Changing Channels

Multi-channel – store, phone, online, mail-order - is finally maturing. For the longest time, retailers promised and customers expected this muti-headed hydra of a retailer present seamlessly across every channel, moving between channels with similar lack of seam, permitting mix & match of all kinds. For the longest time, reality was disappointingly different.

Retailers spent the last decade launching anaemic web stores; proudly announcing that they were multi-channel and hence so much better than pure-play e-retailers. Unfortunately those feeble attempts remained the stuff of boardroom backslapping and upbeat press conferences - neither actual shoppers nor pure play e-tailers took much notice. Staples, John Lewis and a few others remained rare exceptions.

What took so much time? Retailers aren't exactly clueless idiots, why didn't this get figured out a long time ago? Futurebazaar was exactly such an attempt; indeed many customers assumed automatically that we were multichannel and land up at a store asking for online or called us asking for store info. Yet for all that goodwill we didn't quite succeed. Let me try and describe what the complications were.

What's in a name?

The first thing that comes to mind when one hears multi-channel is that all (or at least most) products available on any one channel should be available on other channels too. This expectation turns out to be ridiculously hard to meet. The core of the issue is product metadata – information such as pictures, description, sizes, etc. Traditional retail will call a product (say) "40CTWHTFS" – only a merchandizer knows that this is a 40" cotton white full sleeve shirt. Store shoppers don't need barcode labels to know that the shirt is white, but go multichannel and a proper product name is gold. Stores, similarly, do not need pictures or specsheets. Apparel is the greatest challenge – there are more variants of T-Shirts than scientists chasing the Higgs boson.

A key step to multi-channel is an integrated product master. Early in my stint at Futurebazaar, I met Staples and saw the efforts they had put in to make this possible, and they dealt with a mere 20,000 products or so. Future Group had over 500,000 products across all formats, not even counting food – we got somewhere, but the road was hard and very, very long.

Availability

Once you have the data, you can create the listing but to make it available for sale requires another step – deliverability. This leads us to two questions – is the product available, and can it be shipped? Retail chains often have good ERP systems, and one would think the first question is easy to answer, but as usual life is more difficult than it seems. Retail is the king of the bulk supply chain, but will often not track individual variants – you may know how many of some model of clock is in stock but have no idea how many of those are a particular colour. Many products, further, are delivered direct to store from supplier – there you need hooks into the supplier's inventory. Finally, you might not have a good idea of how many pieces in the inventory are unsold – most stores update inventory information only at the end of the day.

Deliverability is another issue; the product may be in stock but the shopper needs a reliable shipping promise. Products further need to be packed into shipping friendly packaging; this takes staff, space, packing materials and the facility may not be available at every store. Multiple possible pickup locations, packing locations, consolidations, inventory movements – the large number of variables make deliverability a huge challenge. Contrast this with a pure e-tailer, who's probably relaxing on the sofa with stock only in one or two centralised, custom-built, heavily automated warehouses.

Instore and Out

Most shoppers, we saw in Futurebazaar, do not respect the boundaries between online and off. For them, multichannel a single company with multiple channels, not multiple sunsidiaries  one per channel. This shows up in behaviour like returns – they want to return goods bought online to the nearest store (in an environment where we don't even allow return of goods bought in another store). They want instant inventory checks across channels, prices and promotions to match, inventory to move from here to there. They want to pay anywhere and pick up anywhere else. Worse, they get frustrated when they cannot get it, and turn back to pure-play e-tail with its simpler promise.

Retailers have never faced customers with so much imagination. Banks have barely adopted anywhere banking; this surge of customers demanding anywhere retail is quite unnerving. And customers are demanding – Staples, Wal-Mart, Best Buy all have success stories around this. The problem isn't demand, its cost-effective execution. Retailers have become very good at the existing supply chains; they find it hard to accommodate all these new demands. Stores (especially stores in India) have no space to designate for packing and shipping products bought online. They also need to clear out some aisles to put in kiosks.

Headbangers ball

The real challenge was getting the various divisions of the retail company to participate. Multichannel only works if the traditional channels participate as enthusiastically as the new ones, but sometimes it becomes a case of the ant irritating the elephant. The new channels generate small revenues relative to the established ones while demanding a lot of time and attention – this often creates a lot of friction and requires some headbanging to align interests.

The core issue: the head of the multi-channel initiative is rarely powerful enough in the organization to do this headbanging. I may have been a CEO with a loud voice, but the big boys at Big Bazaar often heard just a whiny, reedy-voiced baby. The department heads of the traditional side do not like being told by the new cool kid that things have to change. Merchandizers, suppliers, logistics people are all amused at the fancy new multi-channel's sales volumes – even Jhumritalayia store does more, you're told sniffily. The result is often an uneven, disconnected experience – some parts of the organization help out, some are more reluctant. Eventually, shoppers get tired of waiting.

The DNA catch

If multichannel is to work, the entire company must be willing to wade into deep waters. Multi-channel isn't another initiative; its an evolution of the entire retail model. This key idea (fashionable to call it DNA) must flow through the entire organization and everything must start becoming multi-channel. Create a multi-channel initiative and you'll either get confusion or a dotcom me-too with few of those promised synergies. Create a multi-channel culture, and you might just start worrying an Amazon.