Antiquated IT outmanoeuvres omnichannel for retailers

Outdated IT structures create the most challenges for retailers on their way to Omnichannel. This was clearly indicated based on surveying retailers in the Omnichannel Status Report 2016 compiled by Arvato in cooperation with Salesforce and the WHU – Otto Beisheim School of Management. In particular, corporate structures which are still vertically oriented need to be integrated accordingly with the widely spread, separated sales channels.

„Retailers are aware that their customers expect consistent offers across all channels from retail stores to Smartphones,” according to Marcus Karten, Vice President of Global Business Development & Solution Design of Arvato SCM Solutions – Consumer Products. „Hence, omnichannel is no longer a “nice-to-have,” rather a “must-have.” It is essential that all employees have access to the same system in order to reach customers across all channels.

Currently, many retailers are still operating with out-of-date IT structures, not even networked, and also only partially compatible with one another. Such fragmented systems rarely permit returning an item which was purchased online in a retail store, as it is simply a matter of different, independent databases. The majority surveyed are faced with the challenge of updating their IT for omnichannel. Not only is this time-consuming, but also often extremely costly. Essentially, retailers will gain ground by investing in performance-oriented databases, Webshops and analytics tools providing personalised customer contact.

Retailers linking channels

Most surveyed have already begun linking their channels. Several retailers offer cross-channel promotions and their customers can pick-up merchandise purchased online in a retail store („Click & Collect“). Furthermore, the merchandise offered for sale and their prices are consistently the same. However still uncommon are retail stores offering products which can be purchased online as per the principle of “endless aisle.” And, only a few retailers accept returns of items across all channels.

The survey participants are especially hoping for increased turnover to offset stagnating sales in retail stores though it is debatable if omnichannel customers can truly boost turnover in the short-term. Some of those surveyed support this theory, yet sceptics claim that Omnichannel users are, in any case, often loyal customers unlikely to significantly increase sales.

Even if the sceptics turned out to be correct, modern structures and procedures would ensure that a customer’s expectations are fulfilled, and their own brands empowered, leading to rising sales in the mid-term. Marcus Karten concludes the report’s results as „Retailers are convinced that it pays off to embark on the path to omnichannel despite all its challenges. Omnichannel organisations clearly have a competitive advantage compared to players with separated channels, due to combining the flexibility of e-commerce with personal contact in a retail store.”

Mandatory active change management

Alongside a modern IT and cross-channel sales strategy, vertical thinking which is still so prevalent in many corporations needs to be abandoned. This involves revising internal incentive schemes. Until recently, they have often only dealt with the turnover within individual sales channels. The retailers have recognized that these structures are antiquated; however amending them takes time. “When discussing omnichannel, most focus only on the technical side: How should the web shop look? What features does our app need to have? We have noticed from our participants’ responses that significant changes in organisational structures are a prerequisite. Many retailers are indeed aware of this, yet they drag their feet when it comes to change management,“ remarked Marcus Karten.

For the Omnichannel Report 2016, 20 managing directors from retail corporations from the fashion, beauty and FMCG industries took part in an online survey; 14 experienced retailers were interviewed by experts.

The report can be downloaded free of charge at www.scm.arvato.com/omnichannel-report.