MergingStoreandInternetRetailingTheMoveTowardsOmnichannelanditsImplica9ons

IDIConference2016

Torino(Italy),3-4June2016

LucaPellegriniProfessorofMarkeAng,IulmUniversity,Milan

Agenda

•  Internetretailing:wherearewe?Anoverview

•  Thejourney:frome-commercetoomnichannel

•  Omnichannel:implica9onsforthefuture

2

B2Ce-commerce:anoverview

3

Global population in 2014 7,360 m

People who purchased goods and/or services online at least once 1,200 m

2014: in total, they spent 2015: forecast

€ 1,442 bn € 1,760 bn

Average spending per e-shopper 2014 € 1,100

Es9matedshareofonlinegoodsintotalretailofgoods 4.2%

Source: Ecommerce Europe

16%

B2Ce-commercebyregion2014

4

Asia Pacific € 581 bn 40.3%

Europe € 424 bn 29.4%

North America € 394 bn 27.3%

Rest of the world € 43 bn 3.0%

Total € 1,442 bn 100.0%

Source: Ecommerce Europe

Top10e-commercecountries2014

5

Source: Ecommerce Europe

E-commerceinEurope:percapitaexpenditure2014

6

Source: Ecommerce Europe

E-commerce:toomuchhype?

7

•  AHer20years(AmazonandeBaywentonlinein1995)themarketshareofe-commerceislessthanmanyexpected

•  About50%oftotalexpenditureissAllonservices•  Bricks&mortarretailersreacted:enhancementofin-storeexperience

Whathappenedandwhatisgoingtohappen?

Thejourney

8

1.   E-commerce

2.   Mul9channelretailing

3.   Omnichannel

3Stages

•  PureclicksasthealternaAvetobricks&mortarretailers

•  Amazon’sbet,firstonbooksandthenoneverything:youonlyneedoneretailer.Thecheapest

•  OnlineplaSormsasthealternaAvetoagentsandaucAoneers(eBay,Alibaba)

•  Infomediaries:tohelpconsumerssearchforthebestproductatthelowestprice

•  Somemanufacturerswentonlinetofreethemselvesfromretailers

9

Stage1:e-commerce

10

E-commerce:implica9ons

•  Itworkedverywellwithservices:travelretailers,onlinebanksandinsurances

•  Butgoodsneeddelivery:pureclicksdiscoveredthehardandphysicalchallengeoflogisAcs(nonemorethanAmazon)

•  OnlinepricesincreasecompeAAono  manufacturerssellingonlineconstrainretailers’pricing

policiesandmanyhadtobacktrack

•  Clicks&mortar:bricks&mortarretailersgoonlineandsomepureclicksopentheirownstores:onandofflineretailingasparallelop9ons

11

Stage2:mul9channelretailing

•  Clicks&mortarisananswertopureclicksbut:•  oHenleadstoinconsistencies:differentassortmentsanddifferentpricesonandoffline

•  inmanysectors(eg.groceries)pickinganddeliverycostsareveryhigh

•  oncemorelogisAcsistheproblem:organisingtheserviceforonlinecustomersisdifficult:in-storepickingorspecializedwarehouses?

12

Entersthesmartphone:m-commerce

•  ThesmartphoneredefinestheinterfacewiththeconsumerandofferscountlessnewopportuniAes

•  Butthefirstimpactwasathreat:onandofflinecomparisonsbecomepossibleinthestoreo  showroomingandpricematching

•  Consumerswantitallandonandofflineinconsistenciesneedtoberesolved:aseamlessexperience

•  ClickandcollectinstorebecomesapopularsoluAon:crosssellingtocustomerswhentheycometocollectwhattheyorderedonline

•  “Showroomretailing”:insteadofchoosingonlineandcollectofflinechooseofflineandcollectonline

Stage3:omnichannel

1-ON-1ATTENTIONAknowledgeableGuidewillwalkyouthroughtheenAreBonobosassortment.FINDTHERIGHTFITFitMaders.AGuidewillhelpyoufindyourperfectfitfromallofouravailableopAons.WALKOUTHANDS-FREEAGuidewillplaceyourorderanditwillbeshippeddirectlytoyourhomeoroffice.

IN THE AREA? WALK-INS ARE ALWAYS WELCOME. WEEKENDS TEND TO BE BUSY, SO WE SUGGEST BOOKING AHEAD IF YOU CAN.

1.  Omnichannel,evenwiththeclickandcollectopAon,movespartof

salesoutsidestores:lessspaceisneededandthisisthemainissues

forsinglebrandretailers

14

Omnichannel:unresolvedissues

2.  Omnichanneldosnotsolvetheproblemofpricetransparency

andtheresulAngincreasedcompeAAon:thisisthemainissues

forlargedespecializedretailerssellingbigbrands

•  Fewerstores?Smallernetworkstoserveagivenmarket?DocompaniesrelyingonsinglebrandstoressAllneedmulAbrandstoresinsmalllocalmarkets?

•  Smallerstores?Shouldpartoftheassortment,the“longtail”,bemovedonline?

•  Differentstores?Shouldbigboxesopensmallerstoresincitycentresfortheirclickandcollectcustomers?

•  Fromsalestoexperiences?Shouldstorebeshowroomstocommunicatethebrandsbehindthem?

15

Omnichannel:lessspace

16

Omnichannel:pricetransparency

•  Showroomingasafactoflifetobeacceptedofferingpricematchingtothelowestpureclickprice?Isthissustainable?

•  Pricematchingreducesmargins,leadstoreducedserviceinstoreandmakesstorevisitslessusefultocustomers:howtointernalizetheinformaAonprovidedtocustomers?Howtoescapefromfreeriding?

•  Grantconcessions?Shouldbigboxesrentpartoftheirstorestobigbrands?

17

Towardsclosedecosystems

Omnichannelispushingtoclosedretailecosystems:• Singlebrandecosystems:selfsufficientandunexposedtoAmazon’scompeAAon:ver9calintegra9on• Mul9brandecosystemsrelayingonprivatelabelsforanincreasingshareoftheirsalesandconcessionstobigbrandstoavoiddirectpricecompeAAonwithinternetretailers:ver9calintegra9on