabilities in a single system gives retailers the ability to plan their assortments, forecast their demand and distribute orders in a single cohesive process
• technology allows retailers to have a consolidated view of inventory levels and demand across channels
• provides far more effective planning, resulting in cost reductions associated with holding pooled inventory, improved margins due to better planning of assortments, reduced excess stock and enhanced sales potential through accurate allocation and redistribution of inventory

Key considerations for creating online assortments

• streamlining the assortment planning process to reduce markdowns and improve the appeal of the products

Manage inventory across channels    

• consolidating multi-channel inventory to reduce costs
• enhancing the accuracy of allocation
• redistribution of inventory across channels to improve availability

Today’s more intelligent customer often doesn’t require the levels of advice from store staff as they have done in the past. Instead, they often enter a store knowing exactly what item they want, and the price they’re willing to buy it at. With this in mind, the key thing they are asking the store associate to do is fulfil an order. This means the associate needs better tools to help them have total visibility into the supply chain, understand stock levels and know when an item is likely to be in stock

These solutions can help in a variety of ways, giving staff information about when they are likely to receive inventory, adjust inventory requirements and better fulfil orders,” says Fenwick. “Not only this, but it gives them access to the same information that consumers are accessing when they’re shopping online, giving them the opportunity to direct a customer to their website while they’re in the store, and improving the possibility of brand loyalty across channels

References:

http://www.vendornet.com/img/AssortmentPlanning.htm

http://www-31.ibm.com/cn/services/bcs/iibv/pdf/g510-6186-cross-channel-retailer.pdf

Indian E-commerce – The Tipping Point

(moved from http://anuradhasivarajan.wordpress.com/ original date: Dec 25, 2012) 
This one is long overdue. While Indian e-commerce is still in the first-cracks-on-the-egg-with-beak-and-feathers-sticking-out stage, if the last couple of years are anything to go by, this is a market that is going to grow, grow and how!! Forrester trends say that in the last 12 months alone, venture capitalists have invested heavily in the Indian e-commerce market and are willing to work with any start-ups (as indicated by the flurry of ads introducing new e-commerce sites everyday) that are willing to wade through logistic and payment mode challenges that are typical obstacles for e-commerce in a country like India. While currently the penetration is largely restricted to the metropolitan urban population, it is only a matter of time for e-commerce to permeate the fast-becoming-techno-savvy rural junta. Though the current internet penetration in India is 10%, at the rate at which infrastructure and connectivity is improving in rural areas we are set for speedy growth in this sector. Case in point is our Facebook presence, with 51 million Facebook users; we are the third largest audience for Facebook in the world. Trends such as social media being drivers for e-commerce, advent of grocery shopping online, etc which came much later in the maturity curve of e-commerce in developed countries, have already started in India which is an indicator of this extraordinary growth.

What Indian consumers expect out of e-commerce?
While convenience, being able to browse through a variety of products and getting the best prices are a given, Indian consumers also expect frills such as free shipping. However the most important aspects that encourage adoption, making erstwhile brick-and-mortar retail consumers into online shopping junkies are payment options such as cash-on-delivery and a seamless and hassle free returns process. I shall narrate how my first online shopping experience turned me from a brick-and-mortar retail devotee to an online shopping fiend in no time.

My first online shopping expedition!
I bought a pair of dumbbells on Ebay early this year. I am not proud to admit that though retail is my career, I had to be dragged kicking and screaming into online shopping. What ‘dragged’ me was the prohibitive prices of steel dumbbells and the unavailability of quality PVC dumbbells (the kind I was looking for) in sport & fitness shops. Finally after much soul searching with friends who were regular online shoppers, I stumbled upon just the thing I was looking for, at one fourth the price I was willing to pay, on Ebay. Without much further ado, I ordered the thing and waited with breath that was bated and arms that were itching to be flexed! I was updated from time to time on the progress of my purchase via texts and I am happy to say that I got the dumbbells before the expected delivery date. While I was satisfied with the dumbbells, on observing closely I noticed that the red dumbbells that I had ordered were slightly discolored in certain places. I thought to myself that my apprehensions about Indian e-commerce sites were not entirely unfounded and that if I had picked it up at a shop, I would have made sure that I picked a piece which was perfect. I logged back on Ebay and decided to lodge a complaint with the customer support, though I didn’t hope anything would really come out of it since frankly I had bought decent quality, sturdy dumbbells for literally a song. And most importantly I did not expect to be taken seriously by an Indian e-commerce site with as minor a gripe as mine. You can imagine my surprise when an Ebay employee called me in less than a week and arranged for a conference call between me and the seller to sort out the differences in my expectations and his product. Ebay had held the payment to the seller on receiving my complaint. To cut a long story short, me and the seller sorted our differences under Ebay’s moderation and reached a wholly satisfactory settlement (consumer grievance redressal check, hassle free return process check!). Needless to say, I am impressed and now hooked to online shopping and having tried many other Indian online retailers (the popular ones) I am yet to be disappointed!

Will Facebook Exchange be the next generation of Targeted Marketing?

(moved from http://anuradhasivarajan.wordpress.com/ original date: June 18, 2012) 
We are slowly unraveling answers on how Facebook is planning to leverage its 900 million users to streamline ads from being annoying distractions to pointers for what users actually want to buy. Here is how: Facebook is in the process of developing a real-time bidding ad system.
What is an Ad bidding system?
Digital advertisers manage ad exchange and data exchange accounts through what is called a Demand-Side Platform (DSP). Third parties integrate with these DSPs for better tracking of what we consumers are looking to buy, which in turn helps advertisers to leverage and increase the impact of their ads. Bidding then takes place within these ad exchanges and traffic is directed to websites and charged on the basis of pay per click models.
Why this is not new?
Having said all I did about ad bidding systems, let me also break it here that there is nothing new about ad bidding systems or pay per click advertising. Google started search engine advertising as early as 1999. Pioneered by Overture, now part of Yahoo!, we now have large pay per click providers today such as Google AdWords, Yahoo! Search Marketing, and Microsoft adCenter, all of which follow the bidding system.

So what is new?
While the idea behind exchange is not original, i.e. to show users more relevant ads, combined with Facebook’s 900 million stronghold and zealous user-ship, the targeting could prove to be more potent that regular search engine powered ads. In view of Facebook’s strict privacy protection policies in the past, this move is deemed as forward and aggressive. Having said this, Facebook is still not giving advertisers privileged user information. It’s just letting advertisers target users based on the data they generated while cruising around the Web.
The road ahead…
While Facebook Exchange is definitely a cause for celebration among investors, considering its share would grow more than the predicted 16.8% if it took off, it also means a paradigm shift in Facebook’s advertising mechanism. Would the next step be leveraging its immense database of biographical, social and behavioral information about a potential billion users?

Is HUL driving away Lakme Salon customers with its Loyalty program?

(moved from http://anuradhasivarajan.wordpress.com/ original date: June 01, 2012)
The beauty salon industry in India has seen phenomenal growth in the past decade, thanks to the increasing standards in beauty and awareness about international brands. This 5,000 crore industry, while being dominated by FMCG players and cosmetic giants, also has some niche players. Lakme by Hindustan Unilever is one of the most trusted brand names in India for the past many years and I personally know of people who swear by Lakme products so much so that they ask relatives travelling from India to buy it for them when they move abroad. The salon industry is but a natural extension for this brand.
Whenever I’m in a new city in India and I need to go to a salon, I trust Lakme for hassle free and consistent service. Naturally I was delighted when the chain came up with its ‘Club Radiance’ Loyalty program. Now having worked in the Retail industry, I have come across my share of Loyalty programs, and like newspaper Sudoku columns they can be classified as simple, medium, complex and evil (aka the customer is so confused, she does not know if she is being rewarded or punished!).  Going by these classifications, on the face of it, the ‘Club Radiance’ loyalty program seemed simple enough. You earn 10% of your bill amount as points and each point is equivalent to a rupee that can be redeemed during your subsequent visits to any Lakme salon all over India.



Now here are two instances of what actually happened. First Instance: A couple of months back I was running terribly late for one of my friends’ weddings and needed a quick-fix blow dry. I went to the nearest Lakme, and was relieved that the lady finished setting my hair in 30 mins flat. I proceeded to the counter and opted to pay with my points accrued from previous visits. The lady at the counter looked at me as if I had offered to pay her monopoly money. She was fumbling with the system trying to find me with my name, phone number, card number, et al. To cut a long story short, she did not even know to process such a payment and had to call her regional office 4 times, while I ended up spending 20 minutes at billing alone.
Moral of the story:

• Staff at the front end are not trained to engage with customers that are part of the Loyalty program, be it with respect to knowing the rules of the program or knowing the right buttons to push on their billing system to charge someone their loyalty points.
• The billing systems are probably antiquated legacy systems with no integration whatsoever to, what I am presuming is centralized information, namely Loyalty customer information.

Result:
A customer ends up feeling victimised for professing her loyalty to the brand when she sees 10 other customers walk out of billing in seconds having made no such promise to the brand!
Second instance: Today at another branch of the same chain, I informed the billing lady that I had a loyalty card and wished to pay with my points. First she searches for me in the system and tells me my card has probably expired since she is unable to find me in her system. After some back and forth and a cameo by the regional office, I begged her to forget about the points and take my credit card. She bills me and then wonder of wonders, finds me in the database. But now it is too late since poor her has already billed me. And more is the joy when she tells me that next time I am to inform her before my service starts, so that she can look for me in the database in the meanwhile (For 2 hours??!?).

Same Moral. Same Result:
On my way back I wonder if the failure of the Loyalty card to make me feel rewarded is an exercise in the effectiveness of Indian retailers’ loyalty programs. It is a pity that these programs just migrate in concept from international retailers, but fail to translate into effective customer engagement at the till because of poor staff training and inadequate investment in IT.