Last week, I read an article in Business Insider citing a study recently done by the Kellogg School of Management. The research focused on the popular “buy online, pick up in store” feature that has been adopted by so many retailers in recent years. Specifically, the study zeroed in on these questions: How does such a service impact sales in stores and online? How does it impact the company’s bottom line?
Before I go any further, it’s important to note that this particular study focused on the data of a single home furnishings retailer. Your actual mileage may vary, but the results might surprise you. Here’s what happened: the “buy online, pick up in store” option resulted in decreased e-commerce sales. Store sales increased. Overall, combining the two, sales and profits for the company increased. How so? As it turns out, customers used the ‘buy online, pick up in store” functionality on the website to check to see if the retailer had the item in stock at their local store. Instead of completing the transaction online, many customers instead chose to go to the store to purchase, and as you’d probably expect, once they were in the store, they spent more than originally planned. Implementing this service was clearly a win for the company, though the online channel saw a sales decline.
What strikes me about this research is that the results clearly illustrate the changes companies face as they transition from operating silo’ed store and e-commerce businesses to offering an integrated omni-channel experience.
Many of the companies that I have worked with in the last year or two are deeply immersed in large technology projects to centralize inventory visibility, integrate disparate sources of customer data and improve the speed and flexibility of fulfillment options. These capabilities are rapidly becoming tables stakes to meet growing customer expectations for a connected, continuous shopping experience. Too often, what lags in these organizations are the adjustments to internal processes, planning and incentives to reflect the changing role of the e-commerce team as these new capabilities come to life. E-commerce teams are growing up. They are now wearing many hats.
At most retailers, the online team got started by a few people who were curious and passionate. Someone at the top (a CEO or CMO) gave them a budget and some room to run, and for the most part, the e-commerce team flew under the radar. While that might seem like a crazy approach today, it was for good reason. The rest of the company didn’t need the distraction. No one knew if e-commerce was really going to work. The sales grew. The team and the budget got bigger. The recession hit. Retail growth stalled, but what little growth was happening was taking place online. Amazon, while always a gorilla, was suddenly taking serious share from just about everyone. Smart phones rapidly became the device that consumers couldn’t live without. Show-rooming and mobile commerce were born. At some point in all of this, retail leaders realized that the online channel was more than a rounding error. The e-commerce business was now too big to ignore, too big to fail and yes, too big to be a stand-alone division of the company.
Fast forward to today. The optics of the e-commerce team are now elevated, and they now face higher and different expectations. Their role has changed.
Think about this: chances are, you are now asking your online team to not only deliver a rock solid e-commerce shopping experience, but a host of other important things as well. You’re probably looking to the web team to drive store traffic via improved store locators, store inventory look up and more. Your e-commerce team is likely responsible for (or heavily involved in) your mobile strategy. When it comes to marketing, you’re probably looking to the online marketing team to support digital branding efforts, social media and other programs that have different success metrics than the tried and true digital direct marketing channels like SEM and affiliate programs. As you implement new omni-channel capabilities, like “buy online, pick up in store” or “ship from store”, your e-commerce team is often leading those programs or at least playing a major role in designing the online customer experiences to support them.
All of this means that your e-commerce team is likely now your “all things digital” team. Online sales are only a part of what they do, and in fact, some of the things you are asking them to do might bring less online sales, but success for the company overall.
If this is the case, ask yourself this: have you changed your internal planning, processes and incentive structure to appropriately reflect this shift? If not, you’re likely setting yourself up for some confusion and roadblocks in your quest for omni-channel excellence. Here are a few questions for the leadership team to consider:
- What role does the web/digital play in our overall strategy? Is this role universally known & communicated across the company?
- How do we measure the success of our website? Has this changed as we have worked towards a more integrated way of doing business?
- Do we involve the e-commerce team in our up front annual and seasonal planning efforts? Is there an integrated marketing and promotional calendar that covers all channels & touch points? Is the planning process collaborative and centered around clear and well aligned goals across working groups?
- How do the activities and responsibilities of the e-commerce team today compare to that of 3 years ago? Has our organizational design and incentive structure kept up with the changing expectations?
If you can’t answer all of these questions today, you’re not alone. Omni-channel is in it’s infancy, and it’s impact on retail organizations has not been fully realized. There is still much work to be done, but by working through these questions early in your journey, you’ll put yourself ahead of the curve, and position your e-commerce team to help lead you to success beyond online sales.