Image of Foc Janie Yu Merging Online In Store Retail

Future of Commerce

Innovation is Merging Online and In-Store Retail

Janie Yu, Partner, Fung Capital

Some of the most exciting innovation happening in retail is the technology that integrates online and offline shopping—all in the name of improving customer experience and increasing sales. This trend—multichannel retail—is disruptive and many retailers have been slow to adapt. But consumers increasingly expect a seamless multichannel shopping experience, with convenient, personalized service. Companies that don’t embrace multichannel retail will become less relevant in the years ahead.

There’s another element at play as well. While enabling multichannel capabilities to improve the shopping experience, retailers can also collect large amounts of customer data that can be used to tailor and customize shopping experiences and improve inventory planning.

Often, it’s startups that are seizing the opportunity to offer more efficient, affordable service to demanding customers. An example is Narvar, a post-purchase management platform, which provides real-time order tracking and efficient return service for more than 400 eCommerce retailers. When they first pitched this idea to me five years ago, I thought they were crazy. FedEx can do all this. But Narvar’s product delivers a much better experience for consumers—enabling merchants to increase customer loyalty while conserving cash and labor that can be deployed elsewhere in the business.

While making the returns process more efficient is a worthy goal, it’s even better to avoid them in the first place. One of the best ways to do that is to build a better customer experience, and that comes with a better understanding of who your customers are: their likes, sizes, products they’ve researched online.

That way, when it comes to the in-store experience, your sales clerks can recommend the right products.

Bringing data intelligence into the buying process leads to better decisions.

Profiling your customers across channels requires integration between your online and in-store, point-of-sale (POS) customer data. In the eCommerce environment, you know when somebody lands on your webpage, what product pages they click on, and what items they buy. But does this data translate to—or mirror—when your customers are in the store? Many retailers do not have a clear view into in-store purchases and in some instances, there is just an order total without an itemized listing.

If you don't have the same data available to you when your customers are in the store, that’s a huge lost opportunity. Customer information could enable a sales associate to offer up the right products, in the right size and color, along with related items that might interest the customer. Returning shoppers shouldn't have to “reintroduce” themselves to a sales associate if they’ve shopped there before, or spend half an hour walking the floor to try to find what they need (or want).

Relevant data can be easily collected and recalled, especially if the customer is willing to identify herself. This might be less critical for a thin-margin business like a grocery store, where someone stops in for some chili sauce or a loaf of bread. But at a specialty retailer or a high-end department store, a shopper might be planning to spend a thousand dollars on a very specific product, which may be identifiable from their shopping profile or recent viewing history online. Your store employee needs to know that.

Technology can also empower retail employees to better understand the products offered in their store. Sometimes a customer with a smartphone might know more than a sales associate. If a store lacks the technology and devices that provide key product details, that’s a problem.

Beyond customer engagement, data also helps retailers optimize their operations. Without data, they are just guessing whether they have the right product assortment in the store or the right inventory level.

For example, a big department store might place one, big order for sweaters per season. They'll order 10,000 units in various colors and styles—all based on guesswork. If the store buys the wrong sweaters, or too many, it could be in big trouble. Retailers can face severe cash shortages when their money gets tied up with the wrong inventory. That means they can't make payments on their debt, can’t afford new inventory, and may have to unload what they have for pennies on the dollar.

Companies that adapt and embrace innovation will be the ones that succeed in the years ahead.

Bringing data intelligence into the buying process leads to better decisions. But retailers also need to improve the processes and technologies in the supply chain, so they can receive product much faster. As a result, they might be able to buy just 2,000 sweaters instead of 10,000. Then if those sell well—as demonstrated by their real-time customer data—they can order more.

Fortunately, the supply chain is becoming more efficient and versatile, enabling products to move to stores more quickly, and in better alignment with demand. For example, retailers like Zara have spearheaded “fast fashion” by being able to produce goods and move them from concept to store in just two weeks.

There’s plenty more work to be done. Now that consumers have had a real taste of eCommerce—the convenience, the speed, the transparency—they will bring more and more pressure for continual service improvements. That will require better processes and technology improvement, and a lot of data and intelligence to be ingested into the supply chain. The companies that adapt and embrace those innovations will be the ones that succeed in the years ahead.

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Janie Yu

Partner | Fung Capital

Janie Yu focuses on sourcing deals and conducting due diligence on prospective investments. Prior to joining Fung Capital, she was with Burt’s Bees, leading go-to-market strategies for global expansion. Before starting her business career, she was a journalist for BBC and PRI’s “The World”, conducting in-depth research and reporting on China. Janie obtained her M.A. degree from Harvard University, where she received the prestigious Fung Fellowship, sponsored by the Victor and William Fung Foundation. Janie can be reached at janie at fungcap dot com.