Retailers reveal need for channel diversification

Mobile Commerce (M-commerce) is the number one channel retailers expect to enter over the next three years.

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A report reveals that retailers see diversifying into multi-channel sales operations such as e-commerce and as critical to the sector's future. The report, from independent think tank FreshMinds, 'Multi-Channel Matters: A route to next generation retailing', has been commissioned by DHL Supply Chain. The study is based on extensive research carried out with 500 UK-based retailers plus in-depth analysis with senior professionals and academics within the sector.

Retailers increasingly recognise the necessity of a multi-channel strategy, with 69% already saying that having a multi-channel operation is 'very important' or 'essential' to their business and 25% of businesses considering the biggest growth opportunity for their organization to be establishing new channels to market. The report also confirms that e-commerce is set to stay on its growth trajectory with nearly two thirds (66%) of those surveyed stating they expect to either start or grow e-commerce sales via own-brand websites over the next three years. Furthermore, 32% of the companies surveyed expect to invest most heavily in the e-commerce channel over the next 12 months.

M-commerce was revealed as an emerging channel that retailers plan to enter, with 10% indicating intentions to start selling via mobile applications or devices over the next three years. As 90% of the population now owns a mobile phone, high street retailers such as Next, Warehouse and Barratts are leading the pack, creating mobile tools to allow consumers to access their products 24 hours a day.

Of those planning to enter or grow revenue from the M-commerce market, 35% state this is due to growing consumer demand for the channel while 28% believe using M-commerce positions them as an innovator. The 'bricks and mortar' channel will remain a significant component of a successful retail brand strategy as 48% of the retailers who consider high street channels an important growth area stated that they do so because it is good for their brand presence.

Such planned and intended investment into e-commerce and M-commerce shows that retailers are increasingly using multiple customer touch points, as sales in one channel can be driven by activity in another. The report finds that modern retail is characterized by consumers with high service expectations who demand an easy and convenient retail experience. They also expect to be able to interact with a brand across many channels and to receive a consistent service in each.

In attempting to meet this need for brand continuity across channels, many retailers have prioritized front-end services such as their websites. In total 45% identified ensuring brand continuity and marketing as the biggest challenges in operating a multi channel strategy.
However, the report also finds that, though it is crucial for retailers to ensure they get fulfillment processes right in order to deliver on the service promises of their new websites, many retailers are failing to do so.

For example, while 45% of retailers identify stock availability as the most serious issue they have faced over the past year, only 24% have most heavily invested in making improvements to stock control. Stock availability issues are exacerbated by a move into a multi-channel strategy as retailers report difficulties in deciding which channel to prioritize, and in balancing variable demand between the channels with the customer expectation for an identical service from all channels.

In contrast, 63% of retailers have most heavily invested in front-end processes over the past year (28% in store improvements, 19% in website usability and 16% in customer support services).

Overall consumer satisfaction is influenced by consumer opinions on a number of issues; 31% of retailers consider product choice to be the dominant influence on consumer opinion, 29% chose staff knowledge and advice and 22% chose website usability. Only 11% highlight accurate and on-time delivery.

The report finds that this focus on the 'front-end' is a risk for retailers as they are failing to deliver 'back-end' services that meet increasingly high consumer expectations for an easy and convenient retail experience.

As businesses seek increased diversification in their sales strategies and new avenues for revenue generation, retailers that focus on channel diversification without considering the implications for their back-end processes could seriously damage their overall brand and create a negative customer experience.

John Boulter, Managing Director of Non-Food Retail UK & Ireland at DHL Supply Chain, says: "Retailers must ensure they optimize the brand experience for their customers, so that not only are they able to interact with the brand through multiple channels, but they have a seamless retail experience, meaning the back-end processes are as tailored as front-end. Retailers must provide a consistent brand experience across all channel interactions.

"Companies are increasingly realizing that they must embrace new channels and drive sales through media that they previously might have seen as inapplicable or superfluous to their businesses, as well as maintaining the back-end operational side of the business. This report shows that the retail landscape is constantly shifting and will continue to evolve in the future, and retailers need to keep abreast of these changes and new demands to their business or risk becoming outdated in comparison to their competitors.''

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