OMNI-CHANNEL: driving the convergence of retail and technology
With the proliferation of mobile and tablet devices, combined with the continuing popularity of ecommerce, shoppers are becoming increasingly knowledgeable when making purchasing decisions. Consumers have access to a wealth of information, enabling them to research – online, on-device or in-store – products and identify value for money. Around 86% of UK consumers use their various devices for pre-purchase research. A proper omni-channel offering is key to ensuring a consistent experience across multiple brand interactions – online, on-device, and in-store, and meeting the evolving expectations of these consumers, ensuring they are able to find, purchase and receive their products in the way they want to.
Omni-channel is not a new term, but its importance in the UK is bigger than ever. It is an area of growing focus for both retailers and brands – but what exactly does it mean? Omni-channel implies a seamless, integrated retail experience for consumers spanning the online, mobile and physical shopping channels. This is particularly prevalent in UK retail, where a mature ecommerce market and demanding consumers are forcing retailers to differentiate themselves through customer experience, and to do so consistently across all consumer touch points. This helps drive sales, across all channels, increases consumer awareness of products and builds customer loyalty.
Consumers are more demanding than they were, and their shopping habits are changing – 71% expect to view in-store stock on retailers’ websites, while 50% expect to buy online but pick up in-store. These expectations drive omni-channel strategies including ‘click and collect,’ local physical/local store stock availability, and order in-store for home delivery. It also drives a need for consistent and common interfaces across all devices and in physical locations – which may have very different characteristics and usage patterns. The key purpose of these strategies is to ensure that the customer receives a consistent and integrated experience across all interactions with a retailer or brand. This allows consumers to easily switch between devices, make purchases and select the most convenient method to take receipt of the products.
Evolution, not revolution
With the growth of mobile and tablet commerce, brands and retailers have been increasing investment in mobile apps and mobile advertising. In 2018, mobile advertising is anticipated to reach almost 40% (vs. only 4% in 2012).
Source: eMarketer, Livingstone analysis
The UK market has evolved rapidly to meet the growing importance of digital – in 2012, 37% of total ad-spend was already focused on online advertising, and the UK is widely regarded as a highly-advanced ecommerce market (helped by its small geographic footprint which makes rapid delivery easier). Companies and consumers in the UK have made the transition online faster than other countries, generating a wealth of experience, knowledge and ‘best practice’ for retailers, brands and ecommerce solution providers. With ecommerce anticipated to grow significantly in other geographies including the Asia and Western Europe, UK-based ecommerce solution providers are in prime position to transfer knowledge to help retailers and brands.
The proliferation of mobile devices (including both mobile and tablets – see Mobile isn’t necessarily mobile) is driving the growing popularity of purchasing from smartphone or tablet. It is estimated that £1.5bn per annum is spent through mobile in the UK, and that mobile influences a further £15bn in UK spending. Retail mcommerce in the UK is anticipated to double to £40bn by 2019 (vs. c.£20bn in 2015). The use of tablet devices for mcommerce is expected to be a key driver of sales in the short-term.
Source: eMarketer, Livingstone analysis
It’s not all gravy
The influence of ecommerce and mcommerce is driving increased investment in omni-channel planning and implementation. However many retailers and brands are unaware of how to approach omni-channel and efficiently implement user-friendly digital portals, appropriate technology infrastructure and sufficient back-office operations to effectively serve its consumers.
In the EU, over 75% of individuals have access to the internet and therefore poor website performance, usability and access can dent consumer confidence and deter future purchases. During Black Friday in November 2014, retailer websites in the UK were insufficiently prepared by the increased demand on this day. Although John Lewis reported traffic was up 307% compared with Black Friday in the previous year, at the start of the day 7% of its customers were unable to access the site due to demand. Similarly Tesco incurred such high volumes that its website was unavailable for part of the day.
Retailers also need to ensure that their back-office support systems and operational infrastructure can support the move to omni-channel. John Lewis recently reported that it plans to introduce a flat charge for orders of less than £30 made online and collected in store – this is the first department store chain in the UK to do so. The company stated that the current model for click and collect is “unsustainable for both retailers and courier companies” due to the high costs involved. Market analysts have stated that the move represents an inevitable move to counter the unfavourable economics on online retail.
Omni-channel driving M&A
Given the demand for omni-channel implementation services, many providers are looking to expand their service offering to serve these retailers and brands. This has driven significant M&A in the space, as companies seek to become increasingly vertically-integrated and to provide an end-to-end service. As well as providing additional capabilities, M&A is also providing scale as well as access to new geographies where knowledge and experience from established countries can be easily transferred.
We have seen increasing demand for ecommerce and mcommerce related assets from various sectors including marketing services, IT services, accountancy and consultancy practices. Each sector is looking to expand on services they already provide to retailers and brands and capitalise on the omni-channel opportunity. This is likely to provide opportunities on a global scale to serve client requirements in all geographies where they have a presence.
The different retail channels will continue to evolve and converge, and a joined-up experience will become ever more important to consumers, driving increasing demand for expert advice and solutions for retailers. Companies will need to adapt their routes to market, in particular via mobile, and ensure they have the appropriate technology and operations to support its transition. In order to expand quickly, retailers and brands will need rely on providers to deliver appropriate solutions quickly or risk losing consumers to better-prepared competitors. These providers will become increasingly vertically-integrated, achieved by M&A investment, aiming to provide the best in breed solutions across each area of the value chain. This will result in greater competition across overlapping sectors and drive demand for omni-channel assets with proven solutions and genuine niche expertise.