Channelling your inner market leader

Omnichannel sales represent a consistent, integrated approach to managing all of your sales and information channels (a definition provided by PwC). By using the opportunities thus provided, retail chains can enter into a dialogue with their customers, form a coherent picture of the company, widen the area of its impact and change consumer habits. Omnichannel in this sense also applies to the various types of communication channels, such as social media, mailing, mobile devices and call centre contacts. For the purposes of this article, I will discuss only part of this broad topic, focusing on those aspects related to the activities of retail chains as tenants of shopping centres.

Systems govern sales

Omnichannel retail involves interactions between the operations of traditional stores and online sales, so that the customer can use both methods freely, without even sensing the difference between them, and combining them – for instance by picking up orders placed online in brick-and-mortar shops. Tenants of retail facilities are now learning how to handle the various types of sales tools better, which has definitely been having a positive impact on their financial results. However, in order for both forms of trade to have the desired effect, they have to be properly integrated. This is not so easy, considering the pitfalls that lurk even when introducing new solutions into a brick-and-mortar chain. Redan, and more precisely its discount division, TXM, has had some negative experience in this respect. In Q1 2017, the company incurred a loss of PLN 11.5 mln due to the poor implementation of the SAP goods management system (according to representatives of the chain). The goods went to the wrong shops and in the wrong quantity, which resulted in stock shortages and the opposite problem: overstocking in specific locations. “In particular, the process of receiving and dispatching goods from the warehouse and the interface between the central and the sales system in stores were impeded, which, on the one hand, prevented us from adequately stocking up the shops and, on the other, generated a large number of system errors,” explained Bogusz Kruszyński, the CEO of Redan group, in his summary of the company’s financial results. The company felt the impact of all this in Q2, resulting in H1 2017 losses of PLN 14.2 mln. Clearly, a retail chain needs to have its IT infrastructure functioning perfectly, whether this is its own or has been outsourced. Omnichannel sales come in a number of different varieties: the customer can order the goods online using a computer or smartphone and then pick them up at a selected brick-and-mortar shop or have a courier delivery them; they can also return or exchange goods previously ordered via the internet in a brick-and-mortar shop; they can make their purchases in the store and ask for a courier to deliver them to their homes... there are many options. But the important thing is to provide even more of them. And they all have to be efficiently run using IT systems. “With the omnichannel system, our client has the right and full freedom to combine sales channels for each purchase operation. This in turn requires that the chain moves smoothly between these channels without adversely affecting the customer. In order to minimise the delivery time for online orders, we have to be ready to deliver goods not from the warehouse, but from the shop located closest to the residence of our customer. This requires the full coordination of online orders with the stocks of brick-and-mortar stores,” explains Jacek Kujawa, the deputy CEO and IT director of LPP, which owns the Reserved, Cropp, Mohito, House and Sinsay brands. In order for this service to work well and fulfil its functions, the systems have to be accurate. The functioning of the order routing and system analysis are also important. “We have to make estimates on a regular basis when it comes to what should be sent and where from. We have to handle the so-called life stock accuracy, that is, the accuracy and certainty as to the quantity of goods in a given facility. One excellent method used in this field is the RFID – Radio Frequency Identification – system, which significantly improves the visibility of the inventory. We are currently working on this and plan to introduce it in the spring/summer 2019 season,” adds Jacek Kujawa. Last year LPP employed 250 programmers and invested PLN 60 mln in the development of e-commerce projects. The company is currently intensively engaged in the recruitment of more specialists from the IT sector and wants to have about 1,000 by the end of 2018. Arvato SCM Solutions is the company’s partner in the field of e-commerce logistics services. It is responsible for warehousing, assembly and packaging, courier delivery, handling returns and complaints as well as specialised services (repacking, labelling, plastic sheet replacement and quality control). Arvato uses SAP Poland’s system for all this. In contrast, LPP’s brick-and-mortar brands are supported independently using the PSI and WMS systems. All of this is managed by the Oracle Retail system. Effective IT systems have several other advantages that come in useful for omnichannel sales. The customer can check the online availability of goods in a given store. The system used by the Sephora chain works in this way. “The SAP system is a very helpful tool here. A major IT launch in the area of integrated cash registers and customer service lies ahead of us this year,” reveals Katarzyna Bielecka, the general director of Sephora in Poland.

Just as important

The core of omnichannel sales is the integration of all the different ways of reaching the customer. It does not have a preference for any of the sales formats. Its function is to ensure a coherent narrative for the brand, which should end with the purchase, whether in a physical or online shop. “Shopping decisions these days tend to be made slowly. Customers visit our online stores before deciding upon a purchase; they then compare the price offered against that of the competition. A visit to a brick-and-mortar shop is not itself tantamount to a successfully completed purchase. More important than this are the activities we undertake that help the customer to become acquainted with our range and make their purchases where they want. So our task is to enable this,” emphasises Jacek Kujawa. Retail chains have been striving to put both sales channels on an equal footing. CCC is launching an online shop, while others such as Eobuwie.pl are extending their online sales to brick-and-mortar stores. It would seem, therefore, that the death of traditional retail in physical shops has been exaggerated. “We have carried out surveys that show that customers are now choosing to shop in brick-and-mortar stores more often. Even when we gave out shopping vouchers that were designed to be easier to use with the online shop, a significant number of customers chose to use them in stores in shopping centres,” says Jacek Kujawa. Consumers’ attachment to traditional shopping is one of the factors that has led many chains operating solely on the internet to change tack. In order to entice this type of shopper, Eobuwie.pl has opened the first brick-and-mortar shop that combines on- and offline sales in the Magnolia Park shopping centre in Wrocław. The store has an area of 2,000 sqm, 300 sqm of which is the sales hall while the warehouse makes up the other 1,700 sqm. There are no goods in the store, even though it offers more than 100,000 products. It does, however, have 50 tablets. The customer can order their purchases on the tablets and be handed them in a maximum of three minutes, delivered straight from the warehouse located behind the cash desk. This is one of the boldest attempts to combine sales channels in Poland so far. If the idea is a success, the company intends to open more shops with a similar format, but no more than one store in each big city. They will also function as logistics mini-centres for their regions, offering same-day delivery service, as the store in Wrocław already does. “Our main aim is to reach the 80 pct of the population that still doesn’t buy their shoes and bags online. But we also have something to offer our existing internet customers. We can make their shopping in Wrocław even simpler and more pleasant because now they have the option of ordering products by phone, which they can do while having a coffee with their friends. They can reserve the goods and then come over to pick them up ready or try them on in the salon,” explains Marcin Grzymkowski, the CEO of Eobuwie.pl, about the benefits of the system. However, the company has not revealed which IT and logistics systems it uses.

The market trend is for retail chains to invest both in the development of e-commerce as well as the appearance of their brick-and-mortar premises, as they endeavour to balance the channels. Sephora launched its internet platform four years ago, but has also been taking care of the appearance of its perfumeries by introducing a new layout concept. “Thanks to the launch of our online sales in 2014 we have gained new customers, reaching places where we had not previously had a presence. The number of visits to our online perfumery is currently growing at a rate of 40 pct y-o-y,” claims Małgorzata Kwiecień, the senior digital manager at Sephora. The new layout concept for Sephora’s physical perfumeries was devised after consultations with younger consumers. “Research shows that we are the favourite brand of millennials and generation Z, who love new products and to experiment with new technology. Our priority in Poland is to look after our existing locations and the gradual introduction of the new concept, which we were able to reveal, for instance, in the Wroclavia mall when it opened in 2017, as well as in Serenada in Kraków and the Galaxy shopping centre in Szczecin. The changes include not only new visual elements, but also increasing the size of the perfumeries or relocations to new, more attractive areas in the mall. As a result we can offer our customers a more extensive portfolio of brands and innovative services,” adds Katarzyna Bielecka. Meanwhile, as it continues to build its traditional sales chain, Polish footwear giant CCC has at the same time been embracing online sales. Since autumn 2017 the company has been introducing a new format to its brick-and-mortar outlets, with more than 50 having now been refurbished along these lines. The new stores are large, generally around 1,000 sqm, while virtually all the goods are in the sales room and the cash desks are located at the end of the shop. Large glass displays with LED screens have been installed and wide entrances created to invite customers into the outlets. “The studies we have carried out reveal that the new concept encourages about 70 pct of our customers to enter the shop, whereas the old format only attracted 30 pct of the customers. We have obtained the same result when it comes to improving the organisation of the premises. The new appearance of the stores gives customers a better opportunity to assess the quality of the products we offer at the same time,” comments Daria Sulgostowska, the communications manager of CCC. Meanwhile, “CCC is preparing for the debut of its online shop. We want to launch it in the middle of this year,” she adds.

Improving the numbers

As the representatives of these chains emphasise, all these activities generate improved financial results. “The new concept has certainly enhanced the attractiveness of the perfumery in the eyes of customers and improved our financial results. All the stores we have opened or refurbished according to the new concept have turned out to be a success,” claims Katarzyna Bielecka. However, it is not always possible to precisely determine the effect that individual factors have on improving the sales figures. “It’s difficult to precisely measure the impact omnichannel has on the financial results of our stores. We are developing the internet channel, but at the same time we are introducing many improvements to our brick-and-mortar shops, hence the difficulty in determining what has actually been responsible for the increase in our turnover. The increased profits have certainly been at least partly due to the re-allocation management of our goods, which is crucial for omnichannel retail. Internet sales are also growing – doubling each year, in fact. In 2017 we generated revenue of PLN 365 mln from e-commerce and plan to achieve PLN 700 mln next year,” declares Jacek Kujawa. CCC also expects to see increased revenue from the renovation of its showrooms and the introduction of online sales. “In order to assess the difference in sales achieved using the old and new concepts, we need to have at least a full year of such operations behind us. We will keep on monitoring these results,” emphasises Daria Sulgostowska.

Omnichannel – how to do it?

Jadwiga Żurek, the sales director of Arvato SCM Solutions in Poland

A highly efficient omnichannel system removes barriers to the purchasing process and thanks to its analytical tools and access to the customer’s profile, helps to increase the value of the order – even through cross-selling. This is confirmed by Medallia Institute’s research, according to which multi-channel clients are buying 4 pct more in brick-and-mortar shops and as much as 10 pct more using online channels.

The omnichannel system is designed to provide buyers with consistent brand experience at the purchasing stage. It cannot, therefore, run the sales process itself, but can cover:

• managing customer relations (gathering information onto the CRM system about behaviour, preferences and purchasing history, supported by marketing analytics and data provided by the client itself, e.g. via questionnaires)
• loyalty programmes (not only to increase brand loyalty but also for collecting purchase data for all sales channels)
• customer service support for cross-channel sales (e.g. ordering a product online with collection in a brick-and-mortar shop)

Therefore, it is necessary to integrate the main system used by the company (e.g. ERP) with the e-commerce shopping platform, CRM system and PIM (Product Information Management). Furthermore, the entire integration process should be complemented by logistics processes that are subject to continuous modification at every stage – from the transportation, the storage in warehouses and distribution centres to the courier delivery.

The effective warehouse management of large chains that sell products in several hundred stores, using the e-commerce system and external portals, involves the need to implement advanced solutions.

The key challenges ahead for stores include:

• stock management for the e-commerce channel and brick-and-mortar shop chain. (Should you have one stock or two separate ones? Which goods should be permanently stored and which be stored seasonally?)
• management of e-commerce orders in terms of their payment status (including cross-border sales), the packaging method and the planned delivery date to the final recipient
• managing cooperation between couriers and forwarders
• data analysis and reporting that allows action to be taken aimed at optimising the work of the warehouse

Distribution and return management in omnichannel logistics.

The omnichannel system for large networks is characterised by three main types of delivery:

• B2B to points of sale (often in shopping centres)
• B2C to stores using the click & collect method
• B2C directly to customers via courier deliveries or to collection points (e.g. parcel pick-up stations)
• B2C with a pick-up point

The logistics operator, on the one hand, takes on difficult deliveries to shopping centres (morning and evening deliveries – before or after the centre opens, which must comply with the delivery schedule of the chain and should be synchronised with the other channels when new products are being introduced or a new collection premiered). On the other hand, it must be able to respond to the growing expectations of consumers, even in terms of the delivery times (click & collect, evening deliveries or same-day delivery). One big step towards meeting consumers’ needs is offering several different payment methods, e.g. payment by bank transfer, cash on delivery (CoD) and deferred payments. Omnichannel also means changes in how refunds and complaints through integrated channels are managed. And here the logistics operator has to implement the improvements that online shoppers expect. One of these is the possibility of making the complaint or return in a brick-and-mortar shop (according to research by GfK Polonia, 96 pct consumers expect this to be possible). The growing trend is to allow the return of goods to pick-up points, which is why efficient logistics for returns depends on their quantity.

How can omnichannel be improved?

According to research carried out by Walker, in the next few years (as early as 2020) the brand experience will have more importance for buyers than the price and the product itself. There are many ways to enhance the brand experience:

• Devising loyalty programmes and extending them to all channels. Once all the channels are integrated, the consumer has the opportunity to make any purchase decision without feeling they have lost out (such as in the case of a better offer from a single channel, e.g. a discount for ordering online)
• Personalisation due to the installation of beacons integrated with the mobile application. This method involves providing the seller with data on the purchase preferences of the customer entering the shop, thanks to which it can create an individual range of goods
• Improved payment systems, including instalment systems, deferred payments and money back when shopping online
• Investing in better customer service (technical support with access to the entire order data), as well as investing in a self-service and intuitive FAQ section. Along with embracing ideas for improvements directly from interested customers – e.g. crowd sourcing on social networks

Izabela Sekrecka

senior retail consultant, Cushman & Wakefield, Poland

Warehouses in shopping centres

The development of multi-channel sales will certainly result in an increase in tenants asking about the warehouse space in shopping centres in the future. However, at the moment we are not seeing too much interest from retail chains in this. These operators usually set up on the small spaces they initially lease and only later demand additional warehouse space due to a change in their sales strategy or in ‘hot seasons’, such as before Christmas, when they can expect a significant increase in sales. It is quite a convenient solution for the tenants of shopping centres to rent separate storage areas in the mall where they operate. The tenant does not have to invest in the expansion of its premises, while the financial terms for leasing such space are much more attractive. The rental of warehouse space can be done with an annexe to the lease contract for the retail premises or on the basis of a separate contract. Rents for warehouse space in shopping centres are at around EUR 5–10 per sqm. The fees for utility consumption on the premises should be added to this. At the moment, the owners of shopping centres usually provide storage space in less prominent zones that are difficult to lease out for retail operations, such as within the area of the underground car park. But soon owners may have to create additional space for warehousing needs, especially when the availability of this type of space becomes a major factor in the decisions of tenants to open in the shopping centre.

Witold Podgórski

product manager, Comarch ERP solutions

What can systems do?

Retail chains are currently taking the lead in the field of omnichannel sales. This is a response to the consumer expectations and requirements they have identified. Retailers now want the customer to have the same ordering, return or delivery options for each sales channel. Process automation is also important. For example: a customer makes a purchase transaction via an e-shop, paying by card or bank transfer and ordering the goods to be delivered to a brick-and -mortar point of sale. The system we offer verifies whether the order has been paid for and whether the product is in stock, and provided that these two conditions are met, issues the warehouse documents necessary for the shipment of the goods. Therefore, someone in the company’s headquarters sees the order completed and does not even have to accept it. This significantly reduces the shipping and delivery time. The advantage of systems for operating stores is that they can work without access to the internet. A retailer who does not have access to the internet at a certain moment can nevertheless take back the goods bought using another sales channel and a correction is automatically attached to the relevant document when the internet is available again.

Furthermore, apart from the systems installed in companies’ HQs – Comarch Retail and in our retail outlets Comarch Retail POS – we also use mobile apps. Comarch Moblie mPOS is an app designed for all the processes related to purchases by phone or tablet. It works using the Android system and is suitable for retail chains. For example, during times of increased customer traffic, they can be served by staff equipped with mobile devices. Receipts generated this way go to the headquarters, where the processes occurring in the shop can be monitored on an ongoing basis. The salesperson at the point of sale also has access to this document, so the goods purchased via mobiles are easily refundable or exchanged since all the documents related to the purchase are available at the various levels of the company. We will soon begin to offer retail chains apps for their customers, that is, an e-store on the phone. This will be a special application for purchases using the mobile system.