2012 retail study The rise of the connected consumer

2012 Edition

Contents
Foreward .....................................................................................................1 Note ............................................................................................................2 Executive summary.......................................................................................3 The evolution of communication ..................................................................5 1. Social media be part of the conversation................................................7 2. eCommerce to pursue or not to pursue................................................11 3. Mobile technology play it smart...........................................................15 4. Virtual meets physical the changing face of the in-store experience......19 5. Do likes count? measuring the success of online strategies................23 6. Talent nding those who can...............................................................25 Final thoughts.............................................................................................27 Appendix....................................................................................................28 Contacts.....................................................................................................29

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Foreward

The rise of the connected consumer

The consumer of today and tomorrow is connected, empowered, more informed, social, environmentally aware, time sensitive, and ckle. Here is how she shops: Chats with friends on Facebook Talks to others at work/school Reads reviews on the Internet (mobile and desktop) Checks prices at different retailers Visits a store to check out products Purchases online or in the store, depending on price, service, and availability The Deloitte BC and Alberta retail practices have been tracking these rapidly evolving consumer behaviours and sought to understand how retailers in the region were responding. Deloittes goal is to provide insights to assist these companies to evolve and thrive. Deloitte partnered with the Retail Council of Canada (RCC) to interview prominent retailers based in BC and Alberta to understand how they are using social media, eCommerce,

and mobile technology to expand footprints, build brands, attract new consumers, and improve operations. Technology and social media have opened the doors to a new world, providing the opportunity for retailers to deliver a fully integrated shopping experience and enabling an expanded reach. Conducted over a three-month period in the rst quarter of 2012, Deloitte led in-depth, one-on-one interviews with leaders of over 20 prominent BC and Alberta retailers. These interviews reveal key strategic and operational decisions that are proving vital to the challenge of responding to the changing consumer in a highly competitive and shifting retail landscape. We have a great admiration for the creativity and determination of these companies, and want to express our appreciation for their involvement in this study. We believe that the ndings in this report will prove valuable to other BC and Alberta retailers and provide some leading practices to other Canadian retailers as they engage the connected consumer.

Rick Kohn Associate Partner Deloitte & Touche LLP

Erica Pretorius Senior Manager Deloitte & Touche LLP

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Note
While advances in retail technology have enhanced the ability of retailers to track in-store and online trafc and glean insights and patterns based on ndings from data analytics, this has also presented challenges. Retailers continue to grapple with understanding not only the consumers themselves, but also how they need to leverage the technological advancements and how this relates to enhancing their in-store and online shoppingexpectations. Gone are the days when front-line retail associates were the gatekeepers of specialized product information. With the aid of the Internet and its many social platforms, consumers are now sharing product and retailer information with each other with the click of a mouse. Mobile devices have added a layer to the retail experience, making it easier than ever for consumers to nd product, locations, and deals, right in the palm of their hand. And, with the wide-spread use of technology today, gone also are the days when one might be able to assume, based on a consumers age demographic, whether they are an avid, recreational, or passive user of this technology. Retailers must now begin to understand not only what the consumer is looking for with respect to product and how they might be using technology to nd it, but also how theyd like to be served while in the physical retail environment and while online. We are proud to have engaged with our industry partner Deloitte to explore the ever-evolving relationship between the retailer, the consumer, and technology in the context of what members in BC and Alberta are doing to better understand the relationships nuances and subtleties, and to more effectively leverage these tools to connect, communicate, educate, and serve their consumers.

Shaq Jamal VP, Western Canada Retail Council of Canada

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Executive summary
There has been a signicant focus on social media, eCommerce, and mobile technology in the media, conferences, and thoughtware, speculating on what the world of retail will look like in three months, six months or one year from now. Technology revolutions in eCommerce and mobile applications enable retailers to reach consumers and markets that they would never touch in a brick-and-mortar world. Social media enables retailers to build a brand and put a face to their organizations that is not dependent on face-to-face interaction in retail locations. The death of the physical store has been prophesized, along with the movement from one channel to multi-channel to omni-channel. Through this study we have come to understand how BC and Alberta retailers are incorporating changes in the shopping culture, technology, and consumer preferences to stay ahead in this ever-changing world. What we have found is extremely interesting outlined in this publication are six main themes, with two common threads that bind these six themes together: First, BC and Alberta retailers understand that, in this new connected world, consumers are demanding transparency, control, and customization. Todays consumers are looking for something unique in the shopping experience that empowers them. Whether the purchase is made through a mobile device, eCommerce site or, in some cases, interactive within the physical store, consumers dont want to be told how they should shop or what they should buy. Second, even though the industry is being revolutionized, BC and Alberta retailers are making thoughtful and calculated changes to their business strategies, rather than big capital spending and knee-jerk reactions to the overwhelming amount of industry buildup. They are seeing it as an evolution of their business model rather than a revolution. Now, are these retailers moving too slowly, and not immersing themselves sufciently in these ambiguous new markets? Only time will tell whether this approach is in keeping with the rate of change that BC and Alberta consumers expect, or whether retailers will lose out in the long run to more nimble competitors. Through this study we hope to provide an insight into the exciting, nerve-racking and evolutionary world of BC and Alberta retailers, and how they are making the most of the connectivity that is being afforded to their consumers while battling the internal logistical and cultural challenges that change brings about. It is clear that a broad and effective online strategy touches each part of the business from Supply Chain to Marketing and Sales and from IT to Risk Management and Finance, and that it is not just a Marketing or IT initiative. Are the leaders of these businesses seizing the opportunities and challenges?

Expanding outside bricks and mortar through social media, eCommerce and mobile technology enables retailers to reach consumers they would otherwise never touch.
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The evolution of communication

Consumers are demanding transparency, control and customization.

Through this study we noted many interesting strategies, thoughts and initiatives that have been undertaken by BC and Alberta retailers. Weve grouped these ndings into six main themes:

1. Social media be part of the conversation 2. eCommerce to pursue or not to pursue 3. Mobile technology play it smart 4. Virtual meets physical the changing face of the in-store experience 5. Do likes count? measuring the success of online strategies 6. Talent nding those who can
Within each theme, we note the current state of the retailers we interviewed. We then contrast that information with broader insights gleaned from national and North American-based research. Lastly, we provided insights into what we see as the next steps or next wave for BC and Alberta retailers to move forward in the online journey.

2012 Retail Study

With more people sharing opinions online, Internetbased reviews become more important.
6 Deloitte & Touche LLP and afliated entities.

1. Social media be part of the conversation

Current state
With more people sharing opinions online, Internet-based reviews become more important. Social media provides shoppers with a platform to discuss the products and stores they love or hate. This increase in online consumer conversation provides opportunities for retailers to use this platform to gather insights into consumer thinking and attitudes, and even integrate user product reviews into their physical stores. Currently, while some of the companies interviewed in the study are simply observing the conversations happening on social media sites such as Facebook, Twitter, foursquare, and Pinterest, most are engaged and have a voice in the conversation that is happening around their brand. For most of the BC and Alberta-based retailers included in the study, the main goal of social media strategies is to develop a brand-building tool that can be leveraged as marketing communications. But what they end up with is a consumer experience channel and a need to respond to and manage consumer feedback, both positive and negative. Retailers become part of the conversation and are not always the drivers. What is evident across the respondents is that they all experience barriers when it comes to fully engaging in social media, and appear to be one step behind the consumer. Retailers have long sought and cherished consumer feedback, and social media provides a rich vein of consumer thinking for those adept enough to interpretit. The barriers Understanding how to best leverage social media Retailers marketing departments are still trying to gure it out, and although mass marketing is still one of the most effective methods for conversion, retailers need to generate a plan around building a community online. The reason why a brand joins social media will affect what kind of community it develops. It is not enough to simply have a presence on social media, but the key is to understand that no one cares about the brand per se, but rather what happens around the brand. Being effective on social media platforms means that retailers need to understand that people are telling the stories, and retailers need to gure out how to leverage the lives of the consumer and bring them back into the retail store, says Nikolas Badminton, Director of Digital Strategy at Tribal DDB. Media today

Owned media
Website, mobile site, YouTube channel, partner content, social content

ed Se

Pu

sh

/p ul

Idea
Paid media
Online ads, ofine ads
Classical integration

Earned media
Journalists, bloggers, social media users

Source: Tribal DDB

Senior management buy-in Obtaining senior management buy-in and driving the social media strategy from the top down is crucial to the success of the strategy. Lack of buy-in is often the result of inadequate information on the cost and return on investment (ROI) related to social media campaigns. Enacting a major change in marketing or media campaigns without tangible, measurable information is challenging for traditional brick-and-mortar retailers. Ownership Central ownership versus store-based control of the social media channels is a key discussion point for retailers. The discussion becomes more complex when looking at stores owned by head ofce versus franchise models. Who controls the social media message? What level of control is maintained at the head ofce and what autonomy is given to stores? How do you best manage the brand while still giving the stores an opportunity to build their own local online community? For example, the desire by franchisees to use social media to support the community environment surrounding their store is at times in conict with the online rules and regulations of the franchisor. Silos dont work well there needs to be an integrated strategy that is centralized allowing for consistency, but that has the exibility to allow decentralized collaboration.

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Breaking down the barriers

Considering these barriers, why is it important for retailers to engage in social media? Consumers routinely consult their social networks for product reviews and other information before making purchase decisions, as well as to connect with the things that help to dene their identity. In fact, many consumers have trained themselves to ignore most carefully crafted ads from retailers and to instead rely heavily on their own networks. It is therefore becoming more critical for retailers to create social environments for consumers to shop and play a role in the conversation that is happening around their brand.1 Engaging in the conversation Social media adds value to the existing media mix through engagement, conversation, and reach. As consumers become more channel agnostic, it is important for retailers to opt in to the qualied interest in the brand. Retailers need to actively listen to the conversations that consumers are having on social media sites about their brands, address any issues bubbling to the surface, and take the lead in collaborating with consumers on solutions that will make consumers brand advocates. We have found social media to be an effective mechanism to respond to customer concerns regarding the sourcing of raw materials, fair trade, and to give a voice for the work we do with various foundations to help with long-term sustainability in developing countries, says Peter Higgins, President of Purdys Chocolates. Retailers cant overlook the power of advocates closer to home their employees present perhaps the easiest way for companies to engage consumers, or to lose them. Employees not only communicate and interact directly with consumers as part of their job; they also connect and socialize with other employees and consumers outside of work, talking about the company and its products, services, policies, people, and more via email, on Facebook, and around water coolers virtual or otherwise. Empowered, they can be powerful brand ambassadors who positively engage consumers. One capability that requires more development is site compatibility with third-party social networks (Facebook, foursquare, Twitter, etc). Linking in to these leading social networking outlets enables retailers to enhance their marketing opportunities and allows consumers to extend
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their existing social communications with brands. Going one step further through implementing a social media monitoring and engagement software adds another lens into the mind of the consumer. Small victories versus big bang investment evolution versus revolution Throughout the study it was clear that the social media strategy that is the most effective is one of trial and error. Launch small campaigns that could include competitions, discounts or freebies and track the effect. How many consumers liked your page? How many consumers redeemed the discounts in-store? How much trafc did it drive to the store? The key with these campaigns is to include a way to measure the effect, e.g., a QR code or a special keyword that consumers have to use. The campaign should be structured such that metrics can be obtained, with the right people in place to evaluate the results. This approach allows retailers to get their feet wet without a major capital investment, thus alleviating the cost and ROI questions and improving buy-in at senior levels of the organization. Once retailers are more comfortable with social media and understand how to best present their brand, they often look to professional rms to support their strategy, launch larger movements where analytical software can be used to quantify the results of the campaigns, and provide insight into the type of consumer engaging with the brand. Managed versus controlled Building an online strategy and framework that supports social media and localization of social media for franchisees is important for companies like COBS Bread, that encourage consumers to engage on Twitter and Facebook. We provide a community-based shopping experience a refreshing experience and we want to keep our customers involved. We want to have each bakery make the right bread at the right time for every customer, and we see social media as a key method to gain feedback and engage with our customers on how to do so, says Aaron Gillespie, Vice President of COBS Bread Canada. It is important for each retailer to understand their culture and the extent to which social media should be controlled versus allowing it to evolve to best meet the needs of the specic store or community. To be truly successful in the social media sphere, companies need to be open to think differently. To be successful, retailers have to be willing to open the doors and let people into the company culture.

Deloitte 2011 eCommerce Assessment: What are digital retailers up to?

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Retailers cant overlook the power of advocates closer to home their employees present perhaps the easiest way for companies to engage consumers, or to lose them.

2012 Retail Study

Online, retailers are trying to propel their brands through a means that is aligned to the consumers shopping habits, while attempting to recreate the best facets of the in-store experience.

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2. eCommerce to pursue or not to pursue

Current state
Technology has transformed the expectations of shoppers of all ages. Consumers are increasingly using the web to research in-store purchases. Greater Vancouver Area (GVA)based respondents to the Deloitte 2011 Holiday Survey indicated that they use shopping websites for various activities, including: 35.6% checking prices 31.7% to nd discounts, coupons, sale information 26.6% research gift ideas 27.7 research product reviews or recommendations 13.6% check with friends/family on gifts they want 6.8% coordinate shopping with friends/family 2.7% sharing wish lists For most of the companies interviewed in this study that have an eCommerce platform, the top three reasons why eCommerce strategies are pursued include: Companies are also trying to fend off US competition, as cross-border competition remains signicant. A high percentage of the top US retailers are offering eCommerce capabilities to Canadians. 50.7% of GVA respondents to the 2011 Deloitte Holiday Survey indicated that they visit US retailers websites to purchase product not available on Canadian eCommerce websites or in Canadian retail stores, while 36.1% of Greater Calgary Area respondents indicated the same. In addition, US market entrants such as JCrew and Victorias Secret led their entrance into Canada through eCommerce before establishing a physical presence in the country. For many, eCommerce was pursued in order to gain brand awareness and expand a retailers footprint; however, it hasnt necessarily given them access to people outside a radius around current locations, unless their brand is recognized nationally. Retailers continue to struggle to measure the obvious change in consumer behaviour. They can tell there is a change, however, the impact is uncertain. Understanding, harnessing, and implementing software that can measure and inform management on key performance indicators (KPIs) indicative of eCommerce success is the next step for many of the companies interviewed that have an established eCommerce site.

1. To increase market share 2. To connect with consumers 3. To increase revenue

In essence, the retailers are trying to propel their brands through a means that is aligned to the consumers shopping habits, while attempting to recreate the best facets of the in-store experience or leveraging the technology to create a better online experience that can later be brought back into the store. We see the retail channels blurring. Retailers need to look at shopping through the lens of the customer, not traditional channels. We see a lot of convergence of how customers are using their phones, and retailers need to treat these experiences as a consistent and integrated channel. We send emails to customers with promotions and they can go to the store, use social media or use eCommerce to access the products, says Zaheer Jiwani, Senior Manager, Loyalty at Best Buy Canada Ltd. Retailers with a history founded in logistics and directto-consumer distribution have found it easier to adapt to the new shopping demands of the consumer. When it comes to delivery channels, these retailers have taken to a multi-channel delivery method like a duck to water, while many other retailers interviewed acknowledged signicant challenges when it comes to seamless multi-channeldistribution.

Building an effective strategy

Many companies interviewed are planning to fully develop a social media and mobile strategy in 2012 as part of their overall marketing plan, with eCommerce falling under the same umbrella, however, developing, implementing, and executing an effective eCommerce strategy is no simple task. Retailers have had years to perfect the in-store customer experience and dene the value proposition for physical stores. For many retailers, venturing into eCommerce requires rethinking each element of their business, and with touchpoints to multiple functional business departments such as Marketing, Finance, Operations, IT, Inventory, Distribution, Planning, and Customer Relationship Management, there are many chances for eCommerce strategies, projects, and operations to go awry.

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We see the retail channels blurring. We send emails to customers with promotions and they can go to the store, use social media or use eCommerce to access the products.
Zaheer Jiwani Senior Manager, Loyalty Best Buy Canada Ltd.

Throughout our interviews the following lessons learned relating to an eCommerce strategy and implementation appeared a number of times: Dene the value proposition Dene what the real value of the online eCommerce experience is for your consumers and your products. Without a clear value proposition, an eCommerce site will not be able to live up to its potential or utilize the technology to its fullest. Two participants have given this some thought and had the following to say: The focus with our eCommerce strategy is to bring the customer in-store experience online, especially as it relates to the education required for infrequent and very important purchases, says Jennifer Bawa, Communication Director at Spence Diamonds. We think the success in eCommerce for our line of business is to empower the customer to customize and personalize what they purchase. This increases the value to the customer and offsets the shipping expenses, says Brian Kerzner, CEO of Rocky Mountain Chocolate. We also found that even online retailers consider their online offering carefully and use technology where it makes the most sense. For example: Our core vision is to make it easier for men to get dressed, and were looking for the best solution to get this done. Technology is sometimes an enabler, but where we even as a mainly online retailer can depart from technology and give the customer a personal touch, we will do that. Flexibility in meeting the consumer at a place that works for him is all-important, says Kyle Vucko, CEO of Indochino. Quick and dirty does not pay in the long run When challenged by executives or external market pressures to deploy an online presence within a very tight timeline, including eCommerce, the companies interviewed often opted for an off-the-shelf or immature Software as a Service (SaaS) solution. This approach tended to have initial success, only to be hindered in the long run by the shortcomings of the software solutions, lack of back-end integration with existing operations, and

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inadequate consideration of third-party integration (e.g., shipping companies). Often, the initial expected cost savings were mitigated by the lack of ability to customize the consumer experience and keep the brand intact. Challenges with shipping integration and having a French language site were the two main drivers to move to a new platform, says Mohammed Mahabub, Chief Financial Ofcer of Jysk. Most companies interviewed commented that they were on their second iteration of either an eCommerce platform or an eCommerce operating model. The decision to move to a second iteration was preceded by thorough research, analysis, and a robust business plan that was vetted by the functional business departments that were, and will continue to be, impacted by the eCommerce strategy. Build the right team with support from the right executive sponsor Numerous companies interviewed indicated that inadequate sponsorship or representation from the business functions impeded their ability to deliver a quality eCommerce experience to consumers. To clearly articulate this strategy, the right strategic thinkers have to be present and lead the project. As eCommerce incorporates numerous business functions, teams should be aligned with an internal stakeholder for each functional area that is impacted by eCommerce, and this person should have access to an expert during certain stages of the initial project launch. This ensures that there is an understanding of the current business processes and how the company tends to operate, as well as an understanding of leading practice and how eCommerce will affect the future state of the organization. eCommerce should not be an IT-onlyinitiative.

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The main reason companies consider developing a mobile app is to use the functionality of the phone not available to a mobile website.
Nikolas Badminton Director of Digital Strategy Tribal DDB

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3. Mobile technology play it smart

Current state
The phone Smart shoppers are turning into smartphone shoppers faster than anybody expected, however delivering a relevant shopping experience isnt easy for retailers used to the store-centric way of doing business. With the pressure to take the plunge into mobility, many retailers are stuck in terms of dening a clear strategy. BC and Alberta-based retailers are generally focusing on optimizing their websites for mobile devices. Some retailers aim to have the mobile site include the same functionality as the website, while others have developed a site that focuses on what consumers would mainly need to access when they are out and about (for example, store locations, store hours, store contact information, etc.). The app Very few of the retailers questioned are considering or have built a mobile application (app). The main reason companies consider developing a mobile app is to use the functionality of the phone not available to a mobile website, says Nikolas Badminton. The Brick, working with the development company Imagiu Software Ltd., has an app that allows consumers to scan QR codes on furniture price tags and size the furniture against a photo of a room in their home, which has received signicant response from consumers in Edmonton (where they have been evaluating their proof of concept). Once the company is ready to launch nationally, we will offer it for both iOS and Android, for use by both our customers and Sales Associates, says Richard Hannah, Senior Vice-President, Information Services and Chief Information Ofcer of The Brick Group. The tablet Although tablet ownership is still limited, according to the 2011 Deloitte Holiday Survey, the Greater Calgary Area leads the pack in terms of adoption, with 15.5% of respondents indicating that they own a tablet. 11.4% of GVA respondents indicated that they own a tablet. In contrast, 31.2% of GVA respondents indicated that they use their tablets for online shopping, while only 18.3% of Calgarians did. Both groups used their tablets for working, social networking, surng, and checking email; however, at this time, GVA respondents appear to use their tablets signicantly more.

How to make the most of mobile

Mobile is a natural t for the Canadian consumer, as Canadians are adopting mobile technology at a similar pace to the US. The successful combination of mobile and eCommerce platforms represent a more signicant opportunity for Canadian retailers, given the estimated growth and incremental multiplier effects of both channels coupled with the high social media usage of Canadians. In 2010, the multiplier effect for mobile research inuencing in-store purchases is estimated to have doubled in-storepurchases. Function rst Focus your mobile efforts on what best meets your consumers needs while using their mobile devices. It is clear that recreating the standard website offerings in a mobile way would not, in all cases, best serve consumers. Think through what your consumer would likely need and put that functionality front and centre, whether it is as simple as store locations or as complex as understanding what subset of your inventory consumers are likely to buy through a mobile device. Another key strategic data point is to understand how your consumer may use their mobile devices while in-store. 23% of smartphone users who mobile-shop will research on the smartphone, visit the store to check out the product, and then will purchase online (using a computer or Internetenabled device).2 Does your mobile site allow a consumer to possibly start a shopping experience on their mobile device, instead of waiting for a store attendant? Is there a way for your mobile site to transition into an in-store sale? Could a consumer add a product to a mobile wish list that would drive them to the store if that product is on sale or available in their size?

Smart shoppers are turning into smartphone shoppers.

2

Google / IPSOS OTX MediaCT, The Mobile Movement:

Understanding Smartphone Users, April 2011

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Call to action To make the most of a mobile site, it should have clear and specic calls to action. When consumers are engaged with a product on a mobile device, there is an automatic increase in intent to purchase, says Amielle Lake, Chief Marketing Ofcer and Founder of Tagga. The view is that mobile commerce will increase in the coming years. This begs the questions on how to drive trafc to mobile. Companies have a hard time transitioning their thinking to a fully integrated marketing approach. Mobile makes that possible. Businesses can connect with a consumer from any media channel by creating mobile engagement avenues such as QR codes, SMS, Facebook, etc. Mobile is most powerful when viewed not as a channel, but as the device where all channels converge. Mobile is the ultimate consumer engagement tool, says Lake.

The next wave

To gain the loyalty of tomorrows consumers, retailers should anticipate the systems and processes that will allow them to effectively use mobile devices to create a customized shopping experience. Consumers think of shopping whether it is online, in-store, or on a mobile device as one experience and therefore, so must retailers. Understanding the variations between the companys online environment and the in-store environment in the areas of product knowledge, point of sale, and customer relationship management will help the company to understand where there may be inconsistencies within the operating models. Managing the consumer experience, whether it be online, in-store, or on a mobile will continue to be a constant challenge for any retailer, and integrating all three while delivering what is expected of the brand will continue to be no easy feat in the foreseeable future; however, daily technological advances will make it easier and more affordable.

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Consumers think of shopping whether it is online, in-store, or on a mobile device as one experience.

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Retailers who have the foresight to combine the sensory experience provided by a bricks-and-mortar store with the extensive information and accessibility offered by virtual stores are likely to lead the way.

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4. Virtual meets physical the changing face of the in-store experience

Current state
While no longer the only place where retailers and consumers connect, the physical store remains central to many consumers shopping experiences. Most companies interviewed are very focused on understanding what pieces of the in-store experience to bring online and, in cases where eCommerce has been effectively implemented, how to bring the success of eCommerce back into the store. Retailers who have the foresight to combine the sensory experience provided by a brick-and-mortar store with the extensive information and accessibility offered by virtual stores are likely to lead the way in attracting the loyalty and wallet of tomorrows consumer.3 Although this is on the mind of a number of retailers interviewed, few feel that they have a strong handle on how to implement thisstrategy. Sales and sales research will occur wherever the customer is. People will use the sales channel for its strengths: online for in-depth research, in person for try-on, mobile for nding the store. Customers will know more than the store staff about the product they want, and customers will rely more on consumer feedback for product choice. Having multiple channels and having them seamlessly integrated will be the foundation of the future, says Bob Matheson, Director, Consumer Sales at ARCTERYX Equipment Inc. So how do retailers bring the aspects of the web and mobile devices into the store? For starters, retailers can create immersive retail environments. By giving consumers the opportunity to take photos and share, you are encouraging the conversation around your brand. By integrating the thoughts of consumption and the sharing of content, you are disrupting consumers thought patterns. Mobile devices impact the in-store experience, so embrace them. Create environments that are stimulating and interactive. The technology age Soon, traditional stationary point of sale (POS) devices may only be seen in high-volume, low-unit-price commodity stores (grocery, pharmacy, convenience stores, etc.). Consumers of fashion, specialty and big-ticket retailers will likely expect a higher degree of personalized mobileservice. Rapidly changing consumer behaviour and shopper expectations are likely to bring a paradigm shift in the way retailers respond to shoppers. Some retailers are already testing new consumer engagement technologies such as store windows that operate as dynamic media touchscreen monitors, in-aisle advertising, interactive dressing-room mirrors, social media shopping sites, and personalized discounts through mobile devices. Retailers today are improving store systems to provide a richer shopping experience by integrating POS and web channels, providing self-service kiosks, and encouraging in-store use of mobile and wireless devices.

Bringing the web to the store

The savvy consumer Consumers are armed with information and sometimes they are more knowledgeable than sales staff and BC consumers are more connected to the web than the whole of Canada, and are the savviest Canadians with the Internet. Vancouver is a mobile city and, in general, a connected city. This connectivity is not limited to Vancouver, as 70% of Canadians have mobile phones and 30% of these are smartphones. The change in consumer expectations and the rapid pace of technology adoption are signicantly impacting the stores role and the way it should operate. Given the available information for the consumer, sales associates should be equipped to provide a personalized customer experience. This means that the sales associate needs to be more informed than the consumer. Weve been incorporating mobile in the stores by using tablets with vendor information to help staff educate customers on the different tire options, says Lindsay Marshall, Product & Merchandising Manager (Light Vehicles) at Fountain Tire. A retail stores sales are highly related to the quality of the relationships between its store associates and consumers. Deloitte research shows that conversion rates increased 9% when consumers were assisted by employees who possess a high degree of product knowledge and demonstrate strong interpersonal skills.4

3 4

Deloitte Store 3.0TM The store is dead. Long live the store.
Deloitte Driving protability through your store associates: The make or break factor for retailers, June 2010

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The experience can go well or quickly sour, making a consumer an advocate or a critic of a brand, with the power to share the experience with his or her global network of friends.
Observing the entire experience According to iQmetrix, a company that develops products that bridge the gap between physical and virtual retail channels, the four main stages of the shopping experienceare: Technology also plays a role in supporting associates with sales and service, as meeting the demands of an increasingly ckle consumer can require careful integration of consumer and product data. Ideally, information is aggregated across sales channels to capture the consumers full prole and purchasing history. Easy access to detailed consumer information can better equip sales associates to be informed and to provide a customized experience.5

1. Attracting the consumer 2. Engaging and educating 3. Purchasing 4. Loyalty

There are ways in which a retailer can interactively engage with the consumer inside the store at many of the shopping experience stages. What consumers are doing online or on their mobile device can also be done in your store. There is a way to create a one-stop-shop solution in-store by linking to your eCommerce solution, mobile apps, and mobile site and have it all managed centrally and be able to report holistically. To be able to report collectively means that you are on the same page as the consumers, you and the consumer are thinking about the shopping experience as one experience, and you are following the entire consumer pathway, says Anne Forkutza, User Experience Lead Interactive Retail at iQmetrix. Consumers like being in a store for the social aspect of shopping, so it is a matter of bringing both worlds together. By equipping stores with interactive media, a retailer provides an environment where consumers can do what they would do on their computer or on their phone, right there in the store. Software can also educate consumers, guide them through choices, and make it easier for sales associates to up-sell and cross-sell, making the shopping experience more engaging and fun. The goal of a retailer should be to create a holistic experience where all the elements work together to create a great experience for the end consumer.

The consumer expectation

A multi-channel retailer faces many possible permutations of consumer interactions, with consumers expecting a seamless experience at each touchpoint. In an increasingly connected world, retailers need to continuously rethink how they nurture and protect their brands. At any point during a consumers journey, the experience can go well or quickly sour, making a consumer an advocate or a critic of a brand, with the power to share the experience with his or her global network of friends. It is therefore critical for organizations to be engaging with their consumers through these series of interactions and ensure that they have a positive experience at every point.6 Our main goal is to make the customer experience seamless and consistent whether they are in-store, online, or on their mobile device. Experience means many different things to many different people. Online technologies are forcing retailers to create new experiences that are driven by the consumer, says Clint Mahlman, Senior Vice President and Chief Operating Ofcer of London Drugs Ltd.

Deloitte Store 3.0TM The store is dead. Long live the store. Deloitte Global powers of the consumer products industry 2011, Getting back to growth

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The shrinking store and the endless aisle The brick-and-mortar store itself will continue to evolve. With the increasing emergence of eCommerce, store footprints are likely to become smaller, and stores within stores will replace conventional departments, providing a more intimate and personalized customer experience. In response to tighter margins, some retailers may edit their store portfolio and reduce store counts. Stores supported by a multi-channel supply chain will likely carry less inventory while continuing to offer buyers a wide selection. With the company eCommerce website acting as a store and potentially carrying more SKUs the retailer must consider the implications on inventory, and on the bottom line, once packaging and delivery charges are factored into the equation. Inventory allocation and management While stuff nearby will still play an important role in retailing, in a multi-channel strategy inventory, allocation and management are increasingly not driven by the channel. What location is best for the consumer? When a store is out of stock, why not sell the product at checkout and ship it directly to the consumers home? Does the store need to carry every SKU in every size? Not necessarily. Why not have 15 styles on hand and the highest inventory-turn sizes, but dozens more available through a kiosk or for sale at the checkout? This would address the long-tail economics of low demand: the consumer can place an order in the store, then the product can ship directly from the vendor. The impact on inventory carrying costs could be dramatic. A different way of thinking about merchandise and inventory might be to select brand assortments for brand alignment, not by channel (see following chart). Then, the decision is made about owned or drop-ship inventory positions: of the owned inventory items, which ones should be housed in stores and which in fullment centres? In this model, the merchants are accountable for merchandising and inventory productivity, not channel productivity.7

Traditional approach to assortment planning

Store assortment
The store merchants decide what assortment should be sold in the store

Direct assortment
The direct-to-consumer merchants decide what assortment should be sold in the catalog or on-line

Multi-channel approach to assortment planning

assortment Full
1 2 3

ned invento ry Ow

Assortment

1 2 1 3 2 3 1 2 3

The brand merchants decide what products should be offered by the brand. (Note that the size of the assortment is larger than the traditional approach.) The difference between the full assortment and owned inventory will be available to drop-ship direct from vendors, but will not be owned, due to slow inventory movement. The entire assortment is available through every channel, but may be fullled either direct or through the store. The merchants decide what should be available in stores and what should be housed in fulllment centres.

Deloitte, Reinventing Retail: A Multi-channel Transformation

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Retailers in the study are now testing different things to see what will work. They understand that social media is not as risky as expected in terms of capital expenditure but they still want to see apayback.

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5. Do likes count? measuring the success of online strategies

Current state
Social media and mobile technology are moving at such a fast pace that traditional business cases dont work. It is all about taking traditional tactics and putting them on steroids. Companies cant be like oil tankers they need to be like speedboats, says Nikolas Badminton. building a foundation in the social media, eCommerce, and mobile technology space, your company can engage withconsumers. Test the waters on what works and what doesnt, and get a feel for what the consumers are really saying. Think about the information you can gain from knowing who is in your store when consumers check in on their mobile phone. Knowing who is in your store is an untapped resource, and developing a holistic strategy that acknowledges these areas of interaction with consumers is paramount to reaping the rewards of information and data that consumers are willing to part with, with the click of abutton. Partnering with rms that play in the retail, mobile, and eCommerce space or hiring the right talent to help you develop a strategically integrated marketing and media plan will also support your companys ability to measure and report. Having the right people understand how the technologies and social mediums work is key to beneting from your investment of resources and capital in social media, eCommerce, and mobile technology. Understanding what information people are willing to give you, having a willingness to change your marketing mix, and knowing that fortune favours the brave are important considerations when building a business case. In retail, it is the Wild West, but you need to take chances that arequalied.

Whats the challenge?

For many retailers in BC and Alberta, measuring the benets and added value that these mediums bring is a challenge. The little measurable value and the lack of insight into changes in behaviour of consumers (online or in-store) have made it challenging for some senior executives to commit to spending on social media and mobile strategies. For example, having product information online might drive more consumers into the store, but without tangible numbers, it is often unclear whether there is an increase in physical stores sales that should be attributed to an online presence. Often, this lack of tangible ROI means that online strategies and plans get put by the wayside instead of being executed. For some retailers, the focus has been primarily on getting an eCommerce platform up and running, and with a lack of holistic planning, they are now catching up when it comes to social media. Again, understanding how to measure the impacts and the increase (or decrease) in sales is a struggle. Retailers in the study are now testing different things to see what is going to work. They understand that social media is not as risky as expected in terms of capital expenditure but they still want to see a payback.

Building the business case

The rst step to understanding the ROI is to make the change and understand that it is not a big bang solution it is an evolution, not a revolution. It is about making small changes and seeing if and how they work. By

In retail, it is the Wild West, but you need to take chances that arequalified.

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One of the keys to success is creating consumer intimacy by creating relevant interactions.

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6. Talent finding those who can

Current state
While many companies understand the importance of being engaged in the conversation online, few understand how it ties into the overall marketing strategy. This can hinder a brand, as social media is another avenue of communication with consumers and if the company is not creating the community online, then someone else is doing it for them. While Canadians arent as likely to make purchases online, when compared to US consumers, their path to purchase is heavily inuenced by online tools before ever reaching the store. The Internet is used most often by Canadian consumers for product research and is the most common channel for gathering product information, reviews, and promotions. However, purchasing is predominantly carried out in-store. Therefore, sales associates need to be, at a minimum, just as savvy as the consumer. Shopping has now become such an integrated experience that you want your sales team to feel connected there needs to be integration and collaboration. You need to have a conversation with your employees on a consistent basis so that they are empowered and educated by the brand, says Cary Skidmore, Executive Vice President & Chief Marketing Ofcer of Glentel. The talent management strategy of any retailer should align with the companys overall strategic plan. Effective associates should represent the brand values, messaging, and even marketing though their behaviours, skills, and competencies. As consumers change, retail associates must change as well. This means that retailers need to look to hiring sales associates who understand the inuence of social media and mobile technology on the shopping experience. Retailers should also look for associates with a willingness to use technology to provide better customer service and more efcient store operations. Meeting the demands of an increasingly ckle consumer can require careful integration of consumer and product data. Ideally, information is aggregated across the sales channels to capture the consumers full prole and purchasing history. Collaboration tools can leverage the entire sales organization to improve customer service. By building the right team of associates and empowering them with tools and technology, retailers are likely to benet from improved consumer satisfaction and employee morale, better employee engagement, and lower turnover. Omni-channel retailing is not just about the store or the sales associate it is about serving the consumer however and whenever they want. One of the keys to success is creating consumer intimacy by creating relevant interactions. Leading retailers are already working toward providing a seamless shopping experience before, during, and after the consumer visits to their physical store.

Talent challenges at the head ofce

Understanding how to leverage social media, eCommerce, and mobile technology is a pressing question, and a lot of it comes down to talent. Just as having the right people on your eCommerce team is integral to the success of the venture, so too is having the right talent in your organization to drive and measure the social media and mobile agendas. In Canada, most companies have a Director of Marketing, while in the US, companies are moving towards hiring heads of mobile or digital. When building out your marketing and media team, hire the people who have an old-school foundation in marketing but are willing to learn new ways, and bring in experts to support them. There are numerous support platforms that can track data on the back end of social media sites, eCommerce, and mobile technology. Having people who understand these platforms, the data, and the metrics that can be gained from a social media movement or an eCommerce site, along with the way to structure a marketing campaign on these mediums in order to capture and analyze meaningful data, should also be a component of the talent you build into your marketing and media department. There are plenty of products that support the analytics of online campaigns, but they are useless if you do not have someone in your organization who understands them and someone who knows how to structure a campaign to benet from the software capabilities.

Talent challenges at the store

For many retailers, the store associate is critical to delivering a consistently strong consumer experience, creating competitive differentiation, and driving consumer loyalty. Creating a positive consumer-associate relationship may require a multi-faceted approach centred on building, managing, supporting, and engaging retail talent. A multi-channel strategy caters to Canadian consumers, who tend to research online but buy in physical stores.

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Retail leaders who truly embrace and revel in an ambiguous future will be those we profile in our retail study in years to come.
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Final thoughts
Our study has revealed that BC and Alberta retailers are in the game when it comes to social media, eCommerce, and mobile, but most are not leaders. Larger retailers are ahead of smaller independents, but winning this game does not depend on size. Recognizing the opportunities and embracing the challenges will separate the winners from the losers. Most importantly, leaders who truly embrace and revel in an ambiguous future, who build a culture of experimentation and adaptation, who are prepared to drastically alter legacy channels, and who give a real voice to the consumer will be those we prole in our retail study in years to come.

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Appendix
Denitions
As retailers, the industry and marketing rms often associate their own denitions with mobile and social media and sometimes group all of these activities under the eCommerce or online umbrella. We have applied the following denitions to this study to differentiate between the various retail activities/strategies.

Term
eCommerce

Denition
Conducting sales outside of the normal bricks-and-mortar locations. Could be via the companys website, posting articles on eBay or mobile applications that consumers download to their smartphones or mobile devices. Mobile technology could refer to technology that companies use to reach out to their consumers smartphones, and it could also refer to changes that companies make internally to make their employees more productive or to change the customer experience in the stores, e.g., loading POS software on iPads and allowing sales associates to conduct a sale on the mobile device in the store. Companies could have an online presence that is limited to a website with biographical information, such as store locations, store hours, coupons, and investor information. Their online presence could also include a page on Facebook or a Twitter feed. An online presence that is limited to information sharing generally does not impact the back-ofce operations, and is primarily aimed at interacting with the consumer. An online presence could also include eCommerce.

Mobile technology

Online presence

Online mobility Social media

Mobile technology and online presence. Includes websites and media campaigns on platforms such as Facebook, Twitter, foursquare, etc.

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Contacts
For further information, please contact:

Deloitte BC retail leaders

Rick Kohn Associate Partner 604-640-3228 rkohn@deloitte.ca Erica Pretorius Senior Manager 604-640-3149 erpretorius@deloitte.ca Nicole Coleman Senior Manager 604-640-3038 ncoleman@deloitte.ca

Retail Council of Canada

Shaq Jamal VP, Western Canada 604-683-7706 sjamal@retailcouncil.org

Note
The authors would like to acknowledge the writing talent and insights of Laurin Henderson, Deloitte BC retail team member.

Deloitte Alberta retail leader

Dave Wilson Partner 780-421-3792 davewilson@deloitte.ca

Deloitte Canada retail leaders

Brent Houlden Partner 416-643-8788 bhoulden@deloitte.ca Jennifer Lee Senior Manager 416-874-3344 jenniferlee@deloitte.ca Kim MacDonald Senior Manager 416-643-8413 kimmacdonald@deloitte.ca

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www.deloitte.ca
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