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Commercial Intimacy

The two faces of retail

Martin Grant February 2010

Why should bricks and mortar retailers bother about convergence?

Retail in New Zealand is highly competitive, largely undifferentiated and margin ‘risky’. The time is right for getting ahead of the pack.

Power into the hands of customers

It’s not surprising most New Zealand retailers are traditionally cautious and have ‘gorse pockets’, i.e. a reluctance to spend cash. The world financial meltdown hasn’t helped either. But now it’s February 2010, some green shoots are still present, and it is a prime time to value innovate and get a jump on the competition. According to Retail Forward*, the evolution of creating value in retail is efficiency, then intelligence, and then intimacy. Value innovation around customer intimacy is “managing consumer relationships by ‘customerizing’ the interface and interaction with individual consumers”. In simple terms that means putting the power in the hands of your customers to shop how and when they like. Do that and they will reward you handsomely.

If New Zealand retail businesses opened their eyes and ears to their customers they’d see a major strategic innovation opportunity to deliver greater customer value right in front of them. This opportunity has been created by covergence and is called (by the IBM Institute for Business Value) Integrated Multi Channel Retailing (IMCR), i.e. integrating on and offline channels as if they are from one business. In their book (Strategic Innovation) messers Govindarajan and Trimble identified a ‘strategic innovation’ as a quantaum change with medium to high revenue potential that’s initiated by the business. This is exactly what becoming an IMCR-based business is all about.

Making the business case

The business case for making this a strategic initiative is very strong. A study by Forrester Research recently found that customers who shop across two different channels spend two to three times more than the single-channel consumer. A study, based on over 48 000 interviews of shoppers across channels found store shoppers who also buy online from the same retailer spend an average of US $600 more annually in-store than typical store shoppers of that retailer. IMCR it is not running two channels (online and offline) with two divisions internally, having a store locator online (which Yellow is better at anyway), putting your ads on the web, putting www message in ads or putting www messages in store.

Multichannel retailing

The ways retailers run an integrated multi-channel business is wide and varied, and depends to a large degree on whether they are coming at it from an online or offline stance. But the similarity is that they all cater to customers who are accustomed to mixing and matching whatever they feel like, for instance:

  • Accepting returns anywhere from anywhere
  • Accessing offline inventory stocks via online kiosks
  • Buying in one channel and getting the product via another
  • Using customer communities to manage inventory
  • Staff assisted sales at online kiosk
  • Using customer reviews at shelf level
  • E-coupons redeemable offline
  • Signing up in-store for email messages
  • Downloading product information offline onto your smart-phone (online)
  • Visual merchandising offline online clubs or registries
  • Txt alerts for curbside pick-up of online orders
  • Running gatherings offline for online communities

Assuming retailers have a desire for more customer value and higher returns, how do they go about it? In Target speak – “crawl, walk, run” or in IBM-speak “protect-evolve-transform”. Whichever language you speak the message is the same – insight applied, progressive, cautious, planned innovation, consistent operational delivery, an uninterrupted customer experience, co-ordination across touch-points and a totally engaged organisation. 

It's time to be open to new thinking 

If you are in retail in New Zealand and your strategic plan is full of operational efficiency initiatives that are really just grasping at straws, you might want to be open to thinking about your customers and exploring the case for becoming an integrated multi channel retailer – before your competitor does.


*Thanks to Retail Forward, IBM Institute for Business Value,, Target, and McMillan Doolittle for various extracts for this article.


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