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November 12, 2014

Retailers: beware the omnichannel abyss

Davy Nys, VP EMEA & APAC at Pentaho, urges retailers to not let omnichannel fall into the abyss between IT and the business.

By Cbr Rolling Blog

To paraphrase research from Pierre Audoin Consulting, omnichannel is a hell of a lot more popular with the people in the business who want it, than the people in IT who have to make it work. The groups pushing for its adoption break down as: top management (50%), Marketing (30%), Sales (14%) and omnichannel experts (5%), with IT trailing at a mere 1%. This computes when you consider that the top two challenges for omnichannel exposed in this research is tough data integration problems: real-time access to customer information at the point of sale and managing internal and external (big) data.

With such huge disparity between IT and the Business, omnichannel initiatives risk falling into the wide abyss between these two groups while lengthy internal hearings take place. I strongly urge retailers not to let this happen! With so many advances in the industry happening now, the stakes are too high. Clive Longbottom, research director, Quocirca counsels in his report Bridging the big data divide: "By asking the right questions of IT, the business can make sure that IT goes out into the market and finds a suitable toolset for the business’ analytics needs: the key is in having the right discussions."

I’ve met with enough retail IT professionals to see where the resistance comes from. Most have mixed bags of legacy systems that they can’t just drop off at the nearest charity shop. Due to intense margin pressures, retail IT teams are not always adequately funded. Compared to industries like financial services or electronics, most don’t have the luxury of extra budget or time to experiment with new technologies. The majority are just trying to keep the lights on, never mind fulfil the latest trendy corporate vision.

Regardless, these three companies drive home why retailers can’t afford to kick omnichannel into the long grass:

The Amazon Effect – Amazon’s lead is so enormous now that catching up is not realistic. Competitors are best analysing and exploiting the gaps in Amazon’s business – in customer sentiment, product range, pricing and geographical reach. Now that Amazon is starting to dabble in physical retailing, the gloves are well and truly off.

John Lewis Labs – John Lewis, revered more for its bricks than its clicks recently launched a technology incubator called ‘JLAB’ to test the latest retail innovations and inspire fresh ideas. Given its formidable customer service reputation, when John Lewis becomes more tech savvy, it will be a serious force to reckon with. One of its very public aims is to support the delivery of an "omni customer experience".

RichRelevance – Speaking of John Lewis, one of those hot new technology companies it has recently tested and signed a deal with is Pentaho’s customer RichRelevance. RichRelevance will help John Lewis leapfrog into the analytics age by introducing Amazon-like personalisation to its ecommerce website and emails. The trend in mobile shopping is moving this trend faster.

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These retail players are so far ahead of the game that laggards risk waking up wondering who moved their cheese. You only need to witness the impact of Airbnb on the hotel industry to understand how a major disruptor can shake up a market. Every day another retailer gets caught out and has to cut swathes of jobs (Home Depot) or revise down expectations (Tesco) and this is only the tip of the iceberg.

Here’s the good news. Omnichannel doesn’t require a total technology overhaul not does it have to break the bank. It can take advantage of most or all of your existing IT and data infrastructure. So just because you’ve decided to introduce the latest open standards technologies like Hadoop, Cloudera, MongoDB into your IT architecture, doesn’t mean you have to ditch Oracle, Neteeza or IBM. New technologies can be gained for a relatively low incremental cost and risk compared to proprietary.

Where to begin?

There’s no ignoring the elephant. Those tricky data integration issues have to be solved in order to deliver omnichannel. But at least now the market offers technology and expertise to solve them. The world’s most analytics-savvy companies on earth – Amazon, Google, Facebook and Alibaba and emerging players like Marketo – all use commercial open source software from MongoDB, Cloudera and projects like Spark and YARN.

The right solution depends on the business requirements as Clive Longbottom points out in his report: "With any problem, there will likely now be several possible options. It is not down to IT to choose one option directly itself, but more down to IT to examine what each option offers and present back to the business what these mean to it in terms of business cost, business risk and business value."

Fortunately the stages on the road to omnichannel are practical measures that competitive retailers want to put in place anyway:

? Enterprise Data Warehouse – The traditional data warehouse (DW) is strained by rising data volumes, resulting in people not being able to get the analytics they need on time. Expanding DW capacity can be costly. This architecture enables retailers to augment their existing data architectures with Hadoop to improve DW performance, rather than replacing them. This provides the infrastructure that enables data blending between existing CRM and Financial data with external data sources or new types like Hadoop online. Clive Longbottom’s free report "Optimising the data warehouse" explains this in detail.

? 360 degree customer view – once your data is clean and you have established processes for blending different data types together, you then have the basis to deliver a 360 degree view to customer-facing employees in areas like sales, customer support or finance. The 360 degree view blends various operational and transactional data sources to create an on-demand analytical view across customer touch points.

? Omnichannel – The 360 degree view provides the basis to present information to different external audiences through various channels – in store, on-line, mobile, kiosks and whatever new comes along.

Lastly, I want to emphasise to those on the business side driving omnichannel that it takes a lot more than new technology to deliver it. Omnichannel is designed to blend all the touch points of a brand’s products and services into a seamless customer experience. If you have underlying structural issues – for example – you operate a franchise whose branches compete and treat customers inconsistently – new technology won’t be a silver bullet. Omnichannel must truly be a joint venture between business and IT. Executed well, it will yield substantial returns. Don’t let it fall into the abyss!

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