In my last post, I talked about how giving up some of the trappings of physical retail is not without its costs. This post is about the flip side of that coin – in a way.
What caught my eye was Wal-Mart's new facility allowing customers to pay cash for online purchases. The announcement (made a little over two months ago) comes with a twist unfamiliar to those Indians happy with cash on delivery – this one requires you to visit a Wal-Mart store to pay cash for what you bought on the Internet. After same-day pickups, this seems Wal-Marts latest attempt at that famous silver bullet that was supposed to defeat Amazon – multi-channel.
Online shopping is still a small percentage of worldwide retail, but it is expanding far faster than the boring brick kinds. Profits may not be stellar, but growth certainly is - Amazon is climbing the ladder faster than an MBA on steroids. And physical retailers are feeling – if not the heat, then at least the smell of smoke from the flames. After years of stumbling around, trying without much success to beat the virtuals at their own game, they are finally starting to define a new game.
The real multi-channel game.
(A little disclaimer here. Wal-Mart's cash attempt may well turn out to be a fizzy attempt and not, after all, that great new game. Its just what started my train of thought. Stay with me for a bit).
So many channels, so little choice
What is multi-channel?
The holy grail of this idea is for retailers to build relationships with customers through multiple different ways – so that you buy from Wal-Mart through whatever channel is convenient to you at that moment. Its easy to dream up innumerable possibilities, where all the channels interact with each other, allowing the customer to pick the any combination that works best for any particular situation. If you're on the couch, for instance, online probably works better. If you're going out anyway for a beer, it may be easier to pop into the store next door for your baby's nappies. Some products require research and are best done online, some require touch and feel and are best experienced in stores – most are some combination of both. Some things people are willing to wait for (and wouldn't you rather wait at home than at a long, brat-infested checkout); other needs, like toothpaste or toilet paper are more immediate and best bought on the way home. Multichannel promised to make all these different conveniences possible with the same retailer. Order online or off, pay online or off, pickup or deliver – anything you want. Wake up, its till a dream.
Retailers have trotted out multi-channel for years, every time anything riverine is mentioned. This, however, has been little more than lip service to prevent clicks felling the bricks. All the big boys launched e-commerce versions, but they were just clones of the original e-tailer (and at least in once case actually run by the original till wiser counsel prevailed). For a long while, the e-tail arm of a store remained a silo separate from the retail arm, meant magically to stem the tide, or somehow lure shoppers back into stores. Both, obviously, failed; ungrateful shoppers put their own convenience ahead of the retailers'.
The populace, meanwhile, figured their own multi-channel strategies out, combining online and off in ways that retailers do not necessarily benefit from. People often researching on Amazon to decide on the options, then go to a store to close the purchase. There's the opposite problem too – "showrooming", where people look at products in showrooms, only to go back home and look online for better deals.
Mobiles play a big role in this spontaneous multi-channeling. With smartphones, the Internet is no longer restricted to couches; you can scan barcodes, check prices and reviews online – all without leaving the comfort of your store. This does not always benefit e-tailers; prices may be higher online, or if the difference is small I'd rather check the reviews out and get instant gratification at the counter. Preventing it (Best Buy changes bar codes, Target stocks exclusives) may actually turn customers off – especially on electronics a certain amount of research is a must, and it seems a little silly to send me back to that dreaded couch when I'm already in your store.
Something old, something new
The problem with the old was, it wasn't really thought through - I want to say "holistically" here. The new wave of initiatives are smarter; instead of reacting to some unbricked adversary, the latest attempts use a store's virtual and physical presence to make the customer's overall experience better. Retail isn't about bricks or clicks, its about persuading customers to buy and making it convenient for them to act; that's what the focus has finally moved to.
Cash for online purchases makes online shopping available to unbanked or underbanked shoppers – of which there are plenty in the USA. Its a multi-channel experience, since you combine store visits with online purchases and home delivery. Its about making life easier for the unbanked, not somehow fooling them into walking into a store - indeed the counters are set up some distance away from the regular aisles. So far, the initiative (a first in the USA) seems to have succeeded though a definitive answer will have to wait. Interestingly, Wal-Mart tells us some 40% of the people coming to pay end up using a credit card or something other than cash – they're just not comfortable using it online for fear of identity theft. In India, the impetus for COD is somewhat similar.
Take the first round of in-store pickup initiatives. The initial impetus was again a desperate measure to persuade online shoppers off their couches and into the stores; customers didn't quite see the point. Finally someone thought through the experience and made store pickup a cheaper and faster way for shoppers to get their products – and it worked. More than 50% of Walmart.com's purchases are now picked up in-store, and in a large number of cases retailers offer same day pick-up (or even faster). Instead of doing something that was good for the retailer (get couch potatoes into stores) the program started doing something good for shopper (no waiting for delivery, no missed-you notes). Forget going into stores - car crazy USA even has drive-in pickups and kerbside delivery, in case you don't want to get out of your fully accessorized motor vehicle.
Circuit City, helped by Indian-origin product company Yantra, was one of the pioneers of this (it did prolong but could not prevent their eventual demise). Circuit City had in-store pickup, in-store inventory check (so that you could go to the correct store for what you wanted) and even same-day delivery (their famous 24/24 guarantee – pickup in 24 minutes or get $24 back). Best Buy followed, and then so did Container Store and many others. Barnes & Noble offers same day delivery in Manhattan. Tesco's uses their ubiquitous presence in England to offer same-day pickup. In all cases, the ability to allow shoppers to see which store carried the product they wanted is a crucial element, and one that requires some fancy tech dancing to enable.
Keeping it real
I think of these initiatives as real multichannel, because in-store pickups, cash at the counter and same day delivery all combine more than one channel to provide distinct benefits to shoppers, and are at the moment out of the reach of pure-play e-tailers (do, however, take a look at PayNearMe).
This kind of stuff isn't easy to do at all – fancy technology, brand new methods, processes, thinking all go in. I've argued earlier about separate supply chains for e-tail arms of retailers, and this isn't a change of tone. For those 24/24 guarantee deliveries Circuit City wasn't just picking things off the shelves like people imagine – they had a parallel setup – staff, inventory, pickup areas, even trucking; it was more like a separate e-tailer sharing the same premises. Tesco's, Wal-Mart, Sears, Best Buy, all have similar parallel operations.
How much does it threaten Amazon and its kin? I suspect, not much. Pure couch shopping will co-exist with store visits, each catering to a different set of customer convenience choices. The me-toos fell in between, and hence struggled to inglorious deaths, but the new wave will cement retailers positions, while leaving enough room for the pure potatoes to thrive. And, of course, there's the pure digital stuff – movies, music, ebooks, all of which have neither kerbside nor drive-through.
Real multichannel – coming soon to a store near you.
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