Do you remember when “unbundling” hit the travel sector? Popularised, maybe even invented, by the likes of Expedia and lastminute.com, the internet allowed customers to create their own ‘custom’ travel experience by breaking down the components, like flights, hotels, car hire and so on, into discrete elements which the customer then configured.
I think the same is happening to the retail shopping experience. And, if I’m right, there are some very considerable implications for retailers and those that play in the retail chain.
Chris Roe, now at Virgin Holidays, claimed to have invented “unbundling” whilst at Expedia many moons ago. This concept is now pretty standard and accepted in the travel sector, but I think we’re going to see it happen increasingly in the retail sector. Except it is perhaps more complicated and nuanced in retail because of the greater offline (store) experience and the whole logistics, warehousing, returns, delivery, packaging etc. complexities.
You can look at the customer buying process in a number of ways. McKinsey have this nifty application trying to explain the consumer decision journey and Dr Mike Baxter depicts and explains it excellently in his Online Retail: Checkout Special guide written for Econsultancy in the “In the Mind of the Customer” chapter.
It’s not rocket science. You can depict it how you will, or describe it how you will, but, broadly-speaking, most of us when buying something will go through the following stages:
- (I assume the ‘desire’ or ‘attention’ or ‘intent’ part of the process i.e. you already know you want something.)
- Research: this clearly happens both online and offline.
- Purchase: this clearly also happens both online and offline.
- Delivery: assuming we’re talking about a physical product this can only happen offline.
- Service / Support: this happens both online and offline.
Of course, in simpler times, it was quite typical for all these things to happen through one retailer. You’d go along to John Lewis, talk to the awfully well brought up young man about TVs, buy it, pick it up later from the Customer Collection Point, take it home, and, if it went wrong, get the nice people from John Lewis to come out and fix it.
Then came the internet.
And, before you knew it, your competition were positively encouraging your customers to abuse this process by taking all the lovely (= expensive) in-store advice from said awfully well brought up young man but then to go online to get it cheaper:
So already the Research and Purchase phases are very deliberately being broken apart.
This behaviour is clearly nothing new. People research online and buy offline. They research offline and then buy online. And in both cases the brands and retailers are likely to vary. And in both cases satisfaction with the experience impacts repeat purchase likelihood across all channels (see ForeSee Reults E-Retail Satisfaction Index among others for data on this).
But things are getting more complicated and more multi-channel.
For example, the purchase component itself perhaps isn’t quite as straight forward as it seems. What if the purchase experience isn’t actually “owned” entirely by the retailer? Look at iTunes, look at Amazon, look at PayPal, look at Google Checkout, look at O2 Money, look at… you get the point. If big players aren’t clearly squaring up in an attempt to try and ‘own your wallet’ or become your default ‘billing platform’ then I’ll eat my hat. They have to. They know how much is at stake.
[UPDATE on 15 Feb 2010: if you’re not offended by strong language have a read of Dave McClure’s “Subscriptions are the New BLACK. (+ why Facebook, Google, & Apple will own your wallet by 2015)” Assertion #3 near the end which very much follows my own argument here.]
But if even this small piece of the puzzle is true, what does this mean for retailers? It means they might not ‘own their customers’ quite as much as they would like. Can you seriously imagine the likes of Tesco or Wal-Mart allowing everything bought from them to go through someone else’s virtual tills? And, horror, that their fabled customer data and customer insight, including all transaction data across all purchases, would slowly migrate to someone else? It might happen.
At a dinner I was at recently the Chairman of a large multi-channel retailer, when asked to name his top two competitors going forwards, answered ‘Google… then Amazon’. Smart chap.
But the transaction is just the start. What about the delivery and service elements of the shopping experience which we know to be extremely important to ‘online’ shoppers.
Have you got Amazon Prime? I finally succumbed and paid up for it last year. And it is awesome. That is some logistics machine. The closest anyone else gets are the large supermarkets. In the US, and inside the M25 in the UK, you can buy something from Amazon and it is delivered to you the same day.
So I’m thinking… maybe I can research online, go in store to touch and feel, but buy via Amazon so they can deliver it to me for free later that day. Because, you know, I can’t really be bothered to fetch my new mega-sized TV from the collection point, carry it to the car, into the house etc.
A friend of mine went to the new Westfield Shopping Centre in London to do his Christmas shopping. He went round all the various shops, talking to all the nice sales people, and used his Amazon iPhone app to compare prices for what he was looking at. He added everything he wanted to his wish list on his phone, saved £80 overall, and, at the end of the day, over a nice Latte in some café clicked the buy button on his phone and knew it would all arrive at his house the next day with delivery charge.
Every single transaction went to Amazon.
Think about it. How apocalyptically galling would that be to you as the store owner who’d paid for that space, those sales people, that stock?
He described how he took a picture of a childrens’ book in Waterstones and used his Amazon iPhone app to check for a lower price online (which he got). And you think Waterstones has problems now (which it does)? We ain’t seen nothing yet.
Service and Support
But wait. What about service and support?
You see, much as I love Amazon for the delivery component of the shopping experience, I don’t really trust them with the service component. With commodity items like CDs, sure I trust their excellent do-it-yourself returns process – a marvel in its own time no less. But a washing machine? What happens if that went wrong? Do Amazon even have real people to help me? Are there oompa-loompa-like Amazon service support people who magically appear? I don’t think so.
But John Lewis – now, they will not only deliver the washing machine and install it but also take away the old one. That’s very important in this particular shopping experience.
A computer on the other hand… I could get someone like Geek Squad to provide me with the support component couldn’t I? So I might research online, touch and feel in store, buy online using Google Checkout from a discount computer retailer, get Amazon to deliver and Geek Squad to support it? And all of that, apart from the store experience, I could do from my phone.
The prevailing wisdom at the moment is that, as a retailer, you need to offer your customers a multi-channel proposition. Allow them to flit between channels, online and offline, as they go through the shopping experience with you. Make sure everything is seamlessly integrated between the channels so the customer can ‘pick up’ where they left off across channels. Argos’ Check & Reserve and centralised single stock/inventory depletion across all channels is a good example.
But this assumes the customer actually wants to do all elements of the shopping experience with you?
Maybe my friend and I are highly unusual. Or maybe, increasingly, customers will mix and match as they unbundle, and reconfigure, their buying experience across the experience chain to suit them.
It brings up the question of core competencies across the value chain. Perhaps a fully integrated buying experience with a single retailer will become less and less common as customers atomise and reconfigure it according to the core competencies they trust at each stage?
And, if this is so, it means retailers will have to think much harder about what they are good at. And perhaps they’ll need to partner with erstwhile competitors in order to focus on what they’re good at but provide the best possible experience to customers?
Google are great at many things. Magnificent, in fact, at almost all they do. But customer service? I think they’re really falling down on that at the moment. And that won’t do as they become a retailer e.g. their Google hosted web store for their Nexus One phone. In my eyes Google are a very long way from winning my trust in having customer service and support as a core competence.
What about Apple? Sublime in so many multi-channel ways: those wireless in store devices which mean you can configure and pay for stuff so easily without ever having to queue. But delivery? And at-home support? Still not a patch on some of the supermarkets for most of that.
Implications for retailers?
If the above does indeed begin to happen more, how might retailers sensible react? A few initial thoughts:
- Have unique products (or price). Always a good idea and seems very defensible whatever happens in the channel mix.
- Make sure that you can buy online in store: including kiosks, wireless devices, and by phone. Make it super easy to transition from product research to purchase in store.
- Have a single, and complete, source of stock/inventory available to all customers all the time. This goes with the point above. It is appalling how often you can’t buy something in store because “they don’t have it in stock”. That’s a sale lost to Amazon or someone else. You must be able to buy from the fullest range and inventory online, right away, before leaving the store, or the sale walks out the door.
- Seriously consider other business models and revenue streams. Could you charge someone else to provide an (offline / store) research experience? Could you sell “intent data”, a form of market and customer insight based on observed research patterns (offline or online) but which don’t necessarily result in a sale – the likes of Criteo do a form of this already albeit on a first party, and not network, basis? In a strange twist of fate, as publishers rush towards commerce, perhaps store owners will need to monetise shopping browsers via advertising or product placement (you might laugh but I’ve spoken to some retailers already looking at this)? Should stores become an entertainment experience more than a shopping one and what does this mean for monetisation…? The talks between Simon Cowell and Sir Philip Green are very interesting in this regard.
- At the very least, to maintain margins and profit in the short term, get much better at using multi-channel data and insight to reduce wastage and improve effectiveness of sales and marketing e.g. a catalogue retailer I know recently improved ROI on the catalogue by 2X using behavioural insight from their email and web analytics.
Our Jump event in October will be the event to learn about how offline and online are coming together but, in the meantime, we’ve got a lot on the topic of e-commerce. A few recent useful blog posts:
- Retailers risk losing customers between channels
- Reserve and collect is paying off for Halfords
- E-commerce tips: 13 recommendations for multichannel integration
- Tips for reserve and collect services
[Image by PinkMoose via Flickr, various rights reserved]