Professional article • 01.12.2016

Innovate or die! Retailing in the cross-channel age

Linking brick-and-mortar stores and online options with a focus on the customer

The online market volume still grows steadily in Germany and is likely to break the 50 billion Euro mark for the first time in 2016. According to the “IFH-Branchenreport Online-Handel 2016“ (IFH industry report for the online retail market in 2016), at 38.7 percent (2016 projection), pure online players ranging from Amazon to Zooplus make up the lion’s share, closely followed by brick-and-mortar retailers with online stores. They are now gaining importance online and currently account for approximately 31 percent of the online market volume. Yet despite the excellent growth, they continue battling pure online players. Ultimately, this is also due to continuously changing consumer behavior.

Photo: Innovate or die! Retailing in the cross-channel age...
Source: IFH Köln, 2016

Traditional retailers need to reinvent themselves

According to ECC Köln, today’s consumers are extremely selective, that is to say, they decide whether they buy online or at a brick-and-mortar store based on the situation. Whereas in 2012, every other person was considered a “traditional  shopper“ who preferred shopping at a brick-and-mortar store to online shopping, in 2015, it’s only every third person that does so (see Figure 1). At 45 percent, so-called “selective online shoppers“ make up the lion’s share today. They prefer to purchase certain products such as books or CDs online, while others prefer to shop at brick-and-mortar retailers. In many cases, they also choose one sales channel over the other based on the weather or available time. This trend is even more prevalent with smart natives: 67.9 percent purchase selectively, while only 6.2 percent prefer to do their shopping at brick-and-mortar stores. This trend towards selective online shoppers provides those retailers who are both present in brick-and-mortar as well as online retail, great opportunities to get in touch with their customers. Having said that, these types of cross-channel retailers (also called multi-channel or omni-channel retailers) need to use their available channels strategically and synchronize them to best serve the customer.

Dr. Kai Hudetz, managing director of IFH Köln, is one of the most sought after...
Dr. Kai Hudetz, managing director of IFH Köln, is one of the most sought after e-commerce experts in Germany.
Source: IFH Köln, 2016

Thinking in terms of channels is so yesterday

The ECC-Cross-Channel-Study (in collaboration with hybris) from the year 2015 shows that German online shoppers perceive multichannel retailers in the most positive way. While brick-and-mortar retailers tend to get rated as old-fashioned and unfriendly to customers, customers have an overall positive view of cross-channel retailers. Adjectives like reputable and trustworthy stand out in this context. Shoppers have a more positive image of pure online players versus brick-and-mortar retailers but pure online players have a more negative image when compared with cross-channel retailers.

One of those retailers who is excellent and customer-focused in implementing cross-channel management is the Rose Bikes Company. The company’s own bike configurator is offered both online and in the company’s actual stores. Customers can choose their dream bike from various categories and subsequently individually configure the saddle, shifting system etc. After completion on the Notebook, the customer’s dream bike can be saved on the store card or a USB stick and then viewed in full-scale on a large monitor at the store and further configured. In the last step, components such as angle and length are adapted to the individual seating position by a sales specialist on site. Services like these at a retail store will increasingly become important in the future.

Another example of how online and brick-and-mortar services can be combined is Mister Spex. Its collaboration with over 550 local optometrist partners lets the customer experience the typical service at an optometrist despite shopping online. Customers can conveniently choose a pair of glasses at the online store and have their dream glasses sent right to their homes. The purchase takes place online, while services such as visual acuity measurements or fitting the glasses are handled at a partner optometrist.

Multi touchpoint management is the future

It won’t work to just transfer proven concepts exactly as they are from the store to the internet and run sales channels side by side. It is also not enough for brick-and-mortar retailers to just open an online store and call it a day. All this requires novel, customer-centric concepts. The much-touted changing face of retail changes faster than ever: according to an IFH assessment, approximately 70 percent of traditional retailers will reinvent themselves or disappear while up to 90 percent of today’s pure online retailers won’t survive. Thinking in terms of channels is so yesterday – customer-centric multi touchpoint management is the future. It is imperative to link brick-and-mortar and online services in a customer-focused manner, to provide the customer with a uniform branding experience across channels and offer additional benefits with cross-channel services such as online product availability trackers in the branches, click-and-collect service or returns of online purchases at the store. Flexible, relevant and entertaining formats along the customer journey will dictate the future of retail. Online giant Amazon, in particular, with its continued unbridled growth across categories, will become a major challenge. In order to be able to differentiate from Amazon and survive, companies have to boost and strengthen their core competencies such as consulting and service but also invest in digital competencies. This is the only way to ensure customer loyalty as the key challenge of the future and manage the leap into the digital age.

Author: Dr. Kai Hudetz; Managing Director at IFH Köln

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