How “digital” fits into today’s retail organization

2 Comments | This entry was posted in IT/Operations, Marketing, Merchandising, Mobile, Research, Retail Companies

How to organize e-commerce within a retail company isn’t an easy question to answer.

“E-commerce as a division has been through various stages through the years,” Shop.org Executive Director Vicki Cantrell said during Shop.org’s First Look at Retail’s BIG Show earlier this year. “It has been a separate entity, it’s been integrated (and) even within an organization it could have been a separate business. It’s had quite an evolution.”

The issue is the subject of a recent Shop.org study, Organizational Structure for the Future of Retail: The Digital Effect, that was highlighted during a panel discussion led by Cantrell last month. The study, conducted by Okamura Consulting and sponsored by DataStax, explores the benefits and challenges of how “digital” fits into today’s internal business model for retailers.

“We know that strategies are changing … yet often we do find that the organizational design has not been aligned to really match that strategy,” Okamura Consulting‘s Managing Director Jim Okamura said. “Whether you call it cross-channel, omnichannel or integrated digital strategies, we see organizational issues as critical to how we move forward [and] how we see the modern retail organization evolving.”

During the panel, Cantrell discussed the study with Okamura, REI Senior Vice President for E-Commerce and Direct Sales Brad Brown, Belk Senior Vice President for E-Commerce Ivy Chin, and Jeffrey Liss, senior vice president and general manager for e-commerce and customer relationship management at Charming Shoppes, now part of Ascena Retail Group.

Internal partnerships.
Several years ago, Charming Shoppes redesigned its web site and introduced a universal “cart” across all brands on a multi-tabbed site. Since none of the brands owned e-commerce directly, it forced the two entities to work together. The catalyst for that partnership: time, education and data. For example, the e-commerce team could show each brand that cross-channel customers were, in fact, more valuable. An incentive structure rewarded store associates and managers for total sales in their store, regardless of the channel used.

At REI, the e-commerce and IT teams have jointly developed an “agile” development methodology for their digital business (both mobile and on the web). This includes a “bat phone” that gives the e-commerce team access to certain resources in IT as well as a business analyst and enterprise architects who are the direct link into the IT planning organization. Together, these act as the “e-commerce advocate and watchdog.”

Chin described how Belk has developed a “middle tier group” that helps with “translation” between the e-commerce and IT teams so that both understand the business objectives and what it takes to get a project done. There is also a culture of “no finger pointing.”

“If there’s an issue, we get the team in the room and solve the problem,” she said. Teams can be temporarily co-located, for example, to get a project back on track and successfully delivered.

Mobile.
Several panelists noted that they started out by creating a separate team for all things mobile – only to realize that mobile permeates everything. As Brown explained, “What started out as an independent organization is now what we philosophically want to put across all of our streams – essentially thinking ‘mobile everywhere.’” Chin added, “You have consumer-facing mobile and then you have associate-facing mobile, so we’re going through the conversation of where ‘mobile’ should sit going forward.”

In determining mobile priorities, Brown noted that REI is very data-driven, making it easier to determine whether to focus on the tablet experience than something else, for example. Liss stated that it’s important to think about the digital experience for the customer, and from that determine how brands and e-commerce teams work together. Chin later described a “program office” at Belk that consists of the senior vice presidents of e-commerce, IT and stores, who jointly make those decisions.

Merchandising.
A major part of the study tackled how merchandising functions are now handled within retail organizations. Belk’s central buying office buys for both stores and e-commerce, but the key is “two-way communication” between the web merchandising team and the buying office to help the latter understand “what the web customer is looking for, what lines they need, what sells and what doesn’t” as well as timing. The result: expert web merchants who leverage the buying power of corporate.

As for planning, REI has both a product planning group focused on factors such as product, forecast sell through, and a marketing planning group focused on demand plan and factors, that jointly develop and manage the plan.

Stay tuned for Part Two as the panel explores the impact of digital on internal reporting structures and incentive programs.

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Posted in: IT/Operations | Marketing | Merchandising | Mobile | Research | Retail Companies and tagged , , , , ,

2 Comments

  1. Posted February 27, 2013 at 12:11 pm | Permalink

    I agree that mobile permeates the whole organization. In addition to the customer and associate facing apps, there are the dimensions of ecommerce on mobile devices and in-store use of mobile devices (assisted shopping). With more than 90% of retail still happening in the physical stores, mobile-assisted shopping is by far the bigger opportunity.

    A recent study that we published shows that apps with indoor location technologies (indoor maps, product locations and efficient routing) increases customer engagement by 5x. That creates the opportunity for the retailer to both know much more about their customers (both individually and in aggregate) and deliver highly personalized communications.

    With more and more people using smartphones/mobile in their in-store shopping experience it is not something to be overlooked. It’s easy to say that this is the “retail of the future” but it’s already here. At least from the customer’s perspective and behavior.

  2. Posted February 27, 2013 at 12:25 pm | Permalink

    This piece seems to use “digital” and “ecommerce” interchangeably, as though they were synonyms. Is that wise?

    Ask anybody in shopper marketing “how digital fits in retail” and you’ll likely hear about all kinds of fascinating subjects, from geo/location-based targeting to in-aisle navigation to loyalty programs to mobile barcodes & scanners, to in-store digital discovery of offers/coupons. Ecommerce is an entirely separate wing of the house, and (site-to-store gimmickry notwithstanding) fundamentally distinct from traditional “retail.”

    Ecommerce may indeed account for a *huge* piece of digital, but using the terms interchangeably seems a little shortsighted.

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