Tracking the evolution of the modern retail organization

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At Shop.org’s First Look event during Retail’s BIG Show, Executive Director Vicki Cantrell moderated a panel of e-commerce executives from Belk, Charming Shoppes and REI to discuss challenges and opportunities in the evolving area of organizational structure for retail companies. This panel discussion was held in conjunction with the release of Shop.org’s Organizational Structure for the Future of Retail: The Digital Effect study conducted by Okamura Consulting and sponsored by DataStax. Last week, we explored the influence of mobile and how e-commerce has influenced the evolution of new internal partnerships, and how merchandising functions are now handled within retail organizations. Read on for a deeper dive into more trends that the study revealed and each panelist shared.

Where (and to whom) e-commerce reports
Ivy Chin, senior vice president of e-commerce at Belk, said there are many pros to reporting to the chief marketing officer especially when it comes to branding and budget. Reporting to the CMO gives the e-commerce team a first-hand understanding of the overall branding strategy and tactics, while also ensuring that the digital component is at the table for new branding initiatives. This also provides the e-commerce department with the opportunity to leverage other marketing assets such as print, TV and social media within the CMO’s purview. “Overall, we’re able to reflect our brand in a very well executed way,” Chin said. Strategically, such as influencing changes in budget from print to digital, “It’s great because the CMO gets to see your performance close up, so when they realize how much business you’re able to impact, it’s a whole lot easier to justify.”

Jim Okamura said that his team observed a wide range of reporting relationships for companies’ head of direct or digital sales. “It’s a natural maturing of our industry – there’s a shift in broader strategies [so that] the head of digital no longer needs the ‘protection’ of the CEO.” Strong internal partnerships are critical between the head of direct, the head of stores and the head of technology to determine what the customer experience should be. “Cross-functional strategies will cross functional silos, and we’re starting to see new processes inside companies that make it work more smoothly.”

Jeffrey Liss, senior vice president and general manager for e-commerce and customer relationship management at Charming Shoppes, observed that the original value of having the head of direct report to the CEO was the idea of “fly cover” and ensuring that “e-commerce has its say at the table.” By now, brands have become more aware of the role of e-commerce. He says the value is now in ensuring that the organization “is moving as fast as the consumer … there needs to be a digital point of view at the table.”

Incentives
Cantrell noted that incentive structures are one of the biggest issues the study found. Brad Brown, senior vice president of e-commerce at REI, said his company looks at what they call “market total sales” as the measurement by which store managers are motivated by total sales in their market, or total in-store and e-commerce sales in that store’s market. “As a co-op, we have years of data, so it was pretty easy for us to bring those two channels together from a sales planning perspective,” Brown said. ”Last year we changed that incentive so that … all full-time retail physical store and digital store employees (are) incentivized by market total sales.” While there are a number of other incentives in place as well, Brown added, “Sales is the metric that really started changing how our sales teams (digital and physical) started thinking about channels — and, more importantly, customers instead of channels.”

“I’m not sure there’s any one key metric that would facilitate the integration of our channels,” Liss said. In fact, Charming Shoppes actually removed an incentive program originally implemented to reward stores for online sales. “I think it’s more about shifting the behaviors and the culture. One of the early things Charming did was offer order online, pick up in store functionality. The stores love that as it brings customers into the store and they realized that it’s another value of e-commerce. ‘What’s best for the customer?’ needs to be the true question.”

At Belk, Chin explained that they are still early in the process, but that store managers and associates increasingly understand the value e-commerce can bring – whether it means driving store traffic back to the store, driving more sales, or servicing the customer with inventory they might not have in the store. Chin added that Belk is testing a few ideas, such as a friendly competition between stores, to see how it might change behavior.

“What Brad [Brown] describes is really progressive,” Okamura said. Many executives interviewed for the study said they are just beginning to define the right measurements to not only drive behavior at the front line (store associates) but even in terms of managing Wall Street expectations, both for executives and throughout the organization. “We’re still at the early stages of reinforcing the behavior that we want. Metrics mean a lot – they know the number that they need to hit, so it’s going to be important to keep moving that needle to something that is really aligned with the strategy.”

Much work yet ahead
Digital transformation is integral to the customer experience, and as retailers progress along this learning curve, companies will continue to adjust and refine their organization to optimize the customer experience.  “Bridge roles are becoming so important to help everyone at the table really understand what are those issues that we need to solve, and allowing the team to solve and carry out the plan,” Okamura said. “The structural changes are easy. It’s all the process and cultural changes that accompany those that comprise the really hard work that we have ahead of us.”

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