Retail Intimacy, Part 10: Rebooting Omnichannel

Let’s face it: No other buzzword in shopper marketing circles matches the allure of “omnichannel.” Seminars about omnichannel shopping behaviors consistently sell out at industry conferences and events. The concept gets tossed around in boardrooms and pressrooms, a darling of everyone from marketing practitioners to digital investors. Omnichannel promises to be the missing link for any company struggling to stay relevant with the ever-elusive Millennial shopper.The reality, however, is that omnichannel is not the silver bullet that many marketers imagine it to be. To be sure, the term accurately characterizes how shopping behaviors have evolved in recent years, and any retailer that cannot adapt to those changing forces will lose out to agile competitors. However, simply possessing the digital tools commonly lumped together under the omnichannel umbrella – or even leveraging them effectively – is not enough to guarantee success.“Omnichannel is absolutely required today for brands and retailers who wish not only to inspire but also to create relevance,” says Heidi Froseth, executive vice president and national retail leader for Catapult. “But it’s not akin to advertising or media. It’s behavior-based, not attitudinal-based. It’s not about, ‘How do I spend my marketing dollars the most efficiently?’ It’s alchemy of art and science. Companies need to use sophisticated data and tools, but they must also rely on the intuition that comes with really listening to customers in order to create the best possible and repeatable experience.”The Sales MythIn spite of all the buzz, there’s little data to support a correlation between omnichannel expertise and accelerated retail sales. In fact, many of the companies with the strongest growth rates on the National Retail Federation’s 2014 rankings of‚ “Top 100 Retailers‚“ have made no appreciable investments in omnichannel marketing, notes Brian DeLong, senior vice president of shopper experience at Catapult. That group includes a long list of highly successful operators, such as Circle K, Aldi, Trader Joe’s, WinCo and Whole Foods Market.A standout in this group with more than 10% growth last year, adds DeLong, is Whole Foods. The retailer shows a lack of interest in pursuing conventional marketing (the company launched its first national brand campaign, “Values Matter,” in 2014) and has not made major investments in omnichannel infrastructure. However, says DeLong, “They are being omnichannel without the technology. … Whole Foods has decentralized its marketing efforts to leverage localized store marketing and social outreach. Instead of creating segmentation models to reach millions of shoppers, it has hundreds of employees responsible for reaching thousands of shoppers. This allows them to literally listen, one to one, to shoppers.”In the last few years, some of the world’s largest retailers including Macy’s, Target and Walmart have made newsworthy strides in building their omnichannel capabilities, as the entire brick-and-mortar industry continues to stare down an ever-expanding e-commerce threat from Amazon.com. Yet, even these well-oiled businesses lately have mustered only tepid sales growth, at best. In 2013-14, the growth rates of Macy’s (0.9%), Target (-0.9%) and Walmart (1.7%) were all well below the industry average of 3.2%, per the NRF.“Even at this date, McDonald’s has virtually no digital programs. … That [record] is inexcusablefor the world’s leading restaurant company.”—John Gordon, founder and principal, Pacific Management Consulting GroupOn the opposite side of the spectrum, a woeful lack of technological innovation is one of the main factors crippling McDonald’s, where a lengthy string of same-store sales declines prompted the departure of CEO Don Thompson last month. “Even at this date, McDonald’s has virtually no digital programs,” said John Gordon, founder and principal of Pacific Management Consulting Group, during a recent public radio report. He noted that McDonald’s does not yet have a “stored” digital value/loyalty card, such as one comparable to the Starbucks model, and that the company has barely scratched the surface in terms of developing apps and a mobile payment system. “That [record] is inexcusable for the world’s leading restaurant company,” Gordon said.Given all of these disparities, it’s fair to conclude that an omnichannel capability per se isn’t what separates top-tier retailers from the pack. For further evidence, consider: The number of farmer’s markets listed in the federal government’s directory has more than doubled over the past decade, reaching 8,268 outlets in 2014, according to the USDA. Although this expansion has leveled off recently, farmer’s markets continue to thrive in the U.S. without any significant measure of omnichannel expertise.The Ultimate DifferentiatorThe above examples illustrate a critical point with regard to omnichannel: The ability to win over today’s empowered shoppers is not dependent on a particular set of tools or tactics; nor is product or customer service alone enough to create an inspirational story. Rather, the ultimate differentiator lies in the ability of brands and retailers to deliver a memorable shopping experience. “Retailers already have Millennials telling them, ‘You are not giving me what I want, when I want it; and when you’re talking to me, it’s not based on my values,’” says Froseth. “They’ve got to reimagine their businesses as if they were startups and increase their agility.”Collectively, marketers have become so enamored with the idea of omnichannel, “They have failed to identify the competitive advantage that they are trying to gain from implementing such a strategy,” adds DeLong. Much like social media and mobile marketing before it, companies often view omnichannel as if it were a strategy unto itself. It is seen as a cure, rather than a means to an end. Simply put, everyone wants to do omnichannel for the sake of doing omnichannel.In order to reset the conversation, brands and retailers must resist the distraction of so many shiny new tools and put the focus back on their customers’ core values. “The imperative shouldn’t be, ‘I want to be omnichannel,’” says Froseth. “Rather, it should be: ‘How can I serve my shoppers better?’” The answer – and therefore the omnichannel solution – is going to look very different from one retailer to the next.Unique Approaches, Shared GoalsThe digital evolutions of Nordstrom and Whole Foods, two of the growth leaders in their respective channels, provides best-in-class examples of how to approach omnichannel in the right way. Employees throughout the Nordstrom organization buy into its founders’ famed management principle of providing unparalleled customer service. As new technologies have been added to the retailer’s tool kit, they’ve been deployed for the singular purpose of enhancing that mission. The company, which has made significant investments in its omnichannel infrastructure over the last decade, is planning an additional $3.9 billion in capital expense spending (including 25% on customer-facing technology) through fiscal year 2018.Back in the day, Nordstrom sales employees were famous for keeping handwritten notes on clientele preferences in their personal books. Over time, Nordstrom has adopted technologies, such as a point-of-sale system that can track individual customer requests online that enable its store associates to automate this process. Today, Nordstrom integrates all of its customer data with insights collected from various digital and social tools. Popular items on Pinterest are tagged with the social sharing site’s familiar red logo and displayed in stores, while Twilio software allows employees to text photos of new fashion arrivals to customers’ mobile phones.Nordstrom continues to draw on new digital tools to deliver a personalized experience that meets its shoppers’ lofty standards. However, what’s noteworthy about Nordstrom is not so much the shiny objects it chooses, but rather its ability to seamlessly fold omnichannel techniques into its unwavering customer-relations model, says DeLong. “Nordstrom is using omnichannel to do what it has always done, only better.”Whole Foods, too, uses omnichannel to empower its employees, but in a different way – i.e., to establish a meaningful one-to-one dialogue with customers. For example, Whole Foods community managers use their stores’ individual Twitter accounts to inspire creative and healthy use of natural ingredients. In-store events, such as wine tastings and cooking classes, are similarly intended to share ideas versus incentivize a transaction.On the surface, Nordstrom and Whole Foods appear to represent vastly different omnichannel approaches. One is more stereotypically omnichannel, while the other seems almost anti-omnichannel. But these two companies are succeeding for the same fundamental reason: Each retailer views its omnichannel investment through the narrow lens of delivering hyper-relevant experiences, and each understands how to maximize omnichannel tools in ways that support its existing relationship with customers. Blake Nordstrom, the company’s president, perhaps sums it up best. “We have a customer strategy, not a channel strategy,” he says.Learn from the BestNo matter the level of sophistication of an organization’s omnichannel capability, there are ways to plan, test and learn, deploy assets and engage with shoppers more effectively. It is instructive to examine how some of the leading brands and retailers – including Walmart and Target – are bringing their best and brightest ideas forward.Target’s core strength with shoppers lies in its ability to create a strong point of view around its merchandise. Thus, the retailer and its vendor partners selectively use omnichannel tools to reinforce Target’s market position by inspiring shoppers to engage with a familiar category in new and unexpected ways. In the 2014 “Pack It Back to College” program, for example, Target’s Ganassi Racing marketing partners, led by Clorox and Energizer, collaborated to create excitement in the normally quiet household products category during the high-traffic back-to-college season.Throughout the program, the racing partners leveraged the popularity of gaming to expand their appeal to two key markets – parents and college students – as a preferred destination not only for school supplies and decor items, but also for all essential dorm room and apartment needs. Beginning in July, the partners featured a sweepstakes offering a chance to win a new car and an instant-win game offering more than 1,400 Target gift cards or free product coupons for shoppers to “build their own Dorm Room Survival Kit.” To enter the sweepstakes for the car, participants had to complete an online game in which they were challenged to beat the clock and match essential products with their brand names from Clorox (Disinfecting Wipes, Glad ForceFlex), Energizer, Unilever (Axe) and Kimberly-Clark (Kleenex), or they could choose to play the instant-win game to garner one of the other prizes.By communicating consistently across online, mobile and offline platforms in an inspirational way, notes Froseth, Target and their racing partners motivated shoppers to become more deeply involved in the essentials category during the back-to-college season. As a result, the retailer drove traffic and sales during a high seasonal selling period while netting some of its highest engagement metrics. The racing partners received more than 2.4 million sweepstakes entries while the average game player returned eight times to play during the approximately 10-week promotion, per the company. The Role of Brands Going ForwardAs with any shopper marketing program, brands must come to the table with retailer-specific category insights that allow an omnichannel vision to come to life. When Walmart, for example, looked to bring a new level of enthusiasm to its candy aisles last fall, Mars Inc. delivered Walmart shopper insights that fueled the development of an entertainment-based solution involving Marvel Studios’ “Captain America” franchise and Mars’ M&M’s brand.The Mars research played a key role in understanding how strongly the Walmart mom feels about providing the right mix of snacks and entertainment for her family’s evenings at home. She is also more likely to purchase DVDs than go out to the movies, and prefers to watch TV and movies together as a family, according to data provided by the company.By leveraging these and other insights, Walmart was able to speak to the emotional aspects of snack purchases. At the same time, the retailer added value through various online, offline and in-store promotional offers during its “Movie Night Starts with Mom” program, which coincided with the September DVD release of “Captain America: The Winter Soldier.” In several of its communications, Walmart employed images of M&M’s Red and Yellow characters donning the Captain America shield to create a spirit of fun and adventure in the typically value-driven confections category.In both the Target and Walmart examples, each of the participating brands provided unique products and relevant content that enhanced both the shopping and the brand experience. This is the ultimate takeaway for brands in the omnichannel discussion, argues DeLong. “For CPG marketers in particular, the focus should not be on just building a set of tools, but rather on creating a process to deliver the insights that make a retailer’s omnichannel tools work better.”In many ways, CPG brands have only begun to scratch the surface of omnichannel programming. The future of shopper marketing lies in building equity based on a pattern of shopper behaviors, not on a consumer target. Done well, this data-driven approach can lead to many forms of customization – dedicated tissue pack sizes for specific channel needs, for example, or custom ice cream flavors that speak to different motivations for grocery trips.“As our industry continues to break down barriers for purchasing, omnichannel tools and techniques will allow us to anticipate many more of these needs,” says DeLong. “Once brands figure out how they matter most to a single unique shopper, they can create a model that works a thousand times over. The ‘Least Common Denominator’ formula will soon disappear, replaced by something far more lasting and memorable.”About the SponsorCatapult is a conversion marketing agency, where branding and buying are part of a total solution. Catapult’s data-driven approach identifies the core, actionable insights that inspire brilliant creative with the power to convert consumers into shoppers, shoppers into buyers, and buyers into loyal advocates. Catapult delivers channel-agnostic solutions that are brand savvy, retailer smart, and digitally enabled. Catapult is an Epsilon brand. Visit them at www.catapultmarketing.com and on Twitter @catapultmktg.

Retail Intimacy, Part 10: Rebooting Omnichannel

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