Retailing in the modern age

Australia’s retail sector is often characterised as a battle between slow-moving traditional bricks-and-mortar retailers and the nimble online upstarts chipping away at their market share.

Online retail has delivered the greatest shake-up to traditional retailing since the invention of currency.

But as the two models evolve it is becoming clear that they will have more in common than anyone might have thought possible, especially as each keeps borrowing ideas pioneered and perfected by the other. Many of these efforts revolve around retailers striving to overcome the limitations of their model, habitually by taking inspiration from the other.

According to the head of the National Online Retailers Association Paul Greenberg, himself the former head of online retailer the DealsDirect Group, the lines between online and offline retail are blurring quickly, especially as many retailers explore ‘omni-channel’ strategies incorporating web, mobile and social media in additional to physical retail and direct marketing.

“A lot of the current exciting initiatives seem to be happening in the so-called offline space, where there is a lot of borrowing,” Greenberg says.

For example, the tracking of customer behaviour that has been a hallmark of online retailing is becoming more prominent in the thinking of traditional retailers.

“In online, tracking customers has been going on for a long time – I guess that just naturally flowed into the offline environment,” Greenberg says. “Some of the interesting technology we are seeing are things like facial recognition, so identifying customers as they come into the store.”

While no retailers are willing to discuss facial recognition today – at least not publicly – there is nonetheless a flurry of innovation and activity happening across the sector. For consumers, Greenberg says the result should be a shopping experience that is more personalised to their specific likes and interests.

“The difference between the greengrocer who knew all his customers personally s this can now be done at scale thanks to digital and big data,” he says.

Gathering and separating the herd

Online retailers gather huge amounts of data on visiting customers, such as what they have looked at, and for how long. This data bounty is more difficult for an offline retailer to gather, which has fuelled interest among many in developing omni-channels strategies, where data can be gathered.

At Myer, this strategy is tied together through the Myer One loyalty card. According to the department store’s general manager for information technology, Anthony Coelho, the goal is to provide a consistent experience to shoppers regardless of which channel that experience starts with. This also means gaining a single view of each customer, rather than regarding each transaction across different channels as a discrete customer.

“Just like we want one view of the customer, we want the customer to have one view of Myer as a brand,” Coelho says. “And whether that is in store, whether that is online or through our customer service centre, we make sure that whatever services we provide are done in an integrated fashion so customers don’t see a differentiation across those channels.”

Critical to this is a new order management system, which Coelho expects will come online later this year and will give customers new options for how they can place orders and have them fulfilled, both in store and out.

This integrates with its Retek merchandising system, as well as a new $100 million point-of-sale system that has already delivered new flexibility in store. It has also facilitated a partnership with the Commonwealth Bank of Australia, whereby its customers can complete a transaction within Myer by redeeming their bank rewards points.

Together with the loyalty program, Coelho says these new initiatives will deliver full transparency to Myer management across all stores regarding stock movement and customer activity. “Traditionally you would rely on a method like stock take to give you that kind of data and understanding of what’s happening,” Coelho says.

“Our investment into our merchandising system has given us that visibility of what’s happening in terms of our stock levels and being able to react to our customers’ needs.”

Appliance retailer, Winning Group, is also pursuing an omni-channel strategy through its nine appliance showrooms in NSW and Queensland and its Appliances Online website. Chief technology officer, Simon Smith, says the two brands are vastly different and provide different experiences but are united through use of a common commerce platform from US developer, Hybris.

“We are definitely looking to standardise and get the best of both channels,” Smith says. “But we need to ensure that the brands do stay separate, and leverage what we can as a core.”

One of the possibilities of Hybris is to mobilise the point-of-sale experience within Winning Group’s physical stores. The old model of sales staff taking prospective customers back to queue up at a point-of-sale desk could give way to a mobile experience where staff can stay alongside customers throughout the entire sales cycle.

“Ultimately we could deploy tablets to the sales people so they are not tethered to the desk while customers are roaming around the store,” Smith explains. “The sales people will be able to go up to customers and answer their questions.”

The ability to shadow a customer and assist them through the sales process is something online retailers have struggled with. Where a physical interception may be impossible however, a virtual one is becoming more common.

Many online retailers now offer live chat facilities, where a shopper can engage in a text-based question-and-answer session with a staff member. Smith says he is keen to investigate taking this one step further and having staff instigate conversations and offer help when they think a customer needs it.

“It should be like people have been reading their mind, without being Big Brother,” Smith says. “People say they don’t want to be monitored, but they are expecting that experience and expecting information straight away.”

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Reading shoppers’ minds

Knowing what customers want is one area where smart online retailers excel. The director of technology at $250 million online electronics retailer Kogan, Goran Stefkovski, says smart analysis of data can lead to a personalised experience for shoppers and is one of the key advantages his company has over bricks-and-mortar retailers.

“Bricks and mortar people can follow customers around, but in an online store we can make our store look different to every single customer,” Stefkovski says.

Kogan analyses what customer are looking at in real time to suggest additional products or accessories. The goal is to keep putting appropriate products in front of a customer, allowing them to passively browse until something catches their eye.

Personalisation is also a key component of the online experience of vitamin retail, Aus Natural Care. The company has operated for 24 years as one of Australia’s largest direct marketers of vitamins to older Australians, but six months ago launched a new website to capture a younger audience.

Since joining the company over a year ago, ecommerce general manager, Maurice Cicero, has pondered how to use the company’s vast volumes of existing data “Being 24 years old, the business had an insane amount of data that had collected over the years,” Cicero says.

“Data interrogation and data analysis was taking place, but it was cumbersome and it was painful.

“We were struggling – we had 10 different data sources around the place. Getting some data was difficult and you never got the same result twice.”

Cicero sponsored a data hygiene program and implemented a data warehouse to deliver a single point of truth for the company's data. Once that was delivered, Aus Natural Care turned to SAS to deliver capabilities in analysis and the interrogation of that data.

Cicero says one of the greatest advantages now gained is the ability to see patterns in the data, such as what did different buyers do as a group and how they navigate through the portfolio.

“We’ve been able to identify product sets and identify paths within our portfolio, and we are using that very smartly to put forward better targeted offers,” Cicero says. “We’ve also identified some not so good patterns. We have identified some attrition causes and acted on a couple of those already.”

Subsequent developments will include scenario modelling, to start predicting customer behaviour. “That’s something that we want to do, but we haven’t got around to it yet,” Cicero says.

Winning Group is also collecting data across multiple channels including its call centre, Internet and social media, and internal systems such as traffic counters within stores. Smith says visitors to Appliances Online see a different view of the product range based on what is known about them. Increasingly this is becoming a real-time phenomenon thanks to the Hybris implementation.

“We are collecting all this data and using it for a number of different things across the business, from inventory planning to price analysis to customer marketing,” Smith says. “We are assessing customer behaviour and third party trends that can have an influence on what gets presented to the customer.

“We are bringing new sources of data all the time and trying different things.”

Merging the CMO and CIO: Retail views

In January last year, Gartner predicted that chief marketing officers would outspend chief information officers for IT by 2017. In retail however an alternative possibility is emerging – that the CIO and CMO roles will come closer, and possibly even merge.

That outcome has already taken place at the online furniture retailer Milan Direct, where Cameron Matthies holds the dual role of technology and marketing manager. He says the two functions go hand-in-hand, as the heavy reliance on technology such as Google’s ranking algorithm are essential to the company’s marketing.

For example, Matthies says a higher Google ranking is partially dependent on the speed at which your website responds. Hence achieving a better online marketing outcome requires technical knowledge.

“Having an understanding of that and being able to improve on those things is a big help,” he says. “For an online retailer it is very important for the people in charge of technology to have an understanding of marketing, and also for the marketing people to have an understanding of technology.”

Use of Google analytics also enables Milan Direct to quickly respond to changing consumer trends. “Because the information stays with me, I can adjust campaigns and instruct people to make changes on the website depending on the trends we actually see,” Matthies says.

Even at a traditional retailer such as Myer, general manager for information technology Anthony Coelho can see the two groups coming closer together. “These things are always an evolving journey, but what's always at the forefront of the discussions that we have internally is certainly how we can better service the customer, and ultimately what the customer wants,” Coelho says.

For Milan Direct however, getting the best outcome will definitely mean bringing technology and marketing together. “There are varying interests in technology areas on the horizon that are really going to change the way marketing is done,” Matthies says.