By Leslie Belcher, President, Jesta I.S. Inc.
The economic downturn created a challenging environment for retailers as the concentration of consumer spending has had a direct effect on overall retailing. Individuals are looking more closely at their discretionary spending and are cutting back most on non-essential products while performing more active price comparison. Today, Internet retailing enables consumers to compare prices, save money and limit their delivery costs.
The traditional brick-and-mortar retailers built their IT infrastructure in a piecemeal fashion using legacy merchandising and planning systems to support their growing business (although now it is becoming more expensive to sustain). In the 1990s, the catalog/call-centre system was introduced to manage that sales channel. Presently, various new Web-based e-commerce platforms are helping to grow the business by effectively tying together processes and procedures for the internet channel, with systems that help ensure service excellence by giving the customer the opportunity to buy anything, anywhere, anytime.
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Internet retailing is expected to outpace all store-based formats, as most retailers will either enter or expand in the Internet retailing channel, while a significantly higher proportion of the world population will have access to the Internet, according to research from Global Retailing. By the end of 2010, non-store sales will account for nearly 7% of global retailing. Virtual retailers, which initially dominated internet retailing, are coming under pressure from store-based retailers, as they harness the benefits of multi-channel retail, such as collect-in-store options, driving sales and improving the customer’s experience by eliminating common obstacles surrounding order delivery, according to Euromonitor International.
The conventional retailing business model is no longer working as it was. Retailers are seeking to transform themselves into multichannel enterprises that will use new channels to grow and to cut service costs without abandoning their traditional strengths; however the systems that worked once to manage brick-and-mortar, catalog and call center channels are not designed to support the complexity of the e-channel operations.
While it is typically not feasible to instantaneously change a promotion or a marketing message within the brick-and-mortar store, the same is not true of a transactional e-commerce site, which will often provided up to date information at the click of a button.
The virtual channel is expected to put increasing pressure on store-based retailing in the coming years. If retailers remain stagnant they risk alienating their evolving customer base who are in turn becoming accustomed to enhanced services such as order tracking, customer service and online account management, thus increasing operational expenses, leaving them out of the competition and out of their customers’ scope.
According to an article on multichannel retailing from David Flint and Geri Spieler, retailers should follow a four-stage process to be a successful multichannel enterprise:
- Create a multichannel strategy
- Determine the relative positioning and priority for the channels
- Organize for multichannel operation
- Adopt best practices for integrating the traditional and virtual business.
Their competitive advantage will rely on how they control their multichannel operations. It is essential to ensure the right offering when expanding via online channels.
Moreover, companies need to have the capability to capture accurate demographic information about their online customer base in order to meet their expectations and be consistent through the channels. To do this, retailers must have the right systems in place to collect such information therefore improving their customer relationship management and service excellence/delivery capabilities.
Finally, the technology associated with e-commerce systems will support a wide range of retail applications offering the ability to improve product supply, enhance service and/or reach otherwise inaccessible markets. Providing real-time data and allowing customers to access to inventory information is crucial for internet retailing operations because is directly related to the effective execution of customer relationship management practices.
With more than 25 years of experience in software ERP solutions in the soft goods vertical, Leslie Belcher leads Jesta I.S. with a focus on using technology to solve real business problems. Prior to his role as President, Leslie held several positions in the organization including, Chief Operations Officer and VP of Services and Support. Leslie is an active member on several industry associations including the American Apparel and Footwear Association, National Retail Federation, VICS and ARTS.
