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July 2013, IDC Retail Insights #IDCWP17V

Redef i ni ng the Shopper Experi ence Wi th


Omni channel Retai l i ng
WH I T E P A P E R
Sponsored by: Retalix
Chr i st i ne Bar dwel l
Jul y 2013

EXECUTI VE SUMMARY
Consumers hold the power, and it is consumers who are currently
defining the new rules of retail. As a multitude of interaction options
and technologies emerge, so grows consumer expectation for retailers
to deliver a personalized and consistent shopper experience across all
sales channels and touch points. Furthermore, consumers want to be
able to access them simultaneously and interchangeably.
Consequently, omnichannel retailing, which transcends multichannel
approaches by assuring personalized tracking and full consistency
across all channels and touch points, is no longer a mere differentiator
of choice, but truly a must have. This means that retailers slow to shift
focus from omnichannel theory to practice, especially in an intensely
competitive market, run the risk of losing significant business.
Yet as bare a necessity as it has become, omnichannel implementation
presents notable challenges. How does one get there? When analyzing
gaps, for one, retailers need to perform bold assessment of their
organizational processes and technology capabilities, all while
adhering to a customer-centric perspective. For transformation to
succeed, they must get organization and processes right first, no less
importantly than choosing the right technology for modernization.
Implementation of the right technological innovations will assure
delivery of deeply personalized yet seamlessly branded interaction,
uniquely catering to the needs of each and every individual shopper.
Adopting such an approach is the only way retailers can realize true
360-degree engagement and achieve "total experience" an entirely
new level of relationship with shoppers that goes beyond mere sales
interaction and sale cycle.
I N THI S STUDY
In partnership with Retalix, this study explores the drive for
omnichannel retailing, the processes and technologies retailers need to
employ to gain omnichannel capabilities, and the approach required to
ultimately deliver the "total experience" that present-day shoppers
have come to expect.
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Page 2 #IDCWP17V 2013 IDC Retail Insights
SI TUATI ON OVERVI EW

O mn i c h a n n e l i s N o t a C h o i c e , B u t a n
A b s o l u t e Mu s t
Consumers Define the New Rules of Retail
As new devices and social networking present a greater breadth of
retail interaction options, consumers are increasingly demanding that
retail services fully leverage these options and that their needs be
catered to via a growing array of channels and touch points.
Shoppers are not only demanding that service be delivered via
multiple channels, but also expect it be completely seamless and
coherently branded. In other words, shoppers are demanding seamless
omnichannel service.
And what exactly is seamless omnichannel service? Well, a dictionary
would have the following to say:
Omni- combining form; all; of all things
In more practical terms, shoppers expect retailers to engage and
embrace them in the context of a unified brand, with compellingly
personalized and highly consistent service, anywhere and at any time.
When customers conveniently order items online or on their mobile
devices, for example, they expect that these be delivered to their home
trouble-free. Similarly, they will undoubtedly frown upon arriving at a
store to pick up items ordered on a retailer shopping portal, only to
discover that these items are no longer in stock. And should they have
set up an online account on a retailer's website, they will likely find it
unacceptable when requested to provide personal details upon later
contacting that retailer's call center.
The Stop-Start Shopper
IDC Retail Insights uses the term "stop-start shopper" to describe
omnichannel consumers. Stop-start shoppers generally "hop" among
numerous channels and touch points over an undefined period of time
prior to making a purchase.
For example, when coming across a hat they like in a store, they won't
necessarily purchase it right then and there. They'll scan its barcode
using their smartphone instead, and place it in the retailer's mobile
shopping basket. Upon arriving home later, they may log into their
online account with the retailer, this time via their laptop. Their
expectation is to have their online shopping basket fully and
continuously synchronized with its mobile counterpart, with the hat
waiting there for them to complete the purchase.
Single sign-in, a cross-touch-point "omnichannel shopping basket,"
and coherent, personalized marketing promotions and product
recommendations delivered across all sales channels are but some of
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2013 IDC Retail Insights #IDCWP17V Page 3
the means retailers can employ to address the needs of the stop-start
shopper.
Omnichannel is No Passing Fad, and the Stakes are High
It is important to note that demand for omnichannel retailing is no
passing fad. It is the new norm, and failure to accommodate it carries a
heavy toll. Consider, for example, such formerly prominent brands as
U.K.-based Clinton Cards, which doubted online shopping would take
off, only to see most of its market share frittered away to online
competitors offering customers the ability to create personalized gift
cards on the web. Notable U.S.-based brick-and-mortar music and
book store chain Borders also suffered a similar fate.
The Time for Retailers to Act is Now
The business case for omnichannel retailing is clear. After all,
omnichannel shoppers are known to spend up to 3.5 times more than
single-channel shoppers, and customers provided with seamless
experience across numerous channels tend to shop more frequently
and perform purchases across a relatively broad number of product
categories. Omnichannel retailing also improves customer retention
rates and increases customers' demographic diversity.
And yet most retailers are either not keeping up with this consumer-
driven change, or are struggling to do so. Those holding onto siloed
approaches and manual systems integration are bound to get left
behind as those coming to grips with technological gaps in their
organization, rearchitecting business processes, and implementing
platforms facilitating seamless omnichannel retailing will ultimately
take the lead. This is not the time to hesitate.

Ma k i n g O mn i c h a n n e l S h o p p i n g a R e a l i t y :
Wh e r e D o e s O n e S t a r t ?
While developments have been made in omnichannel-enabling
technology, omnichannel retailing is a relatively new concept. Best
practices are still being developed and information supporting business
cases, particularly with regards to innovative customer-facing
technology, can be difficult to come by.
To help overcome these challenges, IDC Retail Insights has designed
an omnichannel retail maturity model to guide retailers through the
steps necessary to producing an omnichannel experience (see Figure 1).
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Page 4 #IDCWP17V 2013 IDC Retail Insights
F I GURE 1
Th e I DC Ret ai l I ns i gh t s Omn i c hann el Ret ai l Ma t ur i t y Mod el

Source: IDC Retail Insights, 2013

To briefly explain:
"Customer experience" is what is to be delivered to consumers at
each phase. The maturity model is designed to produce
increasingly deeper engagement with shoppers, and serves to
dictate organizational and technological requirements.
"Technology" refers to the technology investments required and
recommended to support experience reflecting this deeper
engagement.
"Process and people" provides framework-level guidance on how
organizations may have to restructure to become more experience-
and less product- and channel-centric.
Even the most mature omnichannel retail businesses are currently
situated at phase 2 (convergence) or 3 (precision) on the IDC Retail
Insights maturity model, with progression toward full immersion being
the next logical step, if they are to go even further than omnichannel
retailing and attain the next level of "total experience."
Continuous Experimentation with New Channel Initiatives
Phase 0:
EXPERIMENTATION
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Offering Multiple
Channels
Applications for a
Customer-Facing
Omnichannel
Experience
Defining the
Business Case
Phase 1:
FOUNDATION
Offer/Loyalty
Segmentation
Cross-Channel
Services (Click &
Collect, Loyalty)
Data Foundation
Single
StoreTechnology
Model
ARCHITECTURE
Best practice
Inventory/RFID
Store/Online
Inventory
Integration
OC KPIs
Identification
Phase 2:
CONVERGENCE
Targeted Real-Time
OC Offer/Loyalty
Cross-Channel
Support Services
Online Inside
Real-Time
Capabilities
O3 Platform (all
Channels)
OC Fulfilment and
Merchandising
Sensors
Social Integration
Omnichannel SC,
Fulfilment and DC
Structure
OC Price
Optimization
OC Business
Performance
Management
Phase 3:
PRECISION
Context-Aware OC
Offer/Loyalty
Personalization
On-Demand
Assortment
OC Customer
Participation
Embedded
Application
Intelligence (inc.
Location)
Predictive
Analytics
Advanced
Customer
Intelligence
Customer-Centric
Merchandising
OC CRM
OC Promotions
Phase 4:
IMMERSION
OC Basket of
Goods
Lifetime Next Best
Action Dialogue
"Zero" OOS
Thin/Smart Clients
Touchpoints; POS =
Gateway to the
Other Channels
Single
Transactional
Engine (Store,
Mobile, Online)
Omnichannel
Single Message
Marketing
Customer
Experience
Innovation
Management
Phase 5:
OPTIMIZATION
OC Basket of Value
Value-Add Service
Differentiation
Self-Learning OC
Experience
O3 Optimization
and Emerging
Technologies
Integration
Embedded
Omnichannel
Culture
Continuous OC
Process
Optimization
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2013 IDC Retail Insights #IDCWP17V Page 5
This is no easy challenge, in that it calls for business model
transformation aimed at capturing and intelligently leveraging,
carefully orchestrating, and efficiently executing all moments of
omnichannel customer engagement into the retailer's brand experience.
For omnichannel retailing to truly become reality, it is critical that
retailers be as receptive as possible, and that they succeed in
positioning themselves as capable of accommodating shoppers' every
need and want, all while directly engaging them over any customer-
preferred channel. This requires that retailers address a number of
business domains, while placing customer experience at the very
center of their thinking and planning processes. These domains
include:
Organizational and business culture and attitudes
Business processes
Technology selection and delivery
Creating an Omnichannel Business Culture
Retailers must adapt to omnichannel retailing. This change needs to be
led by the CEO and board members, as only then will messaging
trickle through the business and retailers gain buy-in from all retail
chain staff.
Too many retailer leaders do not understand the new rules of retail.
They come from a traditional bricks-and-mortar, product-centric retail
background.
The first step for the CEO is to think of the business as a whole, rather
than as siloed operations competing for revenue. This is imperative to
transforming from a multichannel retailer to a business in which
omnichannel retailing and customer centricity are so ingrained that
they lie at the very core of the organization's culture and are regarded
second nature by its staff.
The next step is to create partnerships between IT and line-of-business
(LoB) heads. In working together, it may become apparent that other
units share the same goals and that joint business cases may be
possible. A number of thought-leading retailers have created
omnichannel director- and even board-level roles, so as to streamline
this process, achieve efficiencies across the entire business, and assure
that customer experience be at the heart of all LoB business decisions.
Developing Customer-Centric Omnichannel Business
Processes
Building customer-centric business processes is a vital step to
ingraining omnichannel retailing in the retail organization's culture.
This can be achieved via a number of approaches, including:
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Page 6 #IDCWP17V 2013 IDC Retail Insights
Offering convenient services that span channels, as in allowing
online ordering and in-store returns, as well as click-and-collect
services. To assure high levels of customer service, retail staff will
need to be incentivized. Retail representatives providing click-and-
collect services in stores and not incentivized for sales will
naturally be less likely to deliver exceptional service.
Some retailers are therefore distributing their online sales to
regional retail teams, so that the entire business is able to share in
success. This is particularly important when products are out of
stock, in which case in-store staff can drive POS- or kiosk-based
online sales and prevent loss of business.
Transitioning IT teams from project-driven organizations requiring
business alignment to service management organizations
demonstrating high responsiveness to short- and long-term LoB
leadership needs. This helps retail businesses assure faster
response to ever-changing customer demands.
Unifying siloed online and store business reporting, and
consolidating operations and processes to encourage omnichannel
business culture. For example, if in the past, retailers maintained
two merchandising teams one for in-store and one for online
merchandising the recognized best practice today is to bring the
functions together under a single omnichannel team. It is also
recommended that marketing be included in this consolidation to
assure that retailer marketing department strategies be customer-
centric and that marketing be directed at a consolidated,
omnichannel shopper persona rather than run under a product-
or channel-centric approach.
Deploying the Right Technology to Support Omnichannel
Retailing
To qualify as omnichannel capable, retailers must revisit their IT
strategy, while going deeper, and beyond the application layer.
And yet, in the technology architecture prevalent in today's retail
environment, a move to omnichannel marketing typically requires
utilization of multiple point solutions and plenty of integration.
IDC Retail Insights believes retailers must therefore move up to
technology infrastructure that eliminates the need for costly and
cumbersome integration. The best way to do this is via flexible
architecture and unified software enabling seamless management and
optimization of all business processes, as well as of all product,
shopper, and transaction data.
The recommended technological foundation will ultimately allow
retailers to go beyond merely offering the same products, prices,
coupons, and promotions across all channels. With a simplified
application layer implemented on top of this foundation, retailers
should also be able to deliver fully personalized, anywhere, and
everywhere retailing closely aligned with the familiarity, insight,
and intelligence established on individual shoppers.
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2013 IDC Retail Insights #IDCWP17V Page 7
This architectural approach is illustrated in Figure 2.
As shown, a similar approach can be taken for commerce, fulfillment,
and merchandising.

F I GURE 2
Omni c h annel Ret ai l Ar c hi t ec t u r e

Source: IDC Retail Insights, 2013

The architectural approach depicted above enables retailers to engage
shoppers, influence their behavior, and receive their feedback at every
point throughout the retail cycle. Such expanded control and
involvement is bound to help retailers enhance their relationships with
shoppers, thereby strengthening their brand identity and increasing
shopper loyalty and stickiness.

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Page 8 #IDCWP17V 2013 IDC Retail Insights
EMBRACI NG THE FUTURE

R e a c h i n g B e y o n d O mn i c h a n n e l R e t a i l i n g
Delivering Total Experience
To achieve full omnichannel compliance, taking the right architectural
approach is not enough. While shoppers don't really care about IT-
related challenges, their demand for a seamlessly consistent experience
in all interactions with the retailer is growing to the extent of
becoming critical engagement criteria. They expect to be presented
with the exact same promotions, whether checking the retailer's
ecommerce website, using its mobile app, or entering its physical
stores. They also require that they be allowed to seamlessly manage
their loyalty memberships anywhere at in-store kiosks, at POSs,
and online, or even via their social networking and beyond the sales
cycle.
In the current "always on" era of social network-connected shoppers,
retailers need to be able to consistently manage and execute complex
promotions across multiple sales channels and touch points.
This means having to streamline their marketing applications in
addition to their operational systems. They must do so while avoiding
timely and costly investments in sales channel integration, if they are
to quickly and appropriately respond to shoppers' growing sense of
entitlement and their demand that retailers rapidly adapt to their
evolving needs.
Retailers' IT infrastructure must support innovative new channels that
will allow them to leverage and capitalize on emerging technologies
digital coupons, mobile offers, and location-based promotions, to
name a few to the fullest. Retailer marketing teams need to be
provided with a technological foundation that will enable them to
create promotions once, and have them appear in real time across all
channels on the retailer's ecommerce website, on its mobile app,
and in stores whether at POSs or information kiosks.
To achieve all this, retailers must expand their consolidated application
portfolios with unified marketing and customer management
platforms. These will ultimately enable them to seamlessly manage all
campaigns across all channels and touch points, and maintain the fully
personalized, channel-agnostic shopper engagement crucial to
supporting the next level of retail service namely "total
experience."
Leveraging the Retalix 10 Customer & Marketing Suite to
Provide "Total Experience"
The Retalix 10 Customer & Marketing Suite utilizes a single platform
that draws information from all customer touch points and interaction
channels, allowing retailers to gain a complete 360-degree view of
each individual shopper, with full correlation between shoppers' online
and offline personas. This web-based customer-centric suite capitalizes
on the Retalix 10 platform's consolidated retail data and business logic
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2013 IDC Retail Insights #IDCWP17V Page 9
repository to enable retailers to completely and seamlessly manage and
execute complex promotions across multiple sales channels and touch
points.
The suite fits with IDC Retail Insights' call for innovative omnichannel
IT strategies it helps retailers consolidate innovative marketing
technology within their omnichannel IT environment so as to progress
to the next service level of "total experience."
Retalix 10 Customer & Marketing Suite's range of marketing and
loyalty management tools allows retailers to implement highly
segmented and personalized offers both in and outside stores. It
enables them to engage with and impact consumers throughout the
entire "stop-start" shopping cycle, with seamlessly consistent
experience delivered at any point of interaction.
As illustrated in Figure 3, retailers can use the technology powering
the suite to interact with shoppers via popular communication
channels, including social networks, dedicated portals, paper and
digital coupons, email, text messages, mobile marketing, and location-
based campaigns.

F I GURE 3
Ret a i l 1 0 Cus t omer & Ma r k et i ng Sui t e

Source: IDC Retail Insights, 2013

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Page 10 #IDCWP17V 2013 IDC Retail Insights
In extending interaction with consumers beyond the actual act of
shopping to every possible phase throughout the stop-start shopping
cycle, IDC Retail Insights believes that the Retalix solution assists
retailers in achieving "total experience." It helps retailers become as
accessible as possible, and allows them to tune in and really listen to
shoppers' needs. Customer & Marketing strengthens retailers'
positioning and ability to effectively fulfill these needs, and places
them in a truly differentiated, competitive light.
ESSENTI AL GUI DANCE
It is our recommendation that retailers leverage the IDC Retail Insights
retail maturity model to progress from mere multichannel to truly
customer-centric omnichannel retailing.
To do so efficiently and cost effectively requires that they employ
natively integrated real-time retail system architecture founded on
consolidated customer activity, product, service, and inventory data.
To facilitate omnichannel retailing, this architecture needs to
seamlessly connect an "all channel" commerce engine (covering
transactions, promotions, loyalty, and more) with inventory, demand
forecasting, replenishment, and optimization tools. It should also
leverage data-level integration and web services aligned to processing
retailer business priorities and strategic objectives.
We ultimately encourage retailers to consider augmenting their
investment in omnichannel culture, business processes, and technology
with advanced, consolidated customer and marketing solutions such as
the Retalix 10 Customer & Marketing Suite to achieve the next level
in retail service namely "total experience."



C o p y r i g h t N o t i c e
Copyright 2013 IDC Retail Insights. Reproduction without written
permission is completely forbidden. External Publication of IDC
Retail Insights Information and Data: Any IDC Retail Insights
information that is to be used in advertising, press releases, or
promotional materials requires prior written approval from the
appropriate IDC Retail Insights Vice President. A draft of the
proposed document should accompany any such request. IDC Retail
Insights reserves the right to deny approval of external usage for any
reason.
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