A quarter of major retailers are unable to measure performance by channel

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A quarter of major retailers are unable to accurately measure and report their business performance by channel because they don't have the appropriate tools and systems in place. Yet a third (32 per cent) cite a change in the way they measure and manage business is critical for omni-channel success.

These findings have been published in the new LCP Consulting report, The Omni-channel Dilemma. The report also found that whilst those retailers that have converted to an omni-channel approach reported a 10-20 per cent increase in sales over the past 12 months, tracking and measurement of operational data remains an area that is underestimated by many.

Granularity in business reporting and analytics critical to omni-channel success

The LCP report says that when retailers move to an effective omni-channel, it is critical for the business to actively manage the adjustment of its management reporting and analytical capabilities.

Stuart Higgins, Retail Partner at LCP Consulting, said: "Many retailers are still coming to terms with the fact that omni-channel business requires an omni-channel view of sales, working capital and profit. This detailed understanding of channel economics demands a systemic approach to integrated financial and operational data as an enabler of improved business decision making. In short, channel economics is to the back-end what CRM is the front-end."

The report says that leading players have discovered that in order to deliver a more sophisticated customer proposition at the front-end they need unprecedented access to consumer data and behavioural insights. However, retailers also need to truly understand and optimise their back end capabilities to deliver a seamless fulfilment capacity which places a far more complex set of requirements on management information, and reporting tools and measurements, than has previously been required.

The report includes interviews with an LCP panel, consisting of four leading UK-based retail experts: Graham Barnes (Supply Director, Argos), David Wild (CEO, Domino's Pizza Group), Dino Rocos (Operations Director, John Lewis Partnership) and Neil Ashworth (CEO, Collect+).

David Wild, CEO of Domino's Pizza Group said: "The truth is that developing customer loyalty is also about getting the back end right and fulfilment is becoming a real battleground in today's world. To say you win sales and customer loyalty by managing the front end is only half the story because you win sales by offering a complete service. And to deliver that service with slick fulfilment you need to have an efficient back end.

The winners and the thought leaders are investing in both. Argos is a great example, John Lewis is another. They've recognised the need for parallel investment in the stuff the customer sees and the stuff the customer doesn't see but which contributes to efficient fulfilment and ultimately market leadership."

Four Retail Archetypes have emerged...

The report also identified the need for retailers to understand where they sit in the marketplace, what they should focus on and the best model for them to adopt, using Four Retail Archetypes defined by LCP: These comprise:

  • Omni-channel Pioneers – fully committed to transforming front and back end operations – and investing in necessary tools and systems to deliver a seamless experience to customers. Interestingly this group judge themselves most harshly in the area of having the right tools and measures in place – perhaps based on a heightened level of awareness in terms of what is required to be an omni-leader.
  • Optimised Multi-channel or Pure-Play Retailers – have made a strategic decision to adopt either a Multi-channel or Pure-play approach – often very effective. This group places a premium on tools and processes.
  • Omni-channel Followers – recent converts to investing in omni-channel retailing without a fully integrated business model. Retrospectively fixing their back-end systems to keep up with omni leaders, and as a result, running the risk of not establishing the core systems for long-term success.
  • Challenged Multi-channel Retailers – trying to adapt to a Multi-channel world by bending existing bricks and mortar infrastructure. Clear warning signals that this group is in danger of terminal decline, with lacklustre growth reported.

Dino Rocos, Operations Director, John Lewis, said: "These archetypes match what I'm seeing out there. The real question for retailers is: Is this where I want to be?"

Two winning positions emerging

While an omni-channel future is not inevitable for all – the report identifies that different strategic positions are emerging with omni-channel pioneers and optimised multi-channel/pure-play retailers the likely winners. A key finding of the report is that boards needs to be clear about which retail operating model they want to build and which best suits their own commercial reality and they need to fully understand the implications of the choices they make.

Graham Barnes, Supply Director, Argos, added: "There is certainly a range of models and functionality that most retailers are waking up to as becoming a must-have for at least part of their proposition. But many are not necessarily understanding the full implications of what it will take to deliver them."

Report Methodology

LCP Consulting commissioned market analysts, Research Now, to conduct the independent research with Retail Board Directors and department heads operating in the UK and US. The research was conducted during July 2014. In total, around 50 executives were interviewed in the UK and 50 in the US. More than half of respondents worked for retailers with more than 5,000 employees and more than a quarter for retailers with more than 25,000 employees, all with an annual turnover in excess of £50million.

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