Omni Channel Leadership White Paper 2013

 Retail

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Industry pundits have been talking about omni-channel as ‘the retail of tomorrow’ for some time now. The trouble is, tomorrow is now. Omni-channel is today’s reality and its formats and dynamics are the key to survival, success or failure for the retail sector. Customers’ buying habits have already shifted, altering the retail landscape at a rate that has left many organisations in its wake, as evidenced by the recent collapse of many high street brands like HMV, Blockbuster and Comet. Yet, despite such eloquent demonstrations of the dangers of clinging to tradition as things change, we discovered that retailers are still ignoring many of the warning signs. In our experience of sourcing leadership and managing talent for top retailers across geographies and categories, we have seen the industry adapt and evolve, but never have the consequences of a faux pas been so far-reaching as the risks involved in getting the omni-channel equation wrong. although nobody really knows what tomorrow’s omni-channel will look like and which technological developments will have the greatest impact, retailers must understand that their customers are not interested in technology, but in their product, brand and service. So any innovation that they look to develop must focus on whether it is going to deliver a better customer experience. new technology in itself is not going to do it: retailers need the best human talent to match the appetite for an omnichannel provision. the industry must ensure they have the right people strategy, organisational design and culture, but most importantly they must address the way companies compensate, incentivise and reward their senior digital talent. We explored best practices and the implications of not tackling skill gaps in retail with an international survey into key omni-channel leaders in the industry. the task we set ourselves presented a challenge right from the start: Who will we be interviewing? there is no single profile that is the ‘right’ one to lead the omni channel strategy: in some markets it falls to the marketing director, in others the retail director or a multichannel director, but rarely are all these skills combined into one function – the omni-channel one. While it is widely accepted that the industry needs omni-channel professionals to meet the consumer demand for fully integrated and immersive customer experiences, retailers are ignoring the value of retaining the very talent that makes it possible. at their own risk: we discovered that more than half of the top omni-channel leaders are actively looking for new job opportunities and being contacted at least once a week by head hunters.
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  • 1. OmNI-cHaNNEl lEaDErsHIP The hidden risk facing retailers
  • 2. INDEX Executive summary Introduction Omni-channel strategy Organisation design and culture Best practice Skills gaps Talent attraction and retention Compensation & Incentives Benefits, rewards and satisfaction Key findings and conclusions Recommendations About Green Park 3 4 5 7 8 9 10 11 13 15 17 18 2 Omni-channel leadership The hidden risk facing retailers
  • 3. EXEcutIVE summarY Industry pundits have been talking about omni-channel as ‘the retail of tomorrow’ for some time now.The trouble is, tomorrow is now. Omni-channel is today’s reality and its formats and dynamics are the key to survival, success or failure for the retail sector. Customers’ buying habits have already shifted, altering the retail landscape at a rate that has left many organisations in its wake, as evidenced by the recent collapse of many high street brands like HmV, Blockbuster and Comet.Yet, despite such eloquent demonstrations of the dangers of clinging to tradition as things change, we discovered that retailers are still ignoring many of the warning signs. In our experience of sourcing leadership and managing talent for top retailers across geographies and categories, we have seen the industry adapt and evolve, but never have the consequences of a faux pas been so far-reaching as the risks involved in getting the omni-channel equation wrong. although nobody really knows what tomorrow’s omni-channel will look like and which technological developments will have the greatest impact, retailers must understand that their customers are not interested in technology, but in their product, brand and service. So any innovation that they look to develop must focus on whether it is going to deliver a better customer experience. new technology in itself is not going to do it: retailers need the best human talent to match the appetite for an omni- channel provision. the industry must ensure they have the right people strategy, organisational design and culture, but most importantly they must address the way companies compensate, incentivise and reward their senior digital talent. We explored best practices and the implications of not tackling skill gaps in retail with an international survey into key omni-channel leaders in the industry.the task we set ourselves presented a challenge right from the start: Who will we be interviewing? there is no single profile that is the ‘right’ one to lead the omni-channel strategy: in some markets it falls to the marketing director, in others the retail director or a multi- channel director, but rarely are all these skills combined into one function – the omni-channel one. While it is widely accepted that the industry needs omni-channel professionals to meet the consumer demand for fully integrated and immersive customer experiences, retailers are ignoring the value of retaining the very talent that makes it possible. at their own risk: we discovered that more than half of the top omni-channel leaders are actively looking for new job opportunities and being contacted at least once a week by head hunters. retailers are out of touch with what leaders in this new discipline expect from their careers: changing demographics mean omni-channel professionals require a different combination of benefits than the established pension-health insurance-car allowance offering. Career development is also key to this new generation of employees, yet omni-channel leaders rarely feature on companies’ boards. Shutting this crucial talent out of the top table is a risky move for the retail industry, as it creates an imbalance between the pressure put on the omni-channel function to generate growth and the tools it’s given to bring about the change required to succeed. retailers are confused as to how omni-channel should be represented on the board, but some leaders have been making the first steps in this direction: John lewis recently appointed a new board level online director; marks and Spencer’s laura Wade-gery is executive director, multi- channel and eCommerce and on the other side of the atlantic, macy’s went as far as appointing robert Harrison as ‘Chief omni-channel officer’.trailblazing retailers will no doubt reap the benefits of a new structure that will deliver sustainable performance improvement through people. Steve Baggi, Co-Founder 3 Omni-channel leadership The hidden risk facing retailers
  • 4. 4 Omni-channel leadership The hidden risk facing retailers INtrODuctION Retailers of all sizes and categories are constantly reviewing and adjusting their omni-channel strategies to ensure not only that they connect with customers across all physical and digital channels, but also that they retain what has become a more fickle customer base than ever before. With that in mind, we set out to explore what this meant from a people perspective, to understand if senior Management and leadership within Retail businesses is meeting these challenges and if it’s equipped to make the most of the opportunities ahead. We developed a survey that was distributed to e-Commerce, multi-Channel and digital directors including leaders from over 50 retail businesses across the uK and internationally. We surveyed a variety of organisations of different sizes and footprint: • Businesses with a minimum of £2m turnover and global conglomerates of £1b+ • Businesses operating purely in the uK domestic market and companies trading in the uSa, netherlands, france, germany, and far east markets. We extended our research to include a wide spectrum of product categories including: this White paper builds on the main findings of this international survey to present green park’s recommendations for Senior management to create a sound organisational structure for success in omni-channel retail. FASHION FOOD ELECTRONICS DIY > £2m £1b+
  • 5. Retailers are clearly adopting omni-channel practices and it is widely agreed that developing a robust omni-channel strategy is vital to the future growth of the retail industry. however, many businesses have yet to fully integrate it into their corporate strategy and sales channels remain siloed rather than integrated. retailers have welcomed the benefits of online trading, but they have not been so quick to implement cross-channel practices, with the result of a confused customer base. pioneering companies like apple have changed the retail landscape forever: Steve Jobs was adamant in his view of customer experience as a company driver. apple’s control of customer experience from end-to-end means that all brand attributes are fully broken down on all touchpoints.the true omni-channel consumer has grown to expect a seamless experience across channels as a fact of life and is leaving companies that cannot deliver it. retailers talk the talk, but don’t walk the walk: over half of the organisations have yet to introduce the order and collect purchasing model into their customer proposition.this model is key to meeting the consumers’ expectations in terms of flexibility and to encouraging the combined use of online channels and physical stores, which will always be a valuable part of the mix. With less than a third of the businesses having a store cross-channel incentivisation programme in place, retailers are gambling with overall customer experience, an all-important factor in today’s crowded market. By not offering employee reward for encouraging shopping across multiple channels, organisations are also losing out on the opportunity to upsell and increase their revenue potential. retailers must ensure that store staff provide a first class service even though the transaction and reward will be merited elsewhere, demonstrating the crucial link between culture, incentive programmes and customer service. OmNI-cHaNNEl stratEgY 57% 71.4% of organISatIonS do not CurrentlY uSe ORdeR-aNd- cOllecT BelIeVed tHeY Had TOO MaNy sTORes In tHeIr portfolIo HaVe NO sTORe INceNTIVIsaTION programme In plaCe for CroSS- CHannel SaleS 52.4% 5 Omni-channel leadership The hidden risk facing retailers
  • 6. John lewis, the seventh biggest uk mobile retailer with 764,461 unique mobile visitors (source: comscore gsMa MMM November 2012), has been one of the most active retailers in the mobile space, and has claimed smartphone and tablet shopping is generating triple-digit growth, both in terms of traffic and revenues. although it has yet to determine the exact influence mobile has on offline sales, John lewis has also used devices to link its online and offline customer journeys. OmNI-cHaNNEl stratEgY continued SaId tHat SoCIal medIa dId NOT maKe up part of tHeIr Current SaleS mIX SaId tHat onlIne made up NOT eVeN ¼ of tHeIr total SaleS reSpondentS BelIeVed moBIle Would Be tHe CHannel to generate MOsT gROWTh oVer tHe neXt 3YearS 42% 63% 73.6% of SaleS are drIVen tHrougH moBIle CurrentlY 1 0.5% 1 http://www.themcommercepro.com/news/34/uk-consumers-uneasy-on-mobile-payments-but-m-commerce-still-expected-to-grow/ current sales mix despite the industry increasingly looking to develop innovative online and digital strategies, sales are still largely driven through stores, with social media being neglected as a driver for growth. While some are still questioning the roI of social media for marketing, leaders in the industry, like Currys, are successfully using facebook and pinterest to drive more engaged visitors to their company’s website, strengthen relationships with current customers and increase the total number of sales or average order amount. the riddle of monetisation for a company’s social media efforts is slowly getting solved: whilst the ‘like’ button is not transaction-based, facebook Cards are proving a successful tool to translate social media activity into real sales. While many retailers are still spectators in the social media game, the market changes at the speed of light, with consumers now able to purchase goods and services with a tweet thanks to american express’ new tie-up with twitter. to date, one of the biggest developments in the mobile space is Weve, the mobile marketing and wallet joint venture between ee, o2 and Vodafone. this consortium marks the first collaboration between the mobile networks to bring mobile marketing and payments to the mainstream. retailers need to focus on creating a seamless customer experience across all channels, but also build in increased flexibility across the ever- changing points of sale. as technology continues to develop and brands become more global, retailers must ensure that they are able to adapt their multi- channel capability to merge social and local. The ongoing emergence of new channels, such as the most recent mobile commerce, means the industry struggles to come up with forward-looking strategies, because it focuses on the individual performance of each channel. Businesses must take a holistic view if they want to future-proof their approach: they should focus on integrated services, seamless back office processes and consistency of customer experience. Retailers must ensure organisational design and infrastructure are flexible and agile enough to allow them to plug- and-play as new developments emerge. 6 Omni-channel leadership The hidden risk facing retailers
  • 7. Organisation design and culture Whilst managers and directors in the retail industry feel confident that their organisation has adapted quite well or very well to the omni-channel challenges both on and offline, reality offers a different picture. Customers rate their experience online 5% better than in-store2 . Having such a marked difference between customers’ experiences on and offline can only lead to a diluted brand message and further confusion for customers.With only a few store incentivisation programmes for Importance of Culture on Success of Omni-Channel Approach Has the culture of the organisation adapted to the Omni-channel challenge? Retailers recognise that culture is important in the successful design and delivery of an omni-channel approach.The appreciation of culture as a driver of success in the push towards true omni-channel retail is an important cog in achieving competitive advantage in highly pressured markets. cross channel selling, and online sales and social media being negligible parts of the sales mix, it is hard to justify such optimism. The retail sector has traditionally had an appreciation of the benefits of strong and positive organisational culture: perhaps more than many other sectors.The drive for customer service excellence has typically been the motivator for that trend, but increasingly culture is seen as a cornerstone of all elements of the retail equation. Senior Management has the power to ‘make it happen’ and must ensure that omni-channel models are in place to effectively reflect the industry’s positive attitude towards innovation and real structural change. 70% respondents reported directly into the board When devising their omni-channel strategy, retailers need to take the utmost care in the timing of changes to the structure of their sales teams: maintaining siloed sales channels will work only until a certain point. On the other hand, the emergence of new channels in an omni-channel context can drive retailers to merge teams too early, before such channels are profitable and before the operational and logistical elements of a business are fit for purpose to deliver such a cross channel service. Retailers should be aware of the repercussions that deep organisational changes have to other areas of their business. For retailers to be able to implement a new evolutionary strategy effectively, the omni- channel function must be represented on the company’s board. Only with board visibility can real change happen and the value of omni-channel activity to commercial success be recognised. 2 http://econsultancy.com/uk/blog/11255-online-retailers-deliver-a-better-customer-experience-than-high-street-stores-report 7 Omni-channel leadership The hidden risk facing retailers 86 14 5010 40Not important Important 86 4 5010 40 Very well Quite well Not very well
  • 8. BEst PractIcE In identifying operational benchmarks that illustrate best practice our research highlighted three key themes: the ability to provide a seamless customer experience, regardless of point of sale, channel or technology the consistency of high customer service levels across all touch points the uniformity of the brand and therefore public perception 1. 2. 3. SuB-SeCtor demonStratIng InduStrY BeSt praCtICe grocery Fashion/sport/Footwear general Merchandise Telecommunications entertainment department stores 32% 24% 24% 12% 4% 4% While there is no clear category leader established in industry best practice, organisations that are regarded as clear examples of best- practice include Burberry – renowned for its ambitious digital endeavours – and John lewis, for the strength of its cross-channel logistics and customer service behaviours. tesco.com’s gatwick shopping wall is another example of successful innovation in omni-channel retail. With what is currently one of the most successful supply chain strategies across the industry, fashion retailer next ensures the same levels of customer experience across all channels- physical stores, online stores, mobile apps, telephone sales. With omni-channel best practice the retailer’s reputation and ongoing relationship with its customers is enhanced and greater customer spend encouraged. general Merchandise, department stores and Telecommunications firms are perceived to be trailing the field. 8 Omni-channel leadership The hidden risk facing retailers
  • 9. 9 Omni-channel leadership The hidden risk facing retailers OmNI-cHaNNEl skIlls gaPs Omni-channel is the new retail battleground, and best practice is emerging at the speed of light: the pace and scale of progress means that significant and potentially threatening skills gaps are created, requiring developmental action to bring teams and divisions up to grade. the lack of specific development plans in place to tackle best-practice skills gaps is a real concern for organisations looking to keep apace in a very dynamic and volatile market environment like the retail industry. as with any sector moving rapidly, it’s extremely difficult to find and allocate time and budget to improve internal skills at the same time as attempting to import new talent from the wider market. leaders must look outside of retail to get a balance of skills to build a best in class function. Sectors such as financial Services and fmCg can bring insights into customer experience. the biggest gap in required skills to succeed in the evolving world of retail is ecommerce trading. more traditional functions including buying and merchandising have been developed across the retail industry with courses and formal training, but also considerable in-house programmes. Courses such as the mSc in Internet retailing and International fashion retailing (multichannel marketing) mSc are aimed at providing a wider understanding of all aspects of internet retailing, from web to marketing to supply chain management and logistics. more education and training programmes are being created across different sectors to equip new entrants in the job market and professionals alike with the creative, critical and professional skills necessary to tackle omni- channel retailing. retailers must make sure that the next wave of talent coming through the industry is more prepared and should therefore support such education programmes, as well as promote vocational training among their staff. It is now imperative that organisations address their succession planning and talent management by investing in their internal capability to build a future pipeline, not only for the organisation itself, but the industry as a whole. In doing so, not only will the retention of staff, but also the attraction of new talent be made easier, as organisations actively show an interest in investing in internal talent and in the future of the business.When choosing to develop skills within organisations, the industry must take action and work together to start to think strategically and for the long term. WHat CruCIal SKIllS are mISSIng InYour team? tHe maJorItY of leaderS Had leSS tHan 5YearS’ eXperIenCe WorKIng In onlIne retaIl. < 5 years experience 47.3% ecommerceTrading 15.7% customer Insight 10.5% International ecommerce 10.5% cRM/data Management
  • 10. Talent attraction and retention Over the last few years the economic downturn has led to a number of changes and restructures within organisations. With an increase in redundancies and employees ‘in fear’for their jobs, organisations have found that it has been easier to retain the staff they have. But as the economy begins its recovery and starts to grow, organisations are at a far greater risk of losing their employees to competitors who are willing to compensate and reward more aggressively. Organisations are also struggling to attract future top talent; therefore it is now more important than ever that talent is nurtured from within the organisation. of organisations had experienced difficulties in attracting and hiringtalent they need Averagetenure in leadership is lessthan 2yrs saidthey were dissatisfied withtheir current role of leaders said they were actively looking for opportunities Respondents are being contacted at least once a week regarding opportunities 61.5% < 2yrs 35% 63.6% once a week The level of job satisfaction among e-commerce and multi-channel Directors is astonishingly low. Omni-channel, although an important function, is still uncommon on a leadership board, despite its pivotal role in being one of the few channels to enable business growth. Where before CEOs felt safe in the knowledge that their omni-channel functions were largely fit for purpose, the reality is that this oversight
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