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Six Essentials for Cross Channel Success

S e p t e m b e r 2 0 0 8WHITE PAPER

l Retail Strategies l Customer Experience l Channel Management

Leadersin Cross-Channel & eCommerceIT services for Retail & CPG

Six Essentials For Cross Channel Success | September 2008

� © 2008, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.

Customers are interacting with businesses through multiple touchpoints for research, ordering, payment, tracking and customer service. Many retailers that invested in cross-channel management did not consider the pitfalls and ended up in disjointed business processes, inconsistent channels, and a loosely integrated ecosystem.

We have helped our customers to successfully transition their siloed individual channels to become cross-channel efficient by an approach with six essentials; Business Solutions, Integration, Architecture, Governance, Performance Measurement, and Network and Infrastructure Management. The result: enhanced customer experience, visibility to customers’ shopping behavior, and improved conversion rate.

“If your CEO isn’t onboard with the multichannel imperative, that person shouldn’t be running your company.”

- Brad Anderson, CEO-Best Buy



Introduction 4

The Cross-Channel Matrix 4

Customer Interactions and Touch points 4

Employee Interactions and Touch points 6

Business Functions 6

Channel Management Services 7

Business Solutions 7

Integration Services 9

Architecture 10

Governance 11

Performance Measurement 12

Network and Infrastructure 12

Conclusion 13

About HCL 14

TABLE OF CONTENTS



Introduction

Cross-channel customers not only hop across channels, but also hop in and out of retailers. They are also found to be disloyal and would not hesitate to switch to another retailer for better price, availability, and customer service. Retailers obsessed with product features are categorically snubbed by customers since they shop for ‘their’ needs, not for merchandiser’s whims and fancies. This has created an opportunity for the retailers to focus on customer centric retailing.

Mere lip service is not a substitute for a better customer experience. To enable the business to provide services that wow the customers, it is imperative that there are strong processes and the right technology behind the cross-channel organization. This whitepaper presents HCL’s approach involving six essential elements to a successful transition of a traditional retailer to an efficient cross-channel organization.

The Cross-Channel Matrix

Majority of the cross-channel customers researched the products online and bought them at stores. Customers expect the call center associate, store personnel and online chat agent to provide them information about the product, inventory availability, order status and handle all their transactions in a consistent way. They would like to reserve the items on the web and pick them up at the nearest store. And, at the store, they expect the pickup process to be smooth and quick.

Circuit City’s 24/24 online order and store pickup has set the benchmark for cross-channel retailers just like Amazon’s one-click ordering. In the near future, most of the cross-channel features would become norms setting a high quality bar for retailers. There is an emerging matrix on the cross-channel center stage involving strategies, processes, business functions, customer facing and employee facing solutions, applications, network and infrastructure, policies, and devices (Figure 1).

How can cross-channel success be achieved? Probably, an assessment of cross-channel business challenges might have already been done. The challenges are multi-fold; it is actually a matrix of business, technical and cultural issues. But, these challenges can be overcome through the right combination of technologies and integrated processes and a study of the make up of the matrix to help build a strong cross-channel organization.

Customer Interactions and Touch points

Customers transition from one channel to another according to their preference and taste. They use the device of their choice and expect you to provide consistent information and service in real time. The effectiveness of each channel is judged



by the extent to which the customers were able complete their goals and their experience through the process. Customers are ready to use alternate channels provided they offer the same convenience as traditional channels.

Most first generation software cannot identify the continuance of a transaction when a customer transitions across channels. For example, if the quote for a mobile phone a customer received through email was not honored by a call center associate, the customer could be lost, probably for ever. Similarly, customers might find some of the processes that are designed to work in one channel not working for them in other channels. A good example is kiosk application that was nothing different from a web front and failed due to the inability to provide a unique experience.

We have helped some retailers to redesign their cross-channel architecture of business functions to enable better adaptability to existing and prospective channels. In the process, some processes were re engineered to allow customers to move across the channels. We have seen retailers getting better visibility into their customers’ cross-channel behavior and accurately measure the performance of the customer touch points.

Figure 1: The Cross-Channel Matrix

l POS l Email l Mobile Phone l Online Chatl Web Store l Kiosks l Call Center l Handheld devicesl Catalog l Self-Checkout l IVR l Mass Media

Customer Interactions Business Functions Employee Interactions

Product SearchProduct DataRecommendationsProduct AvailabilityPrice & PromotionsPurchase/Order PlacingOrder TrackingPrivacy & SecurityReturnsCustomer Service RequestsCoupons

MerchandisingeCommerceOrder ManagementInventory ManagementLogisticsCRM/LoyalityBusiness Intelligence

Product SearchProduct DataPrice LookupInventory LookupCustomer InformationLoyality DataOrder PlacingOrder TrackingReturnsCustomer Service Requests

Channel Management Services

Business Solutions Integration Services Architecture

Governance Performance Measurement Network & Infrastructure



Employee Interactions and Touch points

To empower their employees with the right mix of tools and information, many retailers have invested in mobility solutions that help them answer customer queries, look up price and promotion, confirm item availability, and know their customers. In-store associates are using handheld applications not only for information, but also for guided selling and replenishment. Retailers have implemented new features for online chat associates that allow for sales and support activities to better serve their customers during online transactions.

Enhanced features in employee touch points have allowed customer service associates to use real-time information to provide quotes, order status, product recommendations, and price and promotion data. Call center associates handling customers who transition from self-service to live-service requirement are achieving ‘one-call resolution’ that leads to increased customer satisfaction.

Business Functions

Business functions need to work for customer and employees in the cross-channel environment for them to complete their goals. Channels have failed due to the expected functions not being available and inability to meet users’ expectations. Customers do not think that online and offline worlds are two different entities. They access any channel with set expectations for their immediate needs and understand that all channels cannot (and need not) do everything. Hence, it is important to expose only those business functions that meet their expectations in any channel and to be able to transition across channels for other needs.

We have found that many retailers’ channels are not equipped with functions that are considered standard norms by the industry. For example, an email request for product recommendation receiving a reply without a quote. Or, the call center associate not being able to locate the nearest store that carries a product that the customer has inquired about.

Whether you are using custom applications, best-of-the-breed ERP or packaged applications, you need to extend the current business functions to align with their cross-channel strategy. Many features like online orders, store pick-up, order management and fulfillment functions have to be plugged into eCommerce. But, instead of aggressive initiatives to match the competition, a phased approach should be adopted to overcome the complexities of new technology, process, operational challenges, and decrease the risk of destabilizing the ecosystem. It is essential to analyze the customers’ channel behavior to discover the pitfalls and shortcomings. User-centered designs lay the foundation for a cross-channel platform that could help each channel build on its own strength and uniqueness.



Channel Management Services

Let us discuss the six elements that make for cross-channel strategy. These elements help build a strong, integrated environment and have a flexible cross-channel business. Customers that adopted this cross-channel strategy continue to move up the value chain by optimizing their processes in every channel they offer.

1) Business Solutions

Many of our customers had realized that the success or failure of their cross-channel initiatives depends a lot on the business solutions that support various business functions. They aligned their processes with customer centric initiatives to give their customers a better experience. They empowered their customer-facing employees with enhanced features in solutions like call-center management, customer management and loyalty information that yielded quick results. To ensure the information is available real time and allows actions to be carried out when called for, they invested in solutions that allowed flexibility and scalability.

l eCommerce as Cross-Channel Platform: Merchants like Circuit City, JCPenny, and Best Buy have all built their cross-channel platform around the web to provide consistent, transparent, and reliable services. Call-center and store associates are using the eCommerce platform to assist customers with their queries, send recommendations through email, create customer orders, and for after-sales services. The same platform is used to collect and consolidate customer feedback, study customer pathways, gain customer behavioural insights, and manage all outbound communications. The eCommerce platform was built as the foundation for the cross-channel business for many customers. Since cross-channel customers touch online on their pathway, it is essential to transform the eCommerce platform from an online store to a cross-channel hub.

l Master Data Management: Cross-channel design requires a single view of master data to provide an exciting experience for the customers on the offered channels. For example, conflicting item or price information would not only confuse the customers but could also drive them away from retailers. Though retailers have traditionally used the Master Data Management (MDM) functions of their core merchandising application, many eCommerce retailers have adopted best-of-the-breed Product Information Manager Application (PIM) for their MDM needs.

l Merchandising: Merchandisers are focusing on consumer centricity in their merchandising processes. This requires integrating the fragmented planning process across business units. Localizing the assortments, collaborating with partners on replenishment, creating demography specific pricing strategy, using business intelligence for accurate merchandising decisions and using



technology to measure the channel performance are some of the top priorities of retailers.

l Order Management: For many years, retailers had multiple applications to manage orders from different channels. In the recent past, retailers have replaced or enhanced their order management application to centralize the order capture and fulfillment processes. This consolidation has enabled the customers to interact and transact in any channel in any order. To enable this seamless movement, technology enablers like mobility solutions are being added to the solutions portfolio.

l �Order�Fulfillment: The success of many retailers like Amazon has been because of the strength they carry in fulfilling the orders. Complex supply chain processes might pose challenges if you intend to fulfill the orders in-full on-time, every time. Enabling fulfillment through multiple channels has reduced the need for carrying inventory, reducing investment and space needed at the stores.

l Mobility Solutions: Enhancing employee efficiency and customer experience are value drivers to implement mobility solutions at the store front. Concerns like security, infrastructure management, and integrated solutions have been the primary reasons for slower adoption of mobility solutions. But, improved technology along with some killer applications to support functions and infrastructure has helped faster adoption of mobility solutions. A classic example is Apple which has taken customer service to a new level by adopting mobile solutions for all business functions in their stores. Functions like line busting, order management, inventory management, returns management, product information, customer information, assisted selling, and physical inventory can be looked at for investing in mobility.

l Self-Service Solutions: Since moving customers to self-service options is a cheaper alternative for other channels, retailers have been renewing their interest in self-service options like kiosks. But the success of such initiates is dependent on the application features, interactivity with users and most importantly, users’ achieving their goals. Innovative retailers have embedded the business functions with interactive features using technologies like Microsoft Surface that provides customer experience along with rich moving content.

l CRM/Loyalty: Customers need information about their loyalty points and would like to use them at any required channels. The marketing team requires an understanding of customer shopping behavior and measurement of each channel’s performance. Centralize the CRM and customer intelligence solutions as the first step towards building lasting customer loyalty, followed by harmonizing the customer master data to recognize customers at all channels. Apply customer centricity to all functions to provide effective customer service and to develop better customer intimacy.



l Business Intelligence: Transforming a retail organization from being one that is product centric to one that is customer centric would mean that you should know the performance of all the channels and customer preferences in each of those. If you are taking decisions based on customer intelligence, you will benefit from the improvement in customer experience. Such intelligence would also help you put your investment dollars into only those channel capabilities that your customers are likely to use.

2) Integration Services

Most retailers have a combination of ERP and best-of-breed applications and have been integrating them to gain efficiency in their supply chain. The ability of building brand in the process of selling products and services in multi-channel is crucial for the retailers. To achieve this, you should integrate online and offline channels blurring the boundaries so that a customer can cross without barriers.

Developing a dependent relationship connecting all the distribution points – stores, warehouse, suppliers, and distribution centers – will be essential to make cross-channel execution strategy work for you. Building an integrated plan covering merchandise, promotion and category would require effective integration of multiple applications brining incremental benefits to the execution team. Bridging the merchandising and store operations would require visibility of data across the supply chain at real-time. Many retailers have no way of achieving this since their current application architecture and processes do not support such integration.

We have built eCommerce integration services for some of our customers based on Service Oriented Architecture (SOA) (Figure 3) that has proved clear-cut benefits compared to earlier fragmented architecture. Cross-channel requirements would lead to a more complex architecture since they cross boundaries and develop dependencies. But clear business process definitions mapping cross-channel requirements to the applications should help reduce the complexities in managing the cross-channel business.


10 © 2008, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.

Figure 2: HCL eCommerce Framework

Customer Employee Partners

HTTP GPRS/EDGE

User Interfaces

HTML/AJAX SOAP Mobile Gateway

Business Applications

Store Systems

Logistics

ERP

Enterprise Management

Optimization Systems

Supplier Network Hosted Applications

Hosted Applications

Collaborative Commerce

Service Integration Layer

Security Services

Aut

hent

icat

ion

Ser

vice

s

Aut

hori

zati

on

Ser

vice

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Services

Administrative Services

Monitoring

Auditing Analytics

Logging

Core Business ServicesIdentity

Collaboration

Order Mgmt

Email/Messaging

eCommerce

External Integration

Content Mgmt

Supply Chain

Search

Reporting

Integration Layer

Integration Layer Integration Layer

Data/Metadata Respositories Business Components

MonitoringCatalog/ Product

Order Info Other Info eCommerce Compliance Security Others

3. Architecture

Early adapters of cross-channel strategy are entering the next phase in their technology deployment plan by embracing an architecture that involves store systems, head office applications and hosted solutions. By including standards based practices like Service Oriented Architecture (SOA) that provides clear advantages by allowing retailers to continue using the legacy applications and also adopt next-generation applications. This has essentially allowed many applications that were hosted in store servers to be moved to central locations allowing enterprise-wide view of data in real-time.

While traditional retail enterprise architecture focused on retailer’s business process and sometimes included partner processes, but left out the customer from the equation. Cross-channel architecture (Figure 4) maps to customer requirements and promises to align with the customer shopping behavior. Furthermore, it integrates multi-channel business processes instead of having them compete with each other. Consolidation of business applications has removed redundancy of business functions. It is now possible that each of the business functions is executed by only one application regardless of the channel where transaction occurs.


11 © 2008, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.

Cross-channel architecture reinforces the integration and performance capabilities of the retail architecture that has a direct impact on the efficiency of various business units in the supply chain. However, there are some risks in applying the architecture without understanding the impact. There would be modifications to applications, along with changes to business processes in some key functional areas. Functions like Master Data Management (MDM), order management, and order fulfillment might have varied levels of impact. Assessing the impact and having the right strategy to mitigate these risks would reduce the adverse effects of these changes.

l POS l Email l Mobile Phone l Online Chatl Web Store l Kiosks l Call Center l Handheld devicesl Catalog l Self-Checkout l IVR l Mass Media

Order Management Services

Business Services

Customer Management Services

Order FullfillmentServices

CommunicationServices

Logistics Services

Inventory ManagementServices

Back-bone Integration Services

Business Applications

Retailer Manufacturing/Supplier

Partner Consumer

Figure 3: Cross-Channel Integration Backbone

4. Governance

An organization’s maturity level is determined by the strength and adherence of its governance capabilities. Individual channels are often seen using IT to establish their individual goals that usually conflict with organization’s strategy. To avoid such competing behavior, cross-channel businesses should have collective governance of processes, IT, architecture, infrastructure, data, policies and standards. Governing bodies should involve cross-functional and cross-channel units to ensure that any change to the environment – business or IT – should align with the corporate vision.

Customers that are successful in cross-channel initiatives created a leadership team to champion the channel management strategies. They enforced a strong governance mechanism for both business processes and IT architecture. In multi-


1� © 2008, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.

channel environment, process-driven retailers with structured governance model tend to show better relationship with business units and IT organization. The IT organization is empowered to monitor the policies, while the governing body is entrusted to enforce the policies. Involving top leadership in the governance model would avoid pitfalls due to channel wars.

You should ensure that your customers are aware of the uniform privacy and security policies. Knowing that the success of some of the channels in the offering is heavily dependent on employees, you should establish an incentive plan that motivates coordination among employees and prevents channel wars.

5. Performance Measurement

Channels can set their goals only when the performance metrics are transparent and visible. Poor visibility into the performance of individual channels is often responsible for the mediocre results of cross-channel strategy. Without defined metrics and accurate data to drive the measurement, the channel management units cannot evaluate the performance of all the elements in the multi-channel environment. There should be a robust mechanism to collect the data to drive the performance measurement and evaluate the quality of the data collected.

Business units responsible for cross-channel operations can work on the improvement areas only when the objective of measuring these performance metrics is to meet the channel goals. When incentives are tied to performance and when individual channels are managing their own performance metrics, channel war is a result for sure. By linking the store operations with the store pick-up performance, there can be a common set of metrics for both the units.

Since the performance of a cross-channel organization is effectively the collective performance of individual units, metrics like cross-channel conversion rate, transition pathway of customers across channels and cross-channel contribution to the organization goals should be captured. By having these necessary metrics in place, business owners should be able to evaluate the ROI of their investments in the channels and decide upon optimization needs.

6. Network and Infrastructure

Building a network that connects people with solutions would need a supporting infrastructure. The flexibility and scalability of the business solutions that operate in cross-channel environment also depends on the network and hardware infrastructure. As business solutions are getting consolidated, the store, call-center and head office network capabilities can be upgraded to support increased cross-channel needs. For example, many store specific solutions like workforce management are increasingly being moved to the central server.


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The ability to manage hardware and other devices in the supply chain would have an impact on the efficiency of channels. Larger issues like transaction monitoring and security in infrastructure plans should be considered. A customer centric infrastructure would allow customers and employees to transact as if the online and offline worlds do not exist. Real-time data availability and instantaneous access to data are some of the key cross-channel dependencies that make or break the success of the channel operations.

Conclusion

Are you cross-channel ready? If you make an assessment of your cross-channel capabilities, you might discover some surprises. Probably you might have invested in multi-channel solutions that promised more than they could serve. You might realize your processes are so rigid that any minor change would result in a channel’s death.

Are you quick enough to react to cross-channel customer expectations? You might realize that your processes do not align with customer shopping behavior.

So, what should you do now? Your leadership team should develop a strategy that maps to your organizational goals. Instead of a big-bang approach, you should identify multiple quick win opportunities so that customers continuously see value enhancements. This ensures progressive cross-channel maturity and faster ROI without sacrificing any momentum. As the adoption of multiple channels in retail business grows, the enablers for the success would evolve too. Identify strengths and weaknesses of your channels to ensure continuous improvements. Identify internal and external partners to be a part of the coordinated collaboration. Partner with a service vendor to help reengineer your business processes and build the technology blocks to support.

Finally, the 3 C’s that compliment cross-channel success; Consistency, Creativity and Communication should not be forgotten.

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About HCL

About HCL Enterprise HCL Enterprise is a $4.9 billion leading Global Technology and IT Enterprise that comprises two companies listed in India - HCL Technologies & HCL Infosystems. The 3-decade-old Enterprise, founded in 1976, is one of India’s original IT garage start-ups. Its range of offerings span Product Engineering, Custom & Package Applications, BPO, IT Infrastructure Services, IT Hardware, Systems Integration, and distribution of ICT products. The HCL team comprises over 55,000 professionals of diverse nationalities, who operate from 18 countries including 360 points of presence in India. HCL has global partnerships with several leading Fortune 1000 firms, including leading IT and Technology firms. For more information, please visit www.hcl.in.

About HCL Technologies HCL Technologies is one of India’s leading global IT Services companies, providing software-led IT solutions, remote infrastructure management services and BPO. Having made a foray into the global IT landscape in 1999 after its IPO, HCL Technologies focuses on Transformational Outsourcing, working with clients in areas that impact and re-define the core of their business. The company leverages an extensive global offshore infrastructure and its global network of offices in 18 countries to deliver solutions across select verticals including Financial Services, Retail & Consumer, Life Sciences & Healthcare, Hi-Tech & Manufacturing, Telecom and Media & Entertainment (M&E). For the year ended 30th June 2008, HCL Technologies, along with its subsidiaries had revenues of US$ 1.9 billion (Rs. 7,639 crore) and employed 50,741 professionals. For more information, please visit www.hcltech.com.

About HCL RetailHCL helps leading retailers worldwide including 7 of the world’s top 35 retailers through its 2500+ Technology and Domain Consultants with 10,000 person years of Retail industry experience. HCL’s presence in retail and consumer goods is characterized by its ability to impact the business, not only at the point of sale, but through the entire retail and consumer goods life-cycle, from sourcing to the consumer shopping experience. With long term collaborative relationships with customers, rich domain expertise and partnerships, the vertical offers unique, end-to-end solutions, covering the entire spectrum.

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Leaders - hcltech.com · an opportunity for the retailers to focus on customer centric retailing. Mere lip service is not a substitute for a better customer experience. To enable