How to organize the retail company of the future

2 Comments | This entry was posted in Events, Retail Companies

Retail’s BIG ShowIt’s pretty easy to spout adages such as “omnichannel customer” and “cross-channel coordination”, but as any retailer knows, the much harder part is figuring out how the retail organization should be set up to make good on those mantras. Enter a panel of five experienced retail specialists at this week’s Shop.org First Look Track “The Organization of the Future” session: Rob Schmults (Intent Media and panel moderator), Jared Blank (Tommy Hilfiger), Kevin Ertell (OnlineShoes.com), Sally McKenzie (Ecommerce Consulting), and Bob Myers (Sheplers Western Wear).

So, let’s start with the age-old e-commerce question: in a multichannel organization, whom should the e-commerce team report into? The panel agreed: directly to the CEO. The CEO provides the cross-silo solution that cuts across all the divisions within the organization. If the e-commerce team is part of another group – marketing, merchandising, licensing, retail, or the like – it will inevitably be overly oriented toward the agenda of the silo into which it reports. What about the idea of having e-commerce report into the retail (stores) division? No, the panel said: retail and e-commerce need to be on par with one another organizationally. Or the idea of having different parts of the e-commerce team report into functional areas? The panel was clear: don’t break up the e-commerce organization – keep it whole, and, oh yes, have it report to the CEO.

Jared Blank, Vice President, E-Commerce at Tommy Hilfiger

As it turns out, this is how Bob Myers has set up his team at Sheplers. Taking it yet a step further, Bob has also implemented a single P&L within Sheplers, thereby allowing everyone within the company to unify around the consumer, versus individual silos. Sheplers has taken specific measures to make this a reality. For example, stores get credit for online sales that originate in their region or zip code, and e-commerce is tasked with driving sales in stores. As Kevin noted, “It’s about [shared] incentives.”  Furthermore, every employee hired – no matter what their job – has to have digital experience, thereby spreading shared digital sensibility through the organization.

The panelists all emphasized, however, that the most important tenets of classic retail remain: the traditional adage of “retail is detail” is as true as ever, but now it’s a matter of organizing around the customer (or, perhaps, “retail is detail plus digital”). E-commerce in 2012 simply isn’t like the online retail of 10 or 15 years ago – this is true retail, with “real retailers” running the business who understand the importance of factors such as inventory turn. “You have to be voracious about being in stock,” Bob noted as one example – retailers can’t just rely on the idea that the website is the infinite warehouse and that customers will be satisfied if you offer to order their size / color combination for them online, especially now that anyone with a smartphone in hand can do that on their own. (In the out-of-stock situation, Bob advised simply saying to the customer, “Let me get that item for you” – like we used to decades ago! – and then tracking that item down from other stores or even a competitor, simply to deliver on one’s promise to that customer.)

So, how about that other age-old e-commerce question: where does the retail IT team fit into the organization? Retail IT is generally used to build employee-facing tools – tools for employees to learn and use, maybe with training and manuals and on-site help. Consumer software and applications, of course, are very different and thus require a very different approach to development, implementation, and ongoing evolution. The panel agreed that it’s likely prudent to work initially with a third party development team to develop e-commerce solutions, as they know how to design and build for the consumer. As Sally noted, however, no one wants to use external resources indefinitely, so the ideal situation is to bring in and enable the internal IT team over time, gradually transitioning to make IT a true e-commerce partner.

How about e-commerce leadership? Gone are the days of “bright young things” coming in as generalists to run an e-commerce business, the panel agreed. Now, retailers need e-commerce specialists with deep expertise and experience to lead the e-commerce team. Jared described that he spends a lot of time with his merchandising and marketing teams (among others) “getting into the weeds” to understand in great detail what’s going on, how the team is doing, whether the right skill sets are in place. Sally added that understanding whether the right people are in place takes attention and time. E-commerce leaders need to invest in their team by giving them opportunities to develop their understanding of the market and to deepen their skills through venues such as Shop.org events (her words, not mine!). Also, some CEOs may not understand some of the specialized skills needed for e-commerce that are different from more traditional retail roles – for example, a usability expert, whose skills can increase site conversion and otherwise improve the customer experience.

With the e-commerce market developing so rapidly, how do organizations manage budgets? Some things in a budget, panelists noted, are must-haves like “air conditioning – you can’t not have that.” On other things, Bob explained that he listens carefully to his direct reports, and that if they all feel that something on the table needs to be included in the budget, he takes that input very seriously. What about the “shiny new keys” – emerging technologies that may not yet have proven track records? For those, Bob noted, “You place your bets.”

As Kevin pointed out, “Defending the status quo kills companies.” But if your organization isn’t yet quite as future-state as Sheplers, Sally summed up a few key steps towards the retail organization of the future: do ensure the e-commerce team reports into the CEO; focus on integrating *processes* first (i.e. integrate the organization further only once the processes are in place); and ensure that you have the right people for the job.

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2 Comments

  1. Posted January 22, 2012 at 12:21 pm | Permalink

    Great blog Fiona! At blacklocus.com we interact with a broad range of online stores and we noticed that the majority of retailers still have their e-commerce division reporting to another group in the company.

    In our experience, retailers that have their e-commerce group report directly to their CEO, often have a stronger online business resulting in: higher sales, higher overall margins, lower returns, better pricing strategies, more user-friendly stores, smarter adoption of technology, and a combination of product assortment and pricing that is optimized for the online channel.

    To give you an example, we’ve witnessed the transition of an e-commerce department from the time they were reporting to the marketing group to the time they began reporting directly to the CEO. The CEO hired an experienced e-commerce executive to lead the digital channel and turned them into its own division. This change gave the team clear direction, ownership of their work, and independence. The delta in rate-of-progress was mind blowing! Within 6 months they revamped the design of their online stores, enhanced product assortment, increased visibility through channel and targeted marketing, and optimized prices and margins for their entire product selection. Dollars started pouring.

  2. Posted February 19, 2012 at 4:38 am | Permalink

    I read this blog post with interest – and found myself agreeing – but also questioning it. Seems to me that in the increasingly multi-channel or omni-channels world, ecommerce is not its own division, but rather a way of doing business that crosses all divisions. Yes, it might be an evolutionary step forward to have a separate division rather than just a part of marketing (or worse, IT) but surely successful multichannel retailers presently and in future will make sure that the customer is center – and ecommerce is across the whole organization: from supply chain to sales, delivery, marketing etc. All will use ecommerce – not just the dudes tasked with looking after the website.

    This seems reminiscent of IBM’s coining of the word “ebusiness” – which worked 10 years ago, but now seems dated as many people now just see as “business”.

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