PEI: What do you mean by multichannel? Is it just about boosting online sales?
When I was at Hg, I started looking at online as a lever of value creation within retail, because at the time it was the fastest growing segment. I soon realised that it wasn’t just that people were buying more stuff online; they were completely changing the way they shopped. Online is not just a purchasing channel – it influences offline purchases too. For instance, the theory now is that over 60 percent of purchases are researched online before being bought in-store. So multichannel is about how online drives value for the rest of the business.
What would a best-in-class multichannel retailer look like?
The first step is to build a transactional website; these days 90 to 95 percent of retailers have that. The second is to optimize your site so it’s attracting enough traffic, converting visits in line with industry leaders, and so on; a lot of retailers are at this stage. The third is to start implementing some multichannel tools – like ‘click and collect’, or giving customers the ability to return items bought online in store.
The fourth step, which is the most difficult bit, is to achieve complete multichannel integration. That means effectively removing silos, so you don’t have a separate digital marketing team, for instance, or separate online warehousing. The entire organisation lives and breathes multichannel, and doesn’t differentiate between online and offline.
What’s the value proposition as far as private equity is concerned?
The first point is that as far as the customer is concerned, if you don’t offer these options, they may go elsewhere; but if you do, and you do them better than the competition, you’ll gain market share. Also, if you have an integrated multichannel strategy, it enables you to work with less physical space; for example, you might only display a certain amount of product in stores and have a much bigger range online.
It can also save staff time. Say you’re aretailer selling TVs; rather than spending half an hour in store telling a customer everything they need to know, they can have done that research online already. That saves you a lot of time and effort, and therefore money.
Equally, sending individual items to individual customers makes the economics of online retail quite difficult – but by allowing people to order online and collect in store, for example, you can reduce your costs drastically.
Then there’s international expansion, which is notoriously difficult in retail. Doing it online is easier and more cost effective, because you don’t need the physical presence.
So will this actually save money in the long run?
The good news is that you can go at it in stages – and it will always produce a return on investment at every stage. The tricky step to assess is the last one – complete integration – because nobody’s really there yet! But people will have to make that journey at some point, because ultimately it will become about survival. And if you do understand it now, you’re going to take market share at an unprecedented rate.
Understanding multichannel has allowed some niche retailers to storm through and start beating some of the giants, in a way we’ve never really seen before.