Omnichannel Summit 2016
December 5, 2016,
By Allison Zisko
Stores Vital to Omnichannel Success
“There is a direct inverse relationship between e-commerce penetration and EBIDTA sales,” said Karabus, who also noted that retailers’ physical stores have typically borne the cost burden of omnichannel selling. He said when he asks retailers about their cannibalization rate, “nobody knows.”
Meanwhile, e-commerce pure plays are winning market share but not making much money, he said. The e-commerce growth rate began slowing about a year ago, and while that maturity curve has not impacted the home furnishings industry yet, it inevitably will.
Karabus urged retailers to invest in their most important stores. Consumers need to touch and feel merchandise, he said, and they still like to shop.
“Stores are a huge advantage. There’s no doubt ... You can’t put 85 percent of your capital to what’s generating 8 percent of your sales,” he said, referring to the focus shift to e-commerce. “Even if that 8 percent is growing at 15 or 20 percent, and your stores are growing at a negative [rate], your store will still be making most of your profit.”
Selecting the most effective omnichannel strategies is important. “Pick your most important capability that your customer wants because maybe of five capabilities they only want two. Maybe for your business you need two. Maybe that person sitting next to you needs a different two. But don’t try to do them all because it’s a waste of time. Pick the ones that are most important to your customer.”
Karabus also urged the audience to develop realistic financial growth assumptions (consumers only have a finite amount of money to spend), to consider incremental growth versus cannibalization (although it is better to cannibalize yourself than have a pure play cannibalize you), and to prioritize operating and capital expenditures. Entire cost infrastructures should be examined “with a scalpel, not a blunt instrument.”
Finally, retailers must decide exactly how much they want to offer free shipping, free returns and price-matching policies. “Amazon has forced free returns, free shipping down everybody’s throat,” but they’re funding it with over $6 billion a year raised in Prime memberships, Karabus said, noting that nothing is really ever free.
He stressed that pure play retailers are essential to the retail landscape because they raise the bar for everyone. “The Wayfairs and Amazons are necessary. They provide a different experience and they will help to push the envelope for everybody else, because efficiency is a good thing.”
Retailers with physical stores have a direct relationship with their customers, Karabus said. “Retail is not dead and will never, ever be dead because people love going to stores.”
Divergent Omnichannel Strategies
Pier 1 suspended its e-commerce business in 2006 when it was struggling financially and relaunched it in 2009. Stacey Renfro, senior vice president of e-commerce, credited the success of the relaunch to an organizational structure that cross-pollinates digital talent across all departments and a system in which buyers purchase for all channels. The e-commerce division reports directly to the CEO so that it does not become the “tail of the dog.”
Store associates are credited with sales regardless of channel, which invests them in the business, Renfro said. One consistent product merchandising vision is offered across all touchpoints, including mailers, postcards for credit card holders, the home page of the website and in-store displays.
“By consistency, I don’t necessarily mean the same,” Renfro said. “The way that a customer interacts with you in print is different than how she interacts with you digitally.”
Like Pier 1, Nordstrom rallies around a unified vision of “one Nordstrom” that encompasses Nordstrom stores, Nordstrom.com, Nordstrom Rack and HauteLook. Each has it own point of view, said Kecia Hielscher, vice president and executive merchandise manager for accessories, home and beauty for Nordstromrack.com and HauteLook. The unified approach lets customers shop various platforms with one click and introduces its brands to new customers.
The goal is to get its customers to shop full price, Hielscher said. “Then we want to engage her. We want to get her from all those channels; she can shop any of them, she can shop one.”
Enabling consumers to buy on any platform and return goods to its stores enhances customer service and often leads to additional purchases once the customer is in the store, she noted.
Home furnishings online pure play Cymax also serves as a logistics platform, said Arash Fasihi, founder and CEO of the Canada-based company. Data is key to a successful online business, he said.
“The data that every one of you have through your analytic server or search [is] the most important thing that you can start using,” he told attendees.
Information gained through analytical tools such as Google must then be reviewed to see how it impacts profits and loss in terms of spending on ads, social media and more. “Freight is one the major costs that we have,” Fasihi said. “Marketing is the second biggest line item in the P & L. And trying to optimize using the data to get to those numbers was critical.”-Allison Zisko