Returns on Omnichannel Marketing. Towards a holistic framework to manage and measure Omnichannel strategy's success in the premium fashion industry

Agenda

Table of Figures

Table of Equations

Table of Appendixes

1. Introduction

2. Omnichannel – context and definition
History of omnichannel retailing
Definition of omnichannel
A global perspective on omnichannel preconditions

3. Digitalization in the premium fashion industry
3.1 Premium vs. luxury fashion
3.2 Premium fashion 2.0
3.3 Towards omnichannel – status, barriers and opportunities
3.3.1 Omnichannel capabilities today
3.3.2 Barriers of omnichannel marketing
3.3.3 Opportunities of omnichannel marketing
3.4 Burberry – case study

4. Understanding the omnichannel customer
4.1 Digital shopper characteristics
4.2 The evolution of the customer journey concept
4.3 L’Oréal – case study
4.4 Storyscaping
4.5 Omnichannel touch point map
4.6 An omnichannel manifesto for brands

5. Returns on omnichannel marketing
5.1 Marketing ROI
5.2 Planning context
5.2.1 Vision and mission statements
5.2.2 Business goals, strategy and objectives
5.2.3 Performance and Result Indicators
5.3 Omnichannel analytics
5.3.1 A case study
5.3.2 Implementation – the marketing scorecard
5.3.3 Analysis and optimization
5.4 Technical and organizational implications

6. Summary and outlook

Appendix

Sources

Table of Figures

Figure 1: Interviewed experts

Figure 2: E-commerce milestones

Figure 3: Global customers' device usage (DigitasLBI 2015, p. 4)

Figure 4: Multichannel versus omnichannel (Tapp 2014)

Figure 5: Premium or luxury? Rambourg's luxury brands power ranking (2014, p. xxvi)

Figure 6: Luxury and premium goods: projected share of online sales (L2 2015b, p. 2)

Figure 7: Percentage of in-store sales influenced by digital (Lobaugh et al. 2015, p. 7)

Figure 8: Brand's omnichannel maturity ranking (L2 2015c, p. 18)

Figure 9: U.S. digital shoppers' required omnichannel capabilities (L2 2015c, p. 7)

Figure 10: Importance of channels when making a purchase (Capgemini 2014, p. 15)

Figure 11: In-store technology optimized floor space (Silverman/ Hogan 2016, p. 11)

Figure 12: The Art of the Trench campaign impressions (Burberry 2016)

Figure 13: Burberry flagship store Regent Street (Sapient internal)

Figure 14: Customers' device usage versus global media spend (Millward Brown 2014, p. 9)

Figure 15: Digital and mobile influence on in-store sales (Lobaugh et al. 2015, p. 6)

Figure 16: Distribution of digital shopper profiles (Capgemini 2014, p. 22)

Figure 17: Streamlined customer journey after Edelman and Singer (2015)

Figure 18: L'Oréal app

Figure 19: L'Oréal's sticky customer journey (Borison 2013; Edelman/ Singer 2015)

Figure 20: SapientNitro's Storyscaping - creating shared stories

Figure 21: Measurable omnichannel touch point map (own figure)

Figure 22: Marketing returns' valuation levels after Farris et al. (2015, p. 271)

Figure 23: Hierarchy levels between planning components (own figure after Chaffey 2013; PSU 2008, p. 1; Belicove 2013).

Figure 24: Differentiation between KPI, KRI, PI and RI metrics (own figure after Parmenter 2013, p. 28; Parmenter 2015, pp. 4; 11 ff.; 15; 19 f.)

Figure 25: OmniChic's customer centric brand strategies (own figure)

Figure 26: The new planning and measurement framework (own figure)

Figure 27: KPI and their supporting metrics (own figure)

Figure 28: KPIs influence on the MROI elements (own figure)

Figure 29: The new marketing scorecard (own figure after Beckon 2015, p. 9)

Figure 30: The analytics/ optimization loop (Sapient internal)

Figure 31: Technical requirements needed to realize the omnichannel vision (Sapient internal)

Figure 32: Omnichannel blueprint of related data buckets within an organization (Sapient internal)

Table of Equations

Equation 1: ROI versus MROI (Farris et al. 2015, p. 270)

Equation 2: MROI - evolved concept (own equation)

Table of Appendixes

Appendix 1: Percentage of individuals using the internet in 2015

Appendix 2: Daily screen minutes by country

Appendix 3: Offered cross channel services by brand

Appendix 4: Net sales given omnichannel capabilities

1. Introduction

“In a world where nearly everyone is always online, there is no offline. So it is not about the digital business, it is just business. It’s not about eCommerce, it is simply commerce”, (Lobaugh et al. 2015, p. 4).

The digital revolution has led to undisputable and irreversible changes in the way we experience everyday life. This applies especially to our shopping experiences. With the increasing number of sales channels and omnipresent, easy-to-reach information, people have grown to be the best informed customers who have ever existed. (See Cain et al. 2015, p. 76) On average, today’s customers own five devices to meet their demands. (See DigitasLBI 2015, p. 4f.) A digitally supported customer journey could start with browsing social media pages for product ideas over breakfast, transition to the mobile phone during commute, and to a PC or laptop at work. With brands and product ideas in mind, the customer might visit a store to further explore the product in person. Before paying, he or she installs the brand’s app to benefit from a 10 percent discount and to be informed about future promotions. (See Green 2015) To accommodate these changes in the business context, companies have to change their traditional push-based, brand-centric view to one recognizing and catering to an economy of connected experiences that are equally owned by company and customer. (See Cain et al. 2015, p. 76) This integrated brand experience is referred to as omnichannel experience. Omnichannel marketing means that companies now need to provide a seamless shopping experience across channels, allowing their customers to switch between devices and the physical preference whenever and however they like.

Digital customers’ increasingly high expectations present brands with a big challenge. To successfully compete in this connected environment, converging the channels alone misses the point. Retailers need to understand and anticipate the changing perspectives and needs of their customers in order to create ‘sticky’ shopping journey experiences (capture customers’ attention, engage them, convert them and keep them coming back). “The challenge is to identify the attributes that are the most relevant to the target customer, and for retailers in particular to balance in-store^[1] and online investment, and between personalization and intrusion. Most companies are already on their ‘digital journey’ in some shape or form. However, many are uncertain whether they are truly addressing the changing needs of their consumers, the right priorities or the right initiatives”, (Capgemini 2014, p. 9).

Especially in premium fashion, one of the most attractive and fastest growing industries, many brands are still ill-prepared to address consumers’ ever faster evolving digital demands. (See Lobaugh et al. 2015, p. 3) A long time ago, these brands’ fear was that premium and luxury shoppers would not be willing to buy high-end products online and that their sought-after personalized service-standards could not be translated into the mass-medium internet. It was only when ventures like Net-A-Porter began to disrupt the fashion industry by selling luxury products online, and at undiscounted prices, that other companies’ thinking started to evolve as well. (See Dauriz et al. 2014, p. 26) Today, E-commerce represents a scant six percent of premium and luxury sales. (See L2 2015a) However, E-commerce reflects only one aspect of the digital opportunity. Over half of the fashion purchases in 2015 were already influenced by digital touch points in some way, and the figures are on the rise. (See Lobaugh et al. 2015, p. 3)

The most important question a marketing manager can ask is ‘how will the decisions we make today affect our business tomorrow?’. (See HBR Video 2014) To answer it, managers need to rely on the right business measures. The gap between the six percent of online fashion sales versus more than 50 percent of online influence on these sales illustrates marketers’ current top challenge: they are pressured to quantify their strategy’s return on investment (ROI) but have difficulties doing so as the traditional financial metrics overemphasize the short term. (See HBR Video 2014) Focusing on sales and conversion rates, today’s ROI measurement and key performance indicators (KPIs) often fail to deliver a complete picture.

This work raises the hypothesis that today, many premium fashion companies are still struggling to offer seamless and engaging omnichannel experiences, because they lack a holistic measurement framework including future-oriented KPIs – due to legacy systems and departments’ silo perspectives.

After discussing the relevance of the topic and putting omnichannel marketing in context (chapter two), the stage of this work will be set with an exploration of the particularities of the fashion industry and the influences of the digital revolution (chapter three). Chapter four will then take a closer look at the main target of interest: the customers – their behaviour across channels and connections between behaviour and purchase. Subsequently, to help marketers to better depict the success of their omnichannel strategies, a new KPI measurement framework is suggested (chapter five). With this new framework at hand, managers will be able to make more informed, sustainable decisions around content allocation, channel selection and investment opportunities in this multi-experience world, to eventually maximize business success.

The contribution to this article is twofold. First, it consists of a review of existing literature on the subject. Second, to leverage the significance and implication of this current topic, interviews with seven industry experts were conducted. The gained insights were interwoven with the thesis’ literature review and support the work’s findings and statements. To ideally cover the different parts of my work, I spoke to one fashion industry insider (Dr. Carmen Horn), two retail strategists (Neil Dawson, Marina Kuhn), digital solutions providers for offline and online stores (Vivek Agrawal, Vikrant Agrawal), one mobile payment enabler for physical retail presences (David Bellem), and one data analytics expert (Oliver Schiffers). The following overview presents the seven contributors including company, location and role, listed after the interview’s execution date.

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Figure 1: Interviewed experts

- Vivek Agrawal - Senior Vice President at SKAVA, Atlanta
- Dr. Carmen Horn - Professor for Global Brand & Fashion Management at ISM, Cologne
- Oliver Schiffers - Director Data and Analytics at SapientNitro, Cologne
- David Bellem - CTO at payworks GmbH, Munich
- Vikrant Agrawal - CIO at Kairion GmbH, Frankfurt
- Neil Dawson - Chief Strategy Officer, Europe at SapientNitro, London
- Marina Kuhn - Key Account Manager at Liganova GmbH, Berlin

At this point I would like to express my sincere gratitude to each of my interview partners. Thank you for contributing to my work by sharing

your valuable insights and time with me.

2. Omnichannel – context and definition

To impart a better understanding of the rise and meaning of the latest developments in the retail environment^[2], this chapter will outline the context and history of origins of the omnichannel phenomenon.

History of omnichannel retailing

In the early 1990s, the spread of the internet started to disrupt the retail landscape and offered retailers a new variety of sales channels. Until then, over a century of merchandisers offered their products mainly through three channels: physical brick-and-mortar stores, catalog sales, where products could be ordered by telephone or mailing, and direct salespeople. The following sections provide a brief overview of the history of retail, focusing on the United States as a pioneer in many commerce areas. In addition, Germany as economically powerful nation with different conditions is cited as example where it adds value.

Brick-and-mortar stores

Brick(s)-and-mortar refers to a merchandiser who sells a product to the end market through a physical presence, for example a retail store. In the last years, the expression mainly gained attention as differentiation to ‘Clicks and mortar’, also known as Click & Collect, the extension of traditional retail by digital channels. (See Feinstein et al. 2008, pp. 671; 674)

Over centuries, physical retail presences were used as universal trading places for goods of all kinds, with the markets of our ancestors as earliest occurrences. In the late 1800s and early 1900s, independent specialty or single-product stores dominated the market landscape. The advent of department stores led to a change in customers’ shopping behavior as products, brands and services now were available in one place. (See KPMG 2009, p. 6) “For consumers, the appeal was immediate. In addition to convenience, department stores and other retailers offered something new, a customer experience, an intangible, but appealing environment where shopping was more than just a transaction, […] but an occasion”, (KPMG 2009, p. 6).

“Taking their cue from these developments, grocers transformed their models as well, moving from the small general store format to a bigger, broader form of hyper- or supermarket. Within the space of a few decades, the shopping landscape changed from one dominated by category-specific outlets to one that featured integrated “one-stop” shops”, (KPMG 2009, p. 6). The success of supermarkets was leveraged by the spread of cars and refrigerators that allowed consumers to easily transport and store their groceries so that they could cover their demands by bulk buying. Shopping carts, introduced in the early 1920s, and self-service stores further catered to this new shopping behavior. Compared to the prevailing serviced shops, the new self-service offering was perceived by consumers as a gain in autonomy. While saving time (products didn’t need to be weighed and packed any more by the shop assistants), it still allowed price comparisons and the individual choice of goods. (See König 2000, p. 101)

In Germany, the Albrecht brothers pioneered the field by opening the first self-service store in Essen-Schonnebeck in 1954, paving the way for the company’s success. (See Aldi 2016) From there it took only a few years until self-service stores outperformed serviced stores in terms of revenue. (See König 2000, p. 102) Today, the offline retail share in Germany still remains high with 88,4 percent and a European average of 91,6 percent. (See CRR 2016)

Catalog sales

Due to its specific social and geographic conditions with wide rural areas and farmers living in isolated places, catalog sales first took off in the United States in the late 1800s laying the foundation for modern consumerism. Major drivers for the establishment of delivery services were both the development of the railroad transport network and the broadening of postal services in 1913, when the post started to also ship heavy parcels. Mail-order delivery by train could be seen as early example for today’s Click & Collect offering, as customers had to pick up their purchases at the next train station. (See König 2000, p. 94 f.)

The first mail-order catalog was produced on August 18, 1872 by Aaron M. Ward as single sheet offering 163 items. Twelve years later the catalog had grown to 240 pages and by 1904, three million customers were on the mailing list – with a population of 82 million at the time that meant nearly one catalog for every 25 residents. In 1894, the merchant Sears jumped on the bandwagon, issuing its first catalog promoted as “Book of Bargains: A Money Saver for Everyone”. (See Philipps Erb 2014) „The next year, the catalog was chock full of items for sale, including eyeglasses together with a self-test for ‘old sight, near sight and astigmatism’. It was so popular that the company decided to do two catalogs in 1896, one for spring and one for fall, all up to date with the latest fashions. The catalog was so well known that it featured up and coming models and fashion icons together with established stars,“ (Philipps Erb 2014). Ward created the catalog retail market, but Sears outperformed the company, remaining market leader for the entire 20th century. Between 1908 and 1920, the revenue of Sears grew from 40 to 250 million dollars. (See König 2000, p. 95 f.)

In Germany, with people mainly living in non-remote villages, catalog sales only started to flourish after World War II, fulfilling a customer need by offering lower prices. Amongst the big players were Neckermann with its claim “Neckermann macht’s möglich” (Neckermann makes it possible), Otto and Quelle. (See König 2000, p. 97)­­ Today, catalog sales have been replaced more or less by E-commerce. But, according to eMarketer, there is also good news for companies with a strong background in catalog retailing: “[…] nearly all of the leading ecommerce retailers (as measured by ecommerce as a percentage of revenues) in this product segment are known for having translated mail-order businesses to the internet”, (eMarketer 2015).

Direct sales

“Direct selling is face-to-face selling away from a fixed retail location”, (Peterson/ Wotruba 1996, p. 2). “Such well-known direct selling companies as Amway or Tupperware have no retail stores from which a consumer can purchase their products. Most commonly the purchase takes place in a home (usually the buyer's), in a workplace (typically the buyer's), or in a neutral location (for example, a church, a shopping mall, fair, or a third-party home). This locational characteristic differentiates direct selling from personal selling that takes place in a retail store”, (Peterson/ Wotruba 1996, p. 3).

Tupperware belongs to the pioneers in direct selling with its popular Tupperware Home Parties. Despite its innovative nature, the Tupper products, introduced in 1946 by Earl Tupper, didn't sell well in retail outlets. (See Tupperwarebrands) “Plastic still had the image of being brittle, sticky, unreliable and smelly. Furthermore, the airtight and watertight lid called Tupper Seal needed to be demonstrated and explained in order for consumers to understand its benefits“, (Tupperwarecollection). “In response, the first Tupperware Home Party was held in 1948, introducing an all-new way for Tupperware products to reach consumers. Demonstrations proved a dramatically effective way of communicating the benefits of the revolutionary seal. By 1951, the Tupperware Home Demonstration system was working so well that all Tupperware products were taken off store shelves to be distributed in this manner“, (Tupperwarebrands). “These parties with friends, acquaintances or neighbors in a homely atmosphere were designed to gain women’s trust, so that they would feel secure enough to purchase a product and encourage others to do the same” (Tupperwarecollection).

Today, retailers have started to revive shopping events to connect with their customers and to let them participate in their created brand worlds. The chapter three illuminates this trend.

Electronic retail

The foundation for today’s E-commerce was laid long before the advent of the internet, when Michael Aldrich invented Teleshopping. In 1979, the British entrepreneur and inventor was asked to assess the commercial potential of a 26-inch color TV set as a prototype of the Prestel ‘videotex’ information service. He saw the potential to connect the TV set via a telephone line to a computer, which could process transactions. (See Telegraph 2014) “Aldrich’s insight that ‘closed’ corporate information systems could be made open for interactive use by customers and business connections predated many of the developments of e-commerce and social networking”, (Telegraph 2014). Teleshopping first found its application in B2B, enabling travel agents to book holidays for customers. (See Telegraph 2014) “The idea proved to be decade ahead of its time for retailers but was trialed by Tesco in Gateshead, where one Jane Snowball became the world’s first recorded online grocery shopper in May 1984”, (Telegraph 2014).

In 1989, “Tim Berners-Lee, a British scientist at CERN, invented the World Wide Web (WWW) [...] originally conceived and developed to meet the demand for automatic information-sharing between scientists in universities and institutes around the world. [...] On 30 April 1993 CERN put the World Wide Web software in the public domain“, (CERN 2016). Around the same time, the first commercial online services of Web 1.0 started to use the internet as a sales channel, amongst them names like CompuServe, GEnie, Prodigy, Delphi and, America Online (AOL). (See Lewis 1994) Although the purchases went through smoothly, the first electronic shopping transactions were not secure. This changed in 1994, when Net Market enabled “[...] the first retail transaction on the Internet using a readily available version of powerful data encryption software designed to guarantee privacy,“ (Lewis 1994).

From there, developments in E-commerce evolved very quickly: “Around the mid-'90s, the Internet, previously available mostly to universities and government organizations, expanded onto citizens' desktops […]“, (Gagne/ Lake 2009) and “[…] e-Commerce took the industry by storm. The dot-com boom led to a host of pure play online retailers and an era of fast-moving technological innovation that touched virtually every aspect of the retail value chain, from product development and sales to operations. As these technologies entered the wider populace, a host of new channels emerged, many at the hands of the end consumer. Social-networking sites, online product reviews, viral marketing, and other forms of interactivity launched what is still unfolding phase in the industry’s development”, (KPMG 2009, p. 6). The following ten milestones were critical in shaping today’s E-commerce environment:

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Figure 2: E-commerce milestones

2.2 Definition of omnichannel

The advent of the internet and mobile devices was a game-changer for industries worldwide. This digital disruption has started to rapidly alter the way we live and work and will continue doing so. “It took 30 years to connect the first two billion people to the internet. It will take less than seven to connect the next two billion. […] Four billion people will live in a connected world in 2020. While no one can predict how disruptive this exponential increase in connectivity will be, we can expect to live in a profoundly different world,” (Arthur 2013).

DigitasLBI (2015, p. 4) conducted a study with results suggesting that in 2015, already 85 percent of international customers owned a smartphone, outperforming laptops for the first time, see figure 3. The data suggest that consumers continue to migrate away from the desktop usage and towards mobile technology. Many people use up to five different devices to meet their demands, simultaneously or sequentially. (See DigitasLBI 2015, p. 4f.) “Today 90% of our media consumption occurs in front of a screen. [...] This multi-screen behavior is quickly becoming the norm, and understanding it has become an imperative for businesses“, (Google 2012).

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Figure 3: Global customers' device usage (DigitasLBI 2015, p. 4)

The multitude of devices will make marketing only more fragmented in the upcoming years. Therefore, companies need to rethink how to reach and engage customers across touch points. (See AdvertisingAge 2015) “We’re moving away from mass, ‘push’-based marketing, and towards more personalized, 1:1 communication with consumers, through the many channels and on the many devices they use”, (Stocker 2014).

This connected brand experience across channels is referred to as omnichannel experience. Omnichannel marketing means that companies now need to provide a seamless shopping experience, regardless of channel or device. “Shoppers can look online for products, check inventory levels, order online, ship between stores and, most importantly, get the same information and user experience in store, online, and by phone. These retailers are using a unified voice across all platforms to drive customers to their stores and websites. In the store, they invite you to go online. Online, they drive you to the store (almost - they will give you driving directions)“, (Tapp 2014). Consistency and complementary in the brand’s messages and actions are critical success factors for companies that aim at making their shopping experience seamless. (See Stocker 2014)

John Bowden, Senior VP of Customer Care at Time Warner Cable explains the difference between multichannel and ommnichannel strategy as follows: “Multichannel is an operational view - how you allow the customer to complete transactions in each channel. Omnichannel, however, is viewing the experience through the eyes of your customer, orchestrating the customer experience across all channels so that it is seamless, integrated and consistent. Omnichannel anticipates that customers may start in one channel and move to another as they progress to a resolution. Making these complex ‘hand-offs’ between channels must be fluid for the customer. Simply put, Omnichannel is Multichannel done right!”, (Mitchell 2013). Figure 4 visually translates Bowden’s definition.

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Figure 4: Multichannel versus omnichannel (Tapp 2014)

2.3 A global perspective on omnichannel preconditions

The preconditions for omnichannel vary by country. In their Global Retail E-Commerce Index, A.T. Kearney calculates the online market attractiveness for 30 different countries, taking into account online market size, consumer behavior, growth potential and infrastructure. (See A.T. Kearney 2015, p. 1) “The world’s largest markets for e-commerce dominate the top half of the top 30, led by the United States, China and the United Kingdom […]. In the bottom half are some smaller markets, such as Mexico, whose potential for growth is impossible to ignore”, (A.T. Kearney 2015, p. 1). Germany ranks fifth in the survey. (See A.T. Kearney 2015, p. 1)

First and foremost, a seamless shopping experience across channels requires access to the internet. A recently published study shows that there is still an undeniable gap in technology adoption between different demographics and regions. While for the majority of people in developed regions such as North America and Europe internet is a given, there are still large parts of the world without access to the web, see appendix 1. (See Richter 2015)

The figures look similar when it comes to motorization. Here, North America is clearly heading the statistics with 65 percent of inhabitants owning a car. Europe follows with 56 percent. China lies towards the bottom of the list with 91 cars per 1,000 inhabitants. In developing nations it is even less, with Africa’s average lying at only 43 cars per 1,000 inhabitants. (See ACEA 2015) Motorization figures become important for companies who think about establishing services that need the customer to pick up the merchandise at a given place (for example curbside pickup).

When making marketing decisions about a brand’s media mix and channel usage, customers’ device usage figures need to be taken into account. Data suggests that the screen minutes differ significantly by region, from a total of five hours per day in Italy to nine hours in Indonesia (Germany: 6 hours, USA: 7 hours, China: 8 hours). (See Millward Brown 2014, p. 10) “Smartphones are now the most viewed medium in all countries except UK, France and Spain (where TV leads) and Hungary, Poland, Russia, & Slovakia (where laptops lead)”, (Millward Brown 2014, p. 10). Germans spend the major part of their daily screen time with their smartphone (36 percent), followed by TV (34 percent), laptop and PC (20 percent), and tablet (9 percent). (See Millward Brown 2014, p. 10; appendix 2 shows a total overview of screen minutes by country)

The disposable income per person also affects a country’s economic attractiveness for companies to invest, as income is positively correlated to purchasing power. (See Swanson 2015) “[…] The wealthiest country by this measure is Switzerland, with an average of 6,301 dollars a month. That's about two to three times as much as its (still wealthy) neighbors Germany (2,851 dollars) and France (2,760 dollars). […] U.S. average disposable income comes out to 3,258 dollars per person per month”, (Swanson 2015). With an average of 731 dollars, China now lies above other Asian countries’ average. (See Swanson 2015)

To summarize, omnichannel marketing evolved from the emerging channels and brand touch points coming up with the digital revolution. It is an approach of companies to offer customers seamless shopping experiences, enabling them to interact with the brand whenever, wherever and however they like. The preconditions for omnichannel vary by region, as the digital divide between developed and developing markets still is reality. Motorization, average screen minutes (by device) and disposable income also differ by geographic area.

3. Digitalization in the premium fashion industry

The apparel, fashion and luxury sector outperformed the MSCI World indices^[3] for more than a decade, leaving behind even high-growth sectors like technology and tele-communications. This pattern is global. Between 2003 and 2013, publicly traded apparel, fashion, and luxury companies increased their share of global retail sales from 12 to 17 percent across geographies. (See Nolen Foushee et al. 2015, p. 1f.) And there’s more to come: “The size of the global apparel business is growing and is expected to generate double digit growth between now and 2020. Much of this growth is coming from developing markets, notably from the exploding buying power among Asian consumers, who are migrating into the middle class and starting to view clothes as an extension and expression of their new lifestyle”, (Keller et al. 2014, p. 1).

However, the changing dynamics of the fashion industry not only offer great opportunities to companies, but also raise large challenges alongside the ever faster moving nature of fashion. Only those players who understand the needs of their digitally savvy customers and are equipped to meet them will be able to successfully compete in this attractive, but increasingly competitive business environment. “We are fast approaching a day when we can assume 100 percent of shoppers will be connected 100 percent of the time. To survive and thrive in this environment, retailers need to start preparing for that day now, as the data tells us that this time will be here sooner than many think”, (Lobaugh et al. 2015, p. 3).

This chapter first sheds light onto the latest developments in the premium fashion industry and then outlines the opportunities and barriers to omnichannel management.

3.1 Premium vs. luxury fashion

Luxury, premium, high-end – when it comes to the terminology for upscale fashion “[…] consumers and even those within the industry have a difficult time distinguishing luxury from premium brands“, (Roumeliotis 2015). The price is one important determinant to distinguish premium from luxury fashion. But, using it as only differentiator misses the point. That is also why Rambourg’s (2014, p. xxvi) suggested luxury brand pyramid, build by price points and number of points of sale, fails to sufficiently clarify the terms. Though the pyramid helps at gaining an understanding of the scope of goods and brands referred to as luxury, it doesn’t suggest a clear price threshold to distinguish luxury from premium. Premium fashion starts for him with the ‘accessible core’ with price points above 300 dollars, represented by brands like Tod’s, HUGO BOSS or Prada. Louis Vuitton is placed at the threshold to the next ‘premium core’ stage that is defined by price points of 1,500 dollars and above. Other brands in this category are Berluti or Valentino. Hermès is located between ‘premium core’ and the following ‘superpremium’ cluster that ranges from price points between 5,000 and 50,000 dollars. Other ‘superpremium’ brands are Bottega Veneta or Patek Philippe. The top of the pyramid with prices higher than 50,000 dollars builds the ‘ultra high end’ cluster with Leviev and Graff as examples, see figure 5. (See Rambourg 2014, p. xxvi)

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Figure 5: Premium or luxury? Rambourg's luxury brands
power ranking (2014, p. xxvi)

According to Roumeliotis (2015) it is rather the values, stories and lifestyle provided by a brand that make them either a luxury or a premium brand. Time also plays an important role: “Premium products don’t stay premium for a long time. This is called up cycling, your last iPhone will be obsolete in two years, the same with your Samsung tablet. So premiumness is essentially about death, fashion is also. In fashion you are fashionable and then you are unfashionable”, (Kapferer 2013). Luxury, on the other hand, is timeless. It “[…] is a way to remain, and that is why throughout history people have invested huge amounts of money in luxury goods. When you buy a very expensive watch you expect to keep it all your life. And this is why the notion of performance is not that important, because if performance is 100% the reason to buy, then as soon as something comes along that is better, you will upgrade”, (Kapferer 2013).

Carmen Horn, professor at ISM summarizes: Traditional luxury brands don’t follow trends; they are the ones that define the aesthetics based on their unique stories and values. The high-quality of a luxury good goes hand in hand with its continuity. Luxury goods consume time, for the production as well as for the shopping process. By this definition, a brand like Burberry would not be a traditional luxury brand as the frequency of its collections and seasons are dictated by their consumers. (Carmen Horn) A recent example for this consumer-centric behavior is Burberry’s announcement to stage season-less shows twice a year, combine men’s and women’s collections and make the pieces available in stores worldwide right away. (See Indvik 2016) In contrast, with the decision to discontinue the sellout of their valuable collections in end-of-season sales, Gucci acts more like a luxury player. To avoid redundancy and to keep also the last season’s pieces current and valuable, the fashion houses’ latest collections were created to build onto each other. (See Ihring/ Sack 2016) This work will concentrate on premium fashion, as the consumer centricity and the higher reach of this segment strongly appeals to me.

3.2 Premium fashion 2.0

Online sales of premium and luxury goods account for 6 percent of the €224 billion global luxury market. (See L2 2015a) Estimates from the trajectories of mass peers predict online sales to further grow by six to 19 percentage points reaching double-digit values within the next decade. (See figure 6; L2 2015b, p. 2)

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Figure 6: Luxury and premium goods: projected
share of online sales (L2 2015b, p. 2)

The growing E-commerce share is only one, and apparently the most obvious aspect of the digital opportunity. Besides the digital sales there is also the digital influence on sales, including offline sales. Lobaugh et al. (2015, p. 3) define digital influence as “the degree to which in-store sales are influenced by digital at some point in the shopping journey”. Since 2012, three high-profile Deloitte managers conducted yearly research to test their hypothesis that mobile technology and digital information not only affects sales in digital channels, but also have a much broader impact on in-store sales and in-store consumer behaviour. The results not only confirm their hypothesis, but point out that the digital influence is growing at an increasing pace, already influencing over half of all in-store sales in 2015. (See figure 7; Lobaugh et al. 2015, p. 3) Forrester’s data tell the same story. (See Beeson et al. 2015)

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Figure 7: Percentage of in-store sales influenced by digital
(Lobaugh et al. 2015, p. 7)

Consumers now shop differently. They use blogs, social media networks, product review pages and more for inspiration, information, and decision-making. What used to be a physical one-stop shopping experience with awareness, consideration, and purchase all happening in store, has become more fragmented and complex (See Lobaugh et al. 2015, p. 3). “An increasing number of consumers have already determined what to buy by the time they reach the store’s front door”, (Lobaugh et al. 2015, p. 3). In addition, depending on the product category, a customer can go through his or her decision journey in three seconds with Amazon one-click, or take up to six months with several interruptions, for example when purchasing a car. (Neil Dawson) Chapter four will provide more detail about the changed customer behaviors and expectations in their digitally supported shopping journeys.

3.3 Towards omnichannel – status, barriers and opportunities

As outlined before, the digital influence is predicted to increase and continues to shift the ground under the feet of retailers large and small alike. On paper, fashion brands appear digitally optimized and mobile commerce ready. However, in reality many retailers are still ill-prepared to address consumers’ ever faster evolving digital needs and expectations. (See Lobaugh et al. 2015, p. 3) For example, fewer than 20 percent of fashion brands digitally support physical store sales by allowing users to see nearby inventory. (See L2 2015a) “Unfortunately, when it comes to omnichannel, multi-device marketing, consumers today are way ahead of most marketers”, (Stocker 2014). Neil Dawson summarizes: “No brand is really delivering or practicing omnichannel, yet”.

This chapter illuminates where in the omnichannel roadmap fashion brands stand today, why many of them are still lagging behind and how they could benefit of an evolution of their business environment towards omnichannel.

3.3.1 Omnichannel capabilities today

Since 2013, L2 (2015c) has looked into the abilities of fashion brands to encourage consumers’ cross-channel behaviors and rates them accordingly. Its analysis comprises retailers’ supporting structures to support physical sales through digital (like omnichannel fulfilment capabilities, store locator experiences, and promotion of in-store services and events), as well as their E-commerce offering (including free shipping offers, exclusive product, and online-only sales). (See L2 2015c, p. 18)

To reveal broader trends, the examined brands are visualized on a matrix and tracked year-on-year, see figure 8. The matrix ranks brands by their E-commerce and brick-and-mortar incentives, discerning four clusters: E-commerce focused brands, in-store focused brands, omnichannel laggards and omnichannel leaders. Brands that qualify for the latter group are leading in both the E-commerce and the brick-and-mortar incentives categories. The study reveals that brands selling at premium^[4] price points continue to lag behind across both dimensions. (See L2 2015c, p. 18) “However, many major players, including Gucci, Dior, and Louis Vuitton, were observed regressing in push-to-store features, while for the first time prioritizing e-commerce– embarking on their digital roadmaps three to five years later than other retailers”, (L2 2015c, p. 18).

At the prestige price point, the two department stores Nordstrom and Neiman Marcus were able to enter the omnichannel leaders quadrant, the first evolving from being in-store focused, the latter coming from an E-commerce background. (See L2 2015c, p. 18) “The headway came off the backs of major reorganizations at both brands that united merchandising and planning teams across channels”, (L2 2015c, p. 18).

Abbildung in dieser Leseprobe nicht enthalten

Figure 8: Brand's omnichannel maturity ranking (L2 2015c, p. 18)

L2’s findings clearly outline that especially fashion brands with premium price points are still struggling to keep up with the emerging omnichannel trends. The next sections will further look into the adoption and spread of the most common cross-channel offerings.

Inventory visibility

For the majority of surveyed customers, inventory visibility is the most important omnichannel feature, see figure 9. (See L2 2015c, p. 7)

Abbildung in dieser Leseprobe nicht enthalten

Figure 9: U.S. digital shoppers' required omnichannel capabilities
(L2 2015c, p. 7)

However, among the reviewed 57 American aspirational and prestige fashion brands including for example ZARA, Nordstrom and Neiman Marcus, only 51 percent offered in-store inventory transparency in 2015 (up from 37 percent in 2014). Brands to add the feature include Zara, Tory Burch, Michael Kors and Marc Jacobs. (See L2 2015c, p. 7) In the all-premium subset comprised of 28 brands^[5], figures are even lower with only six players (21 percent) that have invested. (See appendix 3, Solca et al. 2015, p. 13) Brands that were launched in 2014 or later all offer in-store visibility without exception. For them, the delivery of outstanding omnichannel retailing is now the price of market entry. (See L2 2015c, p. 7)

But, even after investing in in-store visibility capabilities, many retailers struggle to fully capitalize on the feature as they lack robust consumer interfaces or personalization options. (See L2 2015c, p. 8) “Among brands in the study, only 29 allow consumers to set a preferred store via their account, and 66 percent of those automatically integrate consumers’ preferred locations with store-specific inventory data on product pages”, (L2 2015c, p. 8)

Click & Collect

At 57 percent the second most important omnichannel capability is Click & Collect, where products can be picked-up in-store after reserving or buying them online remains even more under-utilized. Only “[…] roughly one in four brands offer consumers this fulfillment option, with just three brands launching in the U.S. within the last year (Athleta, L’Occitane en Provence, Louis Vuitton)”, (L2 2015c, p. 9). The findings of Solca et al. (2015, p. 13) suggest that to date only 4 out of 26 examined brands (15 percent) offer this option.

Click & Collect exemplifies an effective customer-centric omnichannel strategy for retailers as it gives customers the ultimate convenience of browsing online for the best deal, but collecting products at a time and location of their choice, rather than waiting at home for a delivery. (See Green 2015) Supply Chain experts Lowe and Rigby (2014, p. 6) expect the number of companies offering Click & Collect to rise drastically in the next years. Between 2013 and 2018, they anticipate Click & Collect volumes to rise by 35 percent, accounting for at least 35 percent of total physical delivery volumes. By contrast, the percentage of direct deliveries, which are those specifically to the consumer’s address, is predicted to drop from 72 percent in 2013 to 64 percent in 2018. (See Lowe/ Rigby 2014, p. 6)

Direct deliveries

Today, the majority of brands offer free deliveries to their customers’ homes or work places. Especially within the premium subset, free shipping has established as a standard. (See L2 2015c, p. 21) However, L2’s (2015c, p. 21) figures confirm the prediction of Lowe and Rigby (2014, p. 6) that direct deliveries are about to decrease: between 2014 and 2015, among the surveyed aspirational and prestige brands the share of those offering free shipping dropped from 75 to 69 percent. These figures suggest that brands no longer offer free shipping under all circumstances. (See L2 2015c, p. 21)

In addition, “for those brands offering free shipping on orders of a minimum value, thresholds are also on the rise, […] suggesting brands are taking back control of their shipping policies, with an eye towards profitability”, (L2 2015c, p. 21). Within the apparel and accessories category, the average minimum price qualifying the online purchase for a free delivery went up from 59 to 63 dollars. (See L2 2015c, p. 21)

Return in store

Besides direct deliveries, another often observed cross-channel service is the allowance to return products in store, wherever the purchase was made. Solca et al. (2015, p. 13) found that among the 26 analyzed premium fashion brands 14 were offering this service (54 percent).

In store technology

Industry experts agree that digital in store experiences are the ‘next big thing’ in retail that will transform stores into digital engagement powerhouses. (See Silverman/ Hogan 2016, p. 2) Technologies like camera systems, interactive displays like smart mirrors, RFID chips, QR codes, beacons, virtual reality, and 3D printing are available to connect merchandisers’ physical stores with the digital world. However, so far the actual usage figures are frustrating: Out of the 28 premium apparel brands analyzed by BNP Paribas, only Zegna allowed customers the service to order products from within a store. (See Solca et al. 2015, p. 13)

The figures look similar when it comes to physical tracking capabilities. Only six percent of fashion retailers report the ability to recognize customers via their smartphones when they enter a store. (See L2 2015c, p. 31) “Use of beacons also remains under-penetrated, suggesting brands have yet to unlock real value from the heavily hyped technology–in part, due to the difficulty of analyzing the data returned to the retailers. Just eight percent of brands are testing the technology, while 10 percent have written it off completely and 31 percent are in wait-and-see mode”, (L2 2015c, p. 31).

As with inventory visibility, problems continue even when in-store technology is in use. Many brands are arguably doing very little to action the gained data and drive store performance. This results in today’s digital store experiences often remaining unnecessary, unintuitive and uncomfortable. (See Silverman/ Hogan 2016, p. 2)

Mobile payment

“In short, the market for proximity mobile payments (made in a store) is embryonic. The market for mobile e-commerce is flying”, (MEF 2015, p. 7). In 2014, 66 percent of mobile media users made some form of mobile purchase. But, this figure doesn’t tell the whole story. Actually, only eight percent of consumers use their phone to pay in a physical store. The mass of eager mobile spenders is simply using their phones to make E-commerce purchases. They are buying from eBay or Amazon and, to do so, they have substituted their laptops for tablets and smartphones. (See MEF 2015, p. 5) “It remains true that, for all the hype, the mobile wallet (as a store of value) is not yet ‘a thing’. In fact, our research says 32% of people don’t know what a mobile wallet is or can’t see the point of having one”, (MEF 2015, p. 5).

The outlined findings illustrate premium fashion companies’ poor performance when it comes to the exploitation of omnichannel opportunities. The next section looks into reasons for this sluggish adoption of new technologies.

3.3.2 Barriers of omnichannel marketing

The disruption of the traditional market structures caused by the advent of digital offerings can and may not be denied. “[…] Consumers’ digital behaviors and expectations are evolving faster than retailers are able to deliver, a gap we refer to as the ‘new digital divide.’ Some of the biggest players in retail have been reluctant or slow to understand or acknowledge this widening gap”, (Lobaugh et al. 2015, p. 3). In this chapter several barriers to change are identified.

Perception

For a long time now, many companies have not understood how to deal with the emerging omnichannel topic and have treated it as just another channel: “Organizations still think about omnichannel as an extension of their digital business – or as a sexier name for e-commerce,” (L2 2015c, p. 3) – some are still doing so. Lobaugh et al. (2015, p. 3) advise companies to not walk into this perception trap: “Our experience in the industry tells us that the traditional approach of focusing on digital as a channel drastically limits the value, the opportunity, and ultimately, the strategy”.

For premium fashion brands there is an additional layer: “Among luxury companies, conventional wisdom used to be that participation in e-commerce—and, in particular, selling through multibrand retail websites—was only for the lower and middle range of products. The pervasive belief was that luxury shoppers, with their discriminating taste and preference for high-priced goods, wouldn’t buy expensive things online; they would always opt for the personalized customer service and tactile shopping experience that monobrand brick-and-mortar stores provide”, (Dauriz et al. 2014, p. 26). The huge success of high-end digital ventures such as Net-A-Porter or YOOX, both launched back in 2000, proved the skeptics wrong, demonstrating that consumers do buy premium and luxury products online and at undiscounted prices. (See Dauriz et al. 2014, p. 26; Amed 2016)

Beyond that, the figures predict a promising future: “[…] while overall sales of luxury^[6] goods grew by a mere 2 percent in 2013, online luxury sales increased by 20 percent to an estimated €9 billion. We believe this growth will continue; we project that sales of luxury goods online will more than double to approximately €20 billion in the next five years”, (Dauriz et al. 2014, p. 26).

Measurement

As outlined before, today’s single-digit E-commerce sales share is only one part of the digital narrative. With the current measurement metrics in place, for many brands it is still not possible to evaluate the total digital influence on sales. The result: Scope and impact of business digitalization have long been misinterpreted and underestimated by many.

When planning, managing and measuring an omnichannel approach and its subsequent results, the most important goal should be to derive to a holistic view of causes and effects that drive the business success. Therefore, it is crucial to get a broader understanding of the interrelations between the touch points and channels, and not to look into single initiatives. One example for such a connected measure is the so-called ROPO (research online, purchase offline) -effect. Without the understanding of such relationships, brands will not be able to steer their omnichannel business in the right direction. (Oliver Schiffers)

Furthermore, the measures and metrics companies use to evaluate their digital achievements are currently very short-sighted. Take the conversion rate^[7]. It is one of the shortest term figures available, as it only represents a snapshot within the entire customer shopping journey, failing to explain where the customer came from and what triggered his or her action. Despite this, it has become one of the most popular indicators for evaluating E-commerce success, second only, perhaps to revenue. Common knowledge is that a large conversion rate is good. But that’s only a small part of the story: purchase frequency, loyalty and basket size also need to be taken into account to make proper evaluations. Good indicators permit brands a more holistic and long-term view on customer sentiments and behaviors, such as the customer lifetime value. (Oliver Schiffers)

Legacy systems

Neil Dawson and Oliver Schiffers both name the ‘single view of the customer’ as root and precondition for delivering seamless omnichannel experiences. This term describes the need for complete cross-channel data convergence, by which the provision of, brands would derive a better understanding of who their customer is, where they have come from and where they’re going to in their journeys across touch points and channels.

Still, an aspirational data pool like this remains unattainable for most. “’The single view of the customer’ is something we’ve talked about in data for probably 25 years. In fact, it is extremely difficult and challenging to realize a functional omnichannel system because of the huge changes you need within the technology, analytics and also the culture of a company. It requires massive changes in the organization to create common platforms and sources of data”, (Neil Dawson).

Two implementation barriers stand in the way to realizing the omnichannel vision. First, there is the organizational structure. Many companies build their organizations around sales rather than around the customer. This results in managers’ siloed views, in unbalanced processes and sometimes even in competing goals between different business units. “In many cases departments have been growing together into well-established teams. Between these divisions, I often experienced a lack of cross-linkages and communication, so that online shop, wholesale, and physical retail might differ in a product’s launch date. The same is true for campaigns, where marketing agendas between departments often are not sufficiently aligned”, (Marina Kuhn).

The second barrier is the technical implementation with two major challenges: the extraction of data from the currently existing silos, and the right linkage of these data points. To date, these links between the indicators are often missing, so that the cross device evaluation remains sketchy. Only the conservation of links when extracting the data will allow proper consumer insights across touch points later. This can be achieved for example, through the usage of the same cookies or user IDs over all data. (Oliver Schiffers) To date, out of 234 US mobile and digital decision-makers “[...] only 16% said they merge contextual data with customer data to create a single, shared, real-time view of the customer across channels”, (Google 2015, p. 4).

The mentioned creation of common platforms requires brands to make substantial investments in upgrading the systems that enable their back-end success. Unfortunately, short-sighted business goals and limited budgets often stand in a brand’s omnichannel way and make them rather focus on “[…] flashier plays that can be implemented quickly/ cheaply–including smart dressing rooms, virtual fit finders, and sleek app experiences”, (L2 2015c, p. 33). The current age of retailers’ existing POS systems represents this deficit in the field of technology investments: “41 percent of retailers have had their existing POS terminals for over five years, and 38 percent have gone the same amount of time without upgrading the underlying POS software”, (L2 2015c, p. 33).

Privacy

In the context of the increasingly blurring lines between private and public, the topic of transparency always has to be accompanied by questions and concerns about data privacy. “As shopping has changed, so the digital trail of personal data has grown. We are now seeing the emergence of what are known as ‘data lakes’, aggregations of Big Data from the trillions of transactions and communications at every level of society, together with the power of analytics tools to aggregate, analyze and predict user behavior. This, together with publicized ‘digital landmine accidents’ or data breaches, the pace of technology development, and the ‘Snowden effect’, have generally led consumers to become much more aware of the ownership and value of their data and issues of data privacy. We are witnessing a shift in the power balance between retailers and consumer product companies, and the consumer”, (Capgemini 2014, p. 24). The results of Capgemini’s (2014) global ‘Digital Shopper Relevancy Report 2014’ support this observation: “[...] over 28% of respondents feel strongly that they currently are not being provided with clear notice, choice and control of how their personal data is collected, used and shared by retailers, and 6% do not even know”, (Capgemini 2014, p. 24).

Data protection, with the currently strict rules in Germany, was also a topic in my discussions with David Bellem and Marina Kuhn. The balancing act between the value of smart consumer analytics on the one hand, and the value of trust in maintaining consumer privacy on the other hand increasingly becomes another huge challenge that marketers are facing when aiming to create seamless omnichannel experiences. Brands need to understand and respect customers’ data security concerns and start to act accordingly. The creation of mutual value for both brands and customers will be key in improving the digital engagement and in establishing and retaining customers’ trust. (See Capgemini 2014, p. 24)

Initiative

“Everyone is talking about omnichannel, but when it comes to actually working on solutions and making tough calls, most brands still remain chary. Sure, there is no golden path to a perfect omnichannel solution, but only by actually taking the first steps, can experience be gained”, (Marina Kuhn). By offering seamless shopping experiences and engaging customer journeys, today’s omnichannel frontrunners “[…] grow top-line revenue, and signal innovation to the market, which rewards them with a higher multiple on EBITDA”, (L2 2015c, p. 2). Omnichannel laggards will struggle to catch up with these cutting-edge brands, that often invested in transformative efforts already a decade ago. (See L2 2015c, p. 2)

So Brands, be brave and act – now!

3.3.3 Opportunities of omnichannel marketing

“[…] the premium in the future will be on creating unique, brand-defining experiences that keep customers coming back— whatever the channel”, (PwC 2015, p. 2)

The vast amount of available information and the multitude of purchasing options across channels and countries have combined to an intensification of competition within the retail environment. People are now considered the best informed customers to ever have shopped. In this new context, companies’ traditional ‘strategies’ to rely on barriers such as geography or customer ignorance no longer work. (See Brynjolfsson et al. 2013, p. 26) “Ski resorts, for example, used to be able to exaggerate the amount of snowfall and their overall conditions to attract skiers, but third-party information makes this difficult. Smartphone apps by Skireport.com and others allow skiers to report actual snow conditions in real time, which is pressuring resort operators to be honest. A recent study found that the amount of exaggeration by ski resorts has fallen sharply, particularly at places with good cellular reception, demonstrating how companies must adapt”, (Brynjolfsson et al. 2013, p. 26). Consumers benefit from this power shift as retailers are forced to be honest, and to improve their products, services, and pricing. “[…] Retailers selling inferior products or providing shoddy service will have nowhere to hide. In an omnichannel world, there is a premium on learning rapidly from consumers and catering to their needs. Similarly, there’s a premium on quality, price and value”, (Brynjolfsson et al. 2013, p. 28).

Not only consumers, but also brands and retailers can benefit from this new business environment. Omnichannel offers the ultimate opportunity to leverage sales by increasing brand awareness and engagement, customizing the product and service offer, and building trust and loyalty among customers. Below, several tactics and strategies are introduced in order to successfully capitalize on omnichannel marketing activities.

Increase relevancy through personalization

The explosion of new data from social, mobile and local channels led to an all-time chance to understand not only customers’ transactions, but also their interactions with the brand. To profit from the potential of customization, brands need to put the customer at the center of their retail equation and harness the power of data and analytics. “The limitation is no longer data but the ability to analyze the data”, (Brynjolfsson et al. 2013, p. 26). “Understanding the customer’s purchase history and how they like to buy and collect their products is key. […] Cross-channel data visibility is vital to make the omnichannel work effectively“, (Green 2015).

Personalized offers and customized user experiences help retailers to reach new consumers and to expand their market. These customized offerings will eventually lead to higher customer satisfaction, order values, and shopping frequency, while also improving employee satisfaction. (See L2 2015c, p. 31) “Increasingly, mash-ups of data from multiple sources will give savvy retailers an ability to do predictive analytics to make location- and time-specific offers and recommendations to each of their potential and existing customers“, (Brynjolfsson et al. 2013, p. 26f.). Location-based apps open up new selling possibilities: “Soon retailers will provide special incentives aimed at customers as they enter stores […] or when they leave without purchasing anything. Such offers will take into consideration consumers’ previous history and will be personalized according to their specific data”, (Brynjolfsson et al. 2013, p. 26).

Google goes one step further. In its study ‘Moments that Matter’, Google advises brands to focus on “[…] identifying key moments of intent, delivering on needs in the moment, and measuring all moments — in order to create a customer experience that’s relevant and useful at every touch point in this new path to purchase”, (Google 2015, p. 1). These key moments of intent are also referred to as ‘micro moments’. Google claims that customers want to have their needs met in the same moment of occurrence – also called instant gratification. (See Sena 2015) This approach is one out of many applications of the omnichannel toolbox, supported by data analytics as well as cognitive sciences like neuro-marketing.

Build brand awareness and preference through external brand advocates

The success of E-tailer Amazon exemplifies the importance of (mass) customized service. Consumers not only come to Amazon for cheap prices, but also for its well-curated consumer-generated content and reviews facilitating their choices. It is particularly this incorporation of external sources that enhances Amazon’s product offering. (See Brynjolfsson et al. 2013, p. 26) External influencers are perceived as trustworthy sources because they are allegedly neutral, and not tied directly to retailers or brands. (Marina Kuhn)

External influencers play a major role not only in the evaluation of a brand’s products, but also before when a customer is browsing blogs or social networks like Instagram for inspiration. “Today, as the number of information sources has grown, the digital-enabled customer can actively decide where amongst their many options to look for the best information. These customers look to influencers through social media, often friends or family, subject matter experts, or independent bloggers, for their trusted information”, (Lobaugh et al. 2015, p. 15).

Brands have three ways to connect with their customers through the social networks: building an account, running ads, or indirectly advertising through the sponsoring of influencers. These influencers or brand advocates can be either celebrities, or social media stars like Chiara Ferragni. The efficiency of investments in the latter group is rooted in the authenticity, aspiration, and accessibility of bloggers. Their recommendations are perceived as nearly as relevant as the recommendations from friends. Embedded links in the posts lead customers to the brand’s online shop and connect the inspiration with conversion. According to Lobaugh et al. (2015, p. 16), consumers who use digital services, and especially social media for advice in their shopping process end up converting more often and spending more. Plus, influencer marketing is scalable, leveraging a brand’s reach.

Client-customer relationships are based on trust. Social media marketing via the influencing of influencers offers wide opportunities for brands to increase reach and preference, as well as to build and maintain trust among customers.

Exploit local cross­-channel opportunities

In a recently conducted study, Mastercard (2015, p. 37) found that 63 percent of shoppers are frustrated by differing store and web inventories, followed by 59 percent naming personal information security as a drawback. With 73 percent, only the outage of items was perceived as even more frustrating. Consequently, “[...] retailers need to do a better job of sharing product knowledge across their entire platform. Doing so will facilitate channel integration and attract shoppers who prefer shopping in multiple channels. Features that result in conflicting and confusing product information should be minimized to avoid consumer frustration”, (Brynjolfsson et al. 2013, p. 28).

Improving push-to-store features can help retailers to exploit local opportunities: “[…] apps from retailers such as Wal-Mart, Target and Macy’s allow consumers to search for products and prices available locally. By giving consumers more accurate information about product availability in local stores, retailers can draw in people who might otherwise have only looked for products online”, (Brynjolfsson et al. 2013, p. 25). The International Council of Shopping Centers (see ICSC 2014, p. 15) supports this statement by demonstrating that omnichannel investments do have a positive impact on return on investment as consumers tend to spend more when there are multiple, seamlessly connected touch points, see appendix 4. “While e-commerce pure plays typically net 77 cents on the dollar (due to costly returns that average 23 percent of order value), retailers that offer both in-store pick-up and returns enjoy an accretive effect – whereby shoppers walk out of the store with 107 percent of their original basket size, after exchanging merchandise and making incremental purchases (behaviors rarely seen in a digital world)”, (L2 2015c, p. 2).

[...]

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^[1] Within this work the expression ‘in-store’ refers to the physical store.

^[2] Retail spending is defined as sales of merchandise to the final consumer. (See CRR 2016)

^[3] “The MSCI World Index captures large and mid cap representation across 23 Developed Markets (DM) countries. With 1,653 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. DM countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US”, (MSCI 2016).

^[4] L2 (2015c) distinguishes ‘luxury’ from ‘prestige’ price points. Following above line of argument, L2’s ‘luxury’ is redefined as premium.

^[5] The subset from Solca et al. (2015) also was redefined as ‘premium’.lieternative to help tackle) hic'ers'ads and their appntegrating the journey into energy storage and conservation services

^[6] Again, ‘luxury’ refers to both premium and luxury products.

^[7] A conversion rate is the percentage of visitors who take a desired action, for example purchase a product.