From Finance Director at OuiSet U.K. Ltd / Lisa Stirling Ltd to his current position as Managing Partner at Retail Pragmatist, there is a real sense that Bolton is a born problem solver. He originally trained as an accountant and it could be said that he applies the same financial analysis and rigour to the retail industry. Indeed, Bolton is keen to point out the importance of back-office management, especially concerning stock management and merchandising. His first taste of the retail industry was working for a business that expanded from wholesale into the retail market. This move transformed the stock risk because as a wholesaler, “retailers placed orders on you and it is their stock risk but when you move downstream into high street retail at the sharp end, it becomes quite an eye opening lesson as your markdowns rise and dormant stocks stick around.”
He then moved to GUS Home Shopping, where he used his stock management experience to run two projects on order management and returns. Steve was involved in the acquisition of Argos PLC and helped create the business case and identified how much it was worth, what they should offer and what the synergy benefits would be. One of the outcomes of this exercise was that Argos Direct catalogue began to leverage GUS’s clothing offer, exploiting synergies between the two companies and enhancing a multi-channel offer, integrating orders with tills. The idea of multi-channel is not, however, a new phenomenon and Bolton is keen to point out that he has been working in multichannel since the beginning of the ‘90s. GUS was multi-channels because they had leaflets, emails, direct marketing, catalogue, one page ads etc. The difference is that at the time home shopping accounted for no more than 6-7% of the retail market. Now, almost twenty years later, the whole high street is moving into this space and leveraging different channels, brand and store footprint. “Home shopping is,” as Bolton states, “experienced in after-sales, customer service and order management.” Therefore, the heritage of home shopping and catalogues is right in the sweet spot of multi-channel.
Multi-channel retail creates a range of challenges requiring innovative solutions but as Steve points out it is important to weigh up the costs and benefits of all. Having been actively involved, since the end of the ‘90s, in the final-mile delivery space, he is still actively involved in this area and admits to having seen, “quite a lot of solutions from the good, the bad to the ugly.” He illustrates the example of introducing trial locker banks as collection points in shopping malls to demonstrate a solution that worked on paper but not in reality. Instead of having to wait for a delivery or going to the post office collection point at a certain time, customers would be given an access code to open a specific locker that would contain their purchases. One problem they came across was over gaining permission of the owners of the corridors between the stores of the malls; another was the inability to determine whether a customer would pick the item up as soon as it was delivered, if not the box would be tied up for a very expensive time period .
This was a setback for this automated solution but Steve still sees a future in a similar workable solution, where retailers could leverage the local convenience store to have packages delivered there so that the customer can go out of hours and when it suits them. Considering that a report commissioned by Kelkoo and carried out by the Centre for Retail Research reported in 2010 that £38 billion was spent online in the UK during 2009, this delivery solution could be a workable option for customers who would like to collect their deliveries when they want.
The internet has not only transformed consumer behavior in terms of purchasing but also, as Steve Bolton acknowledges, the retailer’s relationships with the supply chain and the way they present their products to the customer. When he began working for GUS back in the ‘90s, the internet was viewed as a marketing tool, to “make the brand look nice,” and it was thought that it would never be more than 2-5% of sales.” Fast-forward ten years and home retailers like Littlewoods Direct group are, “looking at 75% of their sales to be online.”
An online presence, according to Bolton, should be meaningful and work in conjunction and compliment the bricks and mortar stores. The physical presence of a retailer on the high street will, Bolton affirms, “never die out due to delivery issues, habit and wanting to see an item before buying, sometimes customers returning home to find the best price online later that day” but retailers should still use the power of the net to reach out to customers. He highlights, in particular, the power of click and collect, where by customers are offered the option to reserve on-line and collect later. “Any retailer who has a decent footprint in terms of store coverage has got to have a click and collect proposition,” says Bolton, “If a product is being sold on the web the retailer needs real time stock management, presenting accurate availability of stock. You can reserve and collect it, which means you need to know exactly what stock you have in the store. Or you can buy and collect it, where the customer buys the product online and then comes to the store to collect it later. Either way, you have to either hold the product in store or deliver it from a central warehouse with strong communication processes in place.” Tesco is already making the most of this and offer a, “fantastically flexible proposition where you can order online and get your deliveries delivered next day, collect from store or at a premium between 7am to 11 o clock at night.” Steve adds, however, that, “not many retailers have the infrastructure to leverage so many delivery choices but Sainsburys, Asda and other supermarkets could, and should, go the same way. “
Alongside introducing customer-focused delivery options, retailers are also trying to extend their web platform to well beyond the range of product they have in stock. Steve draws on Amazon’s supply chain model to explain: “Amazon have developed a massive supply chain in terms of integrating a variety of supply offers into their offer. You may expect your items to come from the same supplier because they look like they are in-stock but once the order’s been placed this order is then broken down into items, which could come from different suppliers. This method takes a huge amount of coordination across suppliers from the point of view of managing the delivery promise and all you receive from Amazon is a range of delivery dates so if you’re out all day then that’s no good to you.”
In terms of multi-channel, a transactional website has many benefits for the retailer. The internet can help spread the risk, “if you’ve got a common stock offering through store, internet, catalogues,” says Bolton, “the spread of that risk across those channels is how you can mitigate that risk.” On the other hand, internet only lines can be used to preview products, particularly when it comes to apparel. “We used to do that at GUS – demand forecasts to see the shift in profile. These could then be used to determine the demand of a product.” This is not, according to Steve, particularly well exploited at the moment. On the other hand, offering the customers the option to pre-order products has become a useful tool because, “you know the dates, you can start to take pre-orders to get your risk in terms of what orders to buy to fulfill that demand.” He adds that, “a lot is really down to how responsive your supply chain is, especially with fashion chains, if you’re sourcing something from the Far East, you need around 6 months lead time minimum and you need to be pretty slick to manage that information back into your estimate.”
Managing the supply chain is not the only consideration for retailers who decide to go down the multi-channel route. It is also vital that the retailer clearly specifies their proposition. Steve suggests that they need to ask questions like “what should be available online and if you buy online can it be returned to store?” This is perhaps one of the best options for the customer but the stores will need visibility through an intelligent till or some kind of way to identify the web orders in store. The retailer has to be mindful of the returns’ management process. Online etailer’s ASOS reported a return rate of 25% in 2009. This may seem high to retailers but they need to take into account the way that consumers approach their online purchases. They could order 2 sizes of the same item, try them both on in the comfort of their own home and then send one size back. The high return rate is therefore due to the nature of online shopping.
When it comes to stock management, it is necessary to decide on what happens in the likely scenario that an item becomes out of stock. “The brilliance of the web is that if you’re out of stock you can pull the item online instantly” says Bolton, “but do you offer your customer an email notification, a stock due back in date or if you know when your stock is going to come back in do you take the order and hold it? There is definitely a correlation between the longer you hold an order the higher the return rates are because people go elsewhere,” warns Bolton.
Mobile technology has also added another dimension to the retail mix and is slowly being integrated into multichannel retail. Argos, for example, will send the customer a text message confirming their order over the internet for collection in-store. Customers can now shop from their phones, receive mobile coupons and use geo-location services to find stores nearby. Moreover, mobile phones have applications that allow the consumer to compare prices of goods, “I have an app on my iPhone where you scan the bar code and it’ll tell you where to find the cheapest price.” Bolton continues, “technology has outpaced retailers’ capability to deploy it and there’s a long way to go yet.” Therefore, retailers need to constantly reassess their capabilities and ambitions to stay in touch with the consumer and this is where Retail Pragmatist can help.
Steve’s company, Retail Pragmatist, looks at a retailer’s capability to see where they are on the development path and help them become, “a fully integrated multichannel retailer, developing a model that is appropriate to the proposition.” This holistic approach aims to, “really break down all the functional silos and look at the business from all angles. The marketing department may be doing a sterling job with great offers but the stock department is failing if the product is not available. The retailer needs to understand how to get from where they are to where they want to be.”
Despite the economic downturn of the past year, The Retail Pragmatist has been working with a major high street multichannel retailer on their warehouse distribution strategy and Steve suggests that some retailers are planning for the upturn. “It’s still a bit fragile and a little uncertain” but he will continue to “push the message around about leveraging every end of your business that you can.”For Steve Bolton believes, “there’s still a long way to go in terms of improving delivery options, customer communications, customer engagement, customer understanding and so on,” and therefore he will be working to help retailers enhance their multichannel strategy for a long time to come.
Read 4Retail Profile: Felicity Wade>>