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Convergence in channel shopping

New Zealand retailers are missing out on significant sales opportunities by not using multiple channels to market to their customers.

By taking advantage of emerging trends overseas, local retailers have the opportunity not only to grow their customer base, but also to improve customer retention – all the while remembering the customer is becoming increasingly in control of any relationship.

Research recently conducted by the Australian Centre for Retail Studies (ACRS) at Monash University analyses how consumers consider different channels. According to their report (presented at the recent GRI seminar – a New Zealand Retailers Association event), on-line sales are expected to increase more than 13 per cent annually over the next two years, but cross-channel sales are expected to grow by 17 per cent.

Why are cross-channel sales set to outstrip on-line sales?

Consumers’ expectations are changing and many are looking for an experience that is seamless across two or more channels. These experiences can manifest

themselves in multiple ways. Examples include the ability to reserve a product on-line and complete the purchase in-store. Another scenario in the European

and US markets is known as ‘click and collect’: the ability for a customer to buy on-line – ‘click’ – in the convenience of their home or workplace, and ‘collect’ the product from a store.

There could be many reasons why consumers want to collect from a store, including lower transportation costs, convenience of working patterns, guarantees the product will be in the store, has been pre-selected and is the correct size.

Retailers should be looking to address customers’ needs in using more than one channel. Success involves determining how multiple channels can be brought together and designing experiences that are relevant to customers.

As consumers, we want to be in control. We want to be offered convenience and choice. Multichannel retail is about passing back decision-making to the consumers.


Convergence in action

Whilst the Monash University research was conducted in Australia, observers believe the same behaviours are being exhibited in New Zealand as organisations of all sizes start to embrace multiple channels. While the channels which can be used depend on your customers, and what they expect, we’re definitely seeing more retailers using multiple channels as a way of reaching their customers in new ways.

There’s a real convergence between the traditional bricks-and-mortar outlet and the on-line web shop offer. Successful retailers are designing experiences that

effectively engage and manage customers through an integrated ‘customer journey’. Consumers are able to be constantly connected to a retail channel with the increase in mobile devices. Today, the consumer is in control of the retail experience and thrives on having the opportunity to design an experience that suits their chosen lifestyle.

The ACRS report – entitled ‘Value and Optimisation in Multi-Channel Retailing’ – determined that nearly half of all retail transactions are expected to be made by consumers crossing channels, with approximately 36 per cent of Australians purchasing on-line at least once a month and six per cent purchasing a product once every week. This is a trend that retail businesses can ill afford to ignore.


Enabling technologies

The growth in multi-channel retailing has a lot to do with the myriad of technology options available to consumers. In addition to the web, and using websites as a way of selling to customers, there are new technologies that provide additional ways of interacting.

Short message service (SMS) messaging has been around for many years and has been embraced by retailers to varying degrees.

As technology has evolved, social media services – such as Facebook and Twitter – have enabled organisations to ‘befriend’ their customers and provide them

with the opportunity of not only promoting goods and services but also to listen to customers’ requirements, creating a more intimate experience overall.

More recently, with the arrival of smartphones such as the Apple iPhone, additional channels have emerged, many of which utilise a user’s location. Services such as Foursquare (www.foursquare.com) and Gowalla (http://en.wikipedia.org/wiki/Gowalla) allow their users to ‘check in’ at locations, whether they’re at a shop, a park or a workplace.

Many retailers are using these services to drive promotions so that if someone checks into a particular café, for example, they receive an immediate discount. And if customers are looking for a café or retailer, then they will likely be attracted to one that offers such discounts – their smartphones will basically tell them where to go.

The Mojo coffee outlets in Wellington use Foursquare to drive foot traffic to their stores, offering discounted beverages to those people who ‘check in’ at one of their locations.

According to the ACRS study, social media, SMS and iPhone applications are among the most popular ways retailers communicate with consumers – 68 per cent of Australians have registered to receive e-mails from retailers and 19 per cent opt into communications using SMS messages. Based on the adoption rates of these newer services, one would expect  these newer channels to factor-in future editions of the research.

On-line, the recent emergence of so-called group buying sites provides retailers with another avenue to promote their products or services. Initiated by Groupon (www.groupon.com) in the US, this model allows retailers to offer significant discounts – provided a fixed number of people agree to purchase that product or service. The advantage to the retailer is they can sell a fixed number of items – with the opportunity to cross-sell others; the customers receive a sometimes-significant discount. This model has already been emulated in New Zealand with sites such as GrabOne (www.grabone.co.nz) and Groupy (www.groupy.co.nz) gaining traction.

Going even further, US-based Threadless (www.threadless.com) really harnesses the power of their passionate community to help design their products – clothing designs are  actually created and voted for by their community and successful designs get made and sold. In giving the customer some control over the process – and the fundamental design process at that – the company listens to its community and uses this as a way of creating saleable products.


Changing channels

What do these developments mean for the retailer? In short, they represent new opportunities to take customers on a journey.  By going beyond traditional ‘bricks-and-mortar’ methods, retailers have an opportunity to complement their existing promotional methods and keep their brands in the customer’s consciousness.

Put another way, this approach affords retailers new ways of maintaining a relationship with their customers.

Customers want multiple ways in which they can become aware of, and interact with, retailers. Going beyond the traditional website, these additional methods can be used to attract

new customers and reinforce messages to existing customers, encouraging them to buy on-line or to visit premises. Given the demographics of these services – many of which are popular with the so-called Gen Y – they provide ways of either targeting a new customer base or, at the very least, not being left behind your competitors.

And, it goes beyond promoting products and services too. Air New Zealand, for example, has been very successful at using multi-channel methods – including YouTube videos and other social media – to create new levels of intimacy with their customer base by, extending their overall brand experience to other media and form factors.

“If you’re not going to seriously invest in building and maintaining an effective on-line presence, you run the risk of damaging the value of your brand,” says my colleague, Giles Brown, web strategist at Intergen. “Now, more than ever, it’s vital to be open, honest and transparent with your customers – don’t speak ‘marketese’, open up a genuine dialogue.”


Adding more channels

What can you do to take advantage of these additional opportunities to raise your profile and interact with your customers?

There are a number of key questions to consider:

  • Who are my customers and how would they expect to interact with me?
  • How can I maintain my brand and reputation by using these services?
  • How can I drive footfall in my traditional bricks-and-mortar store when introducing a web channel?
  • How do I manage a web channel consumer that knows more about my product features than my store staff do?

Retailers are facing changing times, and many need to consider how they adapt to meet the needs of the new, informed, consumer.

Technology is increasingly challenging the status quo of the traditional retail experience. Customers now have the ability to make their own informed purchasing decisions, and  expect to maintain a relationship with brands whenever and wherever they like. Retailers need to understand these channels and react accordingly.

Whilst the transition into convergence channel shopping won’t happen overnight, the movement is apparent now and is growing in importance. Thankfully, any efforts made don’t need to be complex or complete from the start; taking basic steps towards aligning channels can reap instant benefits.

New Zealand’s retailers need to think about how they can engage with their customers and take them on a journey that is not only created with them, but more importantly is created for them.


Daniel Munns is leader of the retail industry team at Intergen. This article first appeared in the November 2010 issue of New Zealand Retail magazine.

Posted by: Daniel Munns, Retail Specialist | 07 December 2010

Tags: online retail channels, Retail trends

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