Multichannel Retailing the future for New Zealand Retailers

Published NZ Business magazine Issue: April 2014

The New Zealand retail landscape continues to undergo dramatic change with a competitive environment that has New Zealand retailers concerned. New Zealand retailers need to move into a time of reinvention and evolution in order to remain competitive from international threats.

In 2012, PWC released a document on the Australian and New Zealand online shopping market clearly positioning New Zealand retailers behind the evolution.

New Zealand’s geographical isolation was one reason for the slow digital adoption. There was simply no pressure, threat or urgency.

To add more impact to this issue comes two statistics for 2012:

Total spend of New Zealand consumers on international websites $1.12 billion.

International website sales comprise 35% of total online purchases in New Zealand

“The New Zealand traditional retail operating model is now at a critical juncture. Retailers must adapt the current model if they are going to meet consumer demands.”

[Source: PWC/Frost & Sullivan, “Australian and New Zealand online shopping market and digital insights” July 2012]

The rest of the retail world continues to at an alarming rate. The attempt to grow/establish digital channels for New Zealand retailers has been average at best. Factors affecting the slow adoption of the digital channel for New Zealand retailers:

  • Low budget and resource allocation to digital channels.
  • The entrenched old school retail culture.
  • Entrenched long term relationships with service providers who have weak digital and experience and skills.
  • Legacy technology.
  • Weak positional power of digital staff.
  • Lack of experience and knowledge of internal digital staff.
  • Lack of preparation of CIO’s.

The result of this average effort? New Zealand retailers are losing market share to international retailers. How have the New Zealand retailers reacted to these threats?

[Source: NZ Herald, “Retailer blasts tax ‘failure’”, Dec 13th, 2013.]

This is the wrong approach.

The NZ Consumer is now in control

The NZ consumer is now completely in control of their own buying behaviour, information gathering, engagement, and socialising. The days of the retailers with the biggest marketing budgets winning market share are now over. The NZ consumer is now completely unimpressed with loud flashy expensive advertising. Today consumers want change.

"Established in 1906 used to be important. Now it's a liability."

[Source: Seth Godin's, "Tribes", 2008, Penguin Group, Book of the Year and NY Bestseller].

Example of how Consumer buying behaviour has changed

Google recently released a study showing two key findings over the last 12 months:

  1. The combination of three different digital marketing tactics has a greater influence in consumer buying behaviour than television commercials: Google Adwords, Google Display advertising, Email Marketing.
  2. 90% of all media is consumed on 4 screens: smartphone, tablet, PC, and TV.

[Source: Google, “Multiscreen World”, 2013]

International retailers recognise these consumer behaviour shifts and buying trends and develop their digital presentation to directly align to this new way of engaging with consumers.

New Zealand retailers need to embrace the power and control now in the hands of consumers and undertake a process of reinvention and evolution.

No organisation is too big and/or too bureaucratic for change. After 911, one of the most bureaucratic American organisations was forced into change...The Pentagon. “Senior Pentagon officials realised they were ill equipped in dealing with modern global threats.” They had to change. And so do New Zealand retailers.

[Source: Thomas Barnett, “The Pentagon’s New Map”, 2004, Berkley Publishing].

The New Philosophy

PWC states NZ retailers need to evolve into “Consumer Adaptive Retailing” which is to “supersede traditional approaches”.

This evolution of retailing is intended to deliver a “full retail experience” through the utilisation of , telling relevant brand and product stories. The consumer is placed in the middle of everything you (the retailer) do and your purpose is to simplify the consumer’s ability to find and interact with you whether it is to purchase, to communicate, to learn, or to engage. You need to be ready to respond in a relevant manner when consumers want to engage with you regardless of their location and device.

It is only when you (the retailer) develop this new retailing philosophy can you truly learn, understand and adapt to consumer needs.

“Multichannel” (also known as “Omni channel”) retailing is the approach that delivers this consumer-like cocooning.

Combatting International Threats

Multichannel retailing is the most effective approach to combat the growing threat of international retailers.

With the physical footprint of bricks and mortar locations, New Zealand retailers have a distinct advantage of international pure plays (digital only retailers).

Multichannel advantages:

  • Multiple options in which consumers can purchase.
  • Multiple options to increase the standard of customer service (i.e. phone call, Social tools, email, chat, physical location).
  • The ability to offer better returns and guarantee policies reducing the risk of purchase.
  • Greater opportunities to communicate the retailer/brand story or stories through localised content.
  • Gain insights into consumer needs, how they want to buy from you, talk to you, and have a long-term relationship with you.

The Multichannel Customer

Studies around the world have proven multichannel customers are more loyal and more profitable than single channel customers.

"Using various channels for transactions and engagement means customers can achieve their service output demand more easily. Multichannel shoppers choose the most appropriate and convenient channel for each transaction, using different channels at different times. This channel option provides additional value.
Single channel shoppers repeatedly use the same channel for each step. As a consequence they evaluate the retailers relationship and value based on this single channel and if it does not meet their demand at one time they quickly become dissatisfied and are more inclined to switch retailers."

[Source: Kumar, Reinartz, “Customer Relationship Management: Concept, Strategy, and Tools” 2012]

How is a multichannel customer more profitable?

When you adapt to consumer needs, this approach (when done right) builds brand advocates, or “fans”. Fans behave differently from a standard consumer:

  • A fan will cross the street and avoid your competitors to buy from you.
  • A fan will bring a friend (or friends) to engage with you and buy from you.
  • A fan will reply to you if you ask them questions.
  • A fan will tell you when he/she is unhappy with the way you are conducting yourself.
  • A fan will pay extra for special or limited editions of your product (s).
  • A fan will not comparison-shop because they trust you.
  • And most importantly, fans connect with fans to amplify your brand, and your brand message.

Studies have proven peer referrals are far more impactful in decision making than celebrity endorsements. Building this “fan” community becomes extremely profitable for New Zealand retailers.

[Source: Seth Godin's, "Tribes", 2008, Penguin Group, Book of the Year and NY Bestseller].

Pure play retailers recognise the positive impacts of to the extent of incorporating bricks and mortar strategies for themselves. (an international pure play retailer founded in Australia) has partnered with David Jones to deliver a Shoes of Prey concept store within their department stores.

[Source: Retail Biz, “Shoes of Prey, David Jones launch concept store”, 2013]

The power of Multichannel retailing, one example

OpinionLab’s Customer Feedback Index analyses millions of customers who shopped at hundreds of the world’s largest online brands and retailers. The purpose of this study was to gauge what consumers preferred more, the pure play or the .

One of many areas where the multichannel retailers scored higher was in shopping cart satisfaction.

This finding flies in the face of conventional wisdom. One would assume pure plays would be superior in the checkout process since they invented it. The multichannel retailers’ “offer of varying purchase and fulfillment options is more favourable than the pure plays singular online offer”: buy online, pickup in-store, and allowing in-store shoppers to make online purchases via tablets and kiosks.

[Multichannel Merchant, “Pure Play vs Omnichannel”, August, 2013.]

To end, it’s fitting the last word comes from Jodie Fox, Shoes of Prey co-founder, “We believe the future of retail is multichannel – it’s about being wherever your customer wants you to be in a relevant and valuable way.”

[Source: Retail Biz, “Shoes of Prey, David Jones launch concept store”, 2013]

The times they are changing. It’s your turn.

In the next issue, the focus will be on the hurdles New Zealand retailers face in their evolution to and how to overcome them.

This article was as tagged as Customer Service , Digital Strategy

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