Omnichannel and People: Macys and Belk

Experts outline two recent executive announcements as proof that omnichannel is the future.

• Macy's (click here).
• Belk (click here).

It's been 18 years (1995) since I first heard an executive (at Eddie Bauer) mention the critical importance of "multichannel" - in a meeting, he discussed how digital and retail needed to align to better serve the customer, while everybody else offered blank stares in response.  This individual might be responsible for the phrase "multichannel customers are worth 8 times as much as single channel customers", and I ran the query (under protest, of course)!

In other words, the experts have been beating retailers up for almost two decades ... two decades of dissatisfaction with how retailers respond to first e-commerce, and now, mobile.

When you appoint an executive to lead an area, you are saying that you have a people problem.  I'm not saying that either company is better off or worse off than others.  I am saying that it is terribly difficult to get 150,000 employees (or 150 employees) to all pull in the same direction.  So you put somebody in charge, and you expect that person to make things happen.

Hiring omnichannel executives isn't proof that omnichannel arrived.

Hiring omnichannel executives is proof that it is terribly difficult to get people, human beings, to all do something deemed important by Sr. Management.

eBay and #Omnichannel and Profit and Mobile

You can cobble together some interesting information from eBay's financial statements.  Here's a link to their 10-K for 2012 (click here to read it).

By merging various sources of information, we can guesstimate Marketplaces volume and PayPal volume, and we can estimate the share that come from mobile.  

It's likely that +/- 10% of PayPal volume is mobile, up from +/- 4% a year ago.  It's likely that +/- 20% of Marketplaces volume is mobile, up from +/- 10% last year.  Go cobble the data together yourself (use Google) and see what you can learn.  I'm accurate enough to make the point that follows:

Let's look at eBay total annual net sales, and total annual earnings before taxes, for the past five years.

• 2012 = $14.0 billion sales, $3.1 billion profit.
• 2011 = $11.7 billion sales, $3.9 billion profit.
• 2010 = $9.2 billion sales, $2.1 billion profit.
• 2009 = $8.7 billion sales, $2.9 billion profit.
• 2008 = $8.5 billion sales, $2.2 billion profit.

Those are some nice profit numbers, huh?

Now, let's compare profit numbers from two different years.

• 2009 = No Mobile to Speak of ... $2.9 billion profit.
• 2012 = Surging Mobile Sales ... 10% to 20% of total by business unit ... $3.1 billion profit.

So, yes, mobile is going bonkers.

And, yes, there's no impact on profit.

Please, omnichannel experts, refer to this profit and loss statement, when discussing the myriad financial benefits of omnichannel customers.  If omnichannel customers were more valuable than everybody else, and eBay is rapidly transitioning customers from e-commerce to mobile, then wouldn't profit be absolutely surging?

In fact, you can make a strong case that in the pre-mobile era, eBay generated 33% pre-tax profit (2.9 / 8.7) ... but now in the mobile/omnichannel era, eBay is generating 22% pre-tax profit (3.1 / 14.0).

You don't hear this story told very often, do you?

Office Depot / OfficeMax Merger

By now, you've heard that Office Depot and OfficeMax are merging (click here).

This raises so many interesting questions about the future of retail.

On one end of the spectrum, we have experts who tell us how retail and e-commerce and mobile all fit together in a wonderful blend called "omnichannel".  These folks paint a bright future, one where modern technology helps retailers (click here for one example).

On the other end of the spectrum are the digital elite.  They tell us that retail is dead (click here).

In-between are the Web 1.0 companies who are branching out into retail ... Google, for instance (click here) ... Microsoft ... and Apple, too.

Who is right?  Everybody!

The omnichannel camp is right to integrate all aspects of retailing.  The omnichannel camp cannot prove that their thesis leads to an increase in sales and profit.  Saying that omnichannel customers spend more is ridiculous ... any customer that does more of anything is more valuable than a customer only buying one time in one channel.

The digital elite are right to suggest that a small decline in retail sales is fatal for most retailers, given the debt load most retailers are saddled with.  But the digital elite fail to account for the reality that retail still drives 90%ish of total commerce ... if e-commerce was so amazing, wouldn't e-commerce represent half of total commerce?  Exactly.

These viewpoints represent "small battles".  Folks love to focus on small battles, because small battles don't have a right or wrong answer.  There's no downside to being on the losing end of a small battle.

Here's the difference between a small battle and a real question.

• Small Battle Argument:  "Can the combined Office Depot / OfficeMax can beat Staples and Amazon with a comprehensive omnichannel strategy?"

• Real Question:  "What customer problem does the combined Office Depot / OfficeMax solve better than any other company?"

If you cannot provide a valid answer to the real question, the small battle argument is pointless.

Since it is really hard to answer the real question, we focus on small battles.

In the comments section, try to answer the real question.

Weighted Channel Pairs

In this image, distance matters.

Mail and omnichannel are far apart.

I recently read an article, suggesting that mail is one of the best ways to drive a mobile transaction.

Maybe.  But you can answer this question, using your own data.

In your database, create what I call "channel pairs".  In other words, weight transactions based on historical importance.  Transactions in the past year count for a weight of 1.00, transactions 13-24 months ago count for a weight of 0.50, transactions 25-36 months ago count for a weight of 0.25, all older transactions count for a weight of 0.125.  Multiply the weight by the dollar value, and you have something!

After doing this by channel, identify the most important channel, and the second most important channel (by weighted dollars).  Run a query that identifies the most common channel pairs.

• Customer #1 = Retail First, Email Second.
• Customer #2 = Tablet Commerce First, Catalog Second.
• Customer #3 = Retail First, Mobile Phone Second.
• Customer #4 = E-Commerce First, Search Second.

Now, think about your strategy for each of the four customers above.  Does the strategy include "doing everything"?  Probably not.  Just as important, you'll learn which channels are aligned with each other.  This type of data leads to the distances illustrated above.  Overlay customer demographics, and you have something!

However, you probably won't find much of a link between mobile and direct mail.  And that's ok.

From Multichannel to Omnichannel

In marketing, distance matters.  Well, at least it matters in this chart.  This chart is part of a presentation that's been downloaded/viewed more than 1,000 times in the past month (click here for information).

Multichannel was the glue that connected Judy's world ... catalogs, e-commerce, and retail.

Jennifer didn't need glue, still doesn't.  She figures out what is best for her and her family.  Maybe Amazon is her version of multichannel.

Jasmine is aligned with omnichannel.  Devices will be linked, content will be streamlined.  Jasmine is the target customer for omnichannel efforts.

Keep these trends in mind.

• Judy = Multichannel.
• Jennifer = Amazon.
• Jasmine = Omnichannel.

Then pair your customer (Judy, Jennifer, or Jasmine) to the trend.  What does that tell you?

Dear Catalog CEOs: Crunchy Peanut Butter

Dear Catalog CEOs:

Recently, we had a guest in our home.  To protect the innocent, I'll adjust the story just a bit.  This person wanted to eat breakfast.  He looked in our cupboard, searching frantically for something.  Then he turned, looked at me, and said the following:

• "You don't have crunchy peanut butter?  You're telling me that you don't have any crunchy peanut butter in your home?  None?  How is that possible?  It's a staple!  Everybody has crunchy peanut butter in the cupboard.  Everybody!"

Breakfast was ruined.  It wasn't like the guest didn't get a meal, mind you.  It was just a meal without crunchy peanut butter.   

As they say on Twitter, #firstworldproblems.

We have #firstworldproblems in marketing, too.  We must have #omnichannel in our cupboard.  Omnichannel is the crunchy peanut butter of 2013, replacing big data, which owned 2012.

Back in the day, it was email marketing.  Or banners and affiliates, or even comparison shopping engines.  Then it was search. Then multichannel.  Oh, you couldn't live without multichannel, just ask Circuit City.  Then MySpace.  Then podcasts, because everybody is dying to listen to a twenty minute show about the myriad benefits of extended warranties.  Then Second Life, you had to set up a virtual store or you'd be left behind, right?  Then it was the "long tail", just reap the rewards of the long tail!!  Then Facebook.  Then Twitter.  Then QR codes.  Then retargeting.  Then mobile.  Then tablet commerce.  And here, in 2013, we realized that you can't just have all of those strategies buried in silos, you need to fuse them together ... call it omnichannel!

All you have to do is integrate every single aspect of your marketing plan ... same creative ... same promotions ... same merchandise ... and then make sure that, from a marketing standpoint, you execute every single possible tactic ... everything!  Might be close to impossible, and there's absolutely no proof that sales will increase on an annual basis if you do it (contact me by clicking here if you know of a business that saw a 10% sales increase across one full year by adhering to multichannel/omnichannel strategies).

Omnichannel is like crunchy peanut butter --- you have to have it!

In the parable at the start of this post, the guest still ate breakfast.  He didn't go hungry. 

If you don't employ a thoughtful omnichannel strategy, there's no proof that you won't be as profitable.  None.  No proof that you'll miss a meal.

Instead of being "omnichannel", why not focus on merchandise that your customer needs?  Why is marketing strategy so separate from merchandise strategy?

Gus Johnson

Sports fans either love Gus Johnson, or they love to hate Gus Johnson.

Naturally, opinions were split as Fox pushed Mr. Johnson into football / soccer ... covering the Manchester United / Real Madrid Champions League match this week.

Yes, I have a point that relates to e-commerce.  More on that in a moment.

Mr. Johnson has virtually no experience covering what we call soccer, much less a match at this level of importance.  But look at what this individual did on his way up the ladder:

• On air personality, WAAY, Waco, TX.
• On air personality, WXII, Winston Salem, NC.
• Weekend Anchor, WTTG, Washington, DC.
• Minnesota Timberwolves NBA play-by-play announcer.
• Big East college basketball.
• College Hockey and College Basketball on ESPN.
• Canadian Football League on ESPN2.
• Radio Play-By-Play, New York Knicks NBA Basketball, and TV broadcasting for the NY Knicks, 1994 - 2010.
• Yankees / Rangers pre-game host.
• Pre-Season NFL coverage of the Bills, Eagles, Lions.
• Showtime Championship Boxing announcer.
• Voice of EA Sports NCAA Basketball game in 2010.
• Voice of Madden NFL11 and NFL12 video games.
• Buffalo Wild Wings commercial announcer.
• NFL on CBS.
• March Madness College Basketball announcer on CBS.
• Big Ten Network College Basketball announcer.
• FOX College Football announcer.
• Radio announcer for San Jose Earthquakes soccer team.

Does your resume look like that?  Mr. Johnson isn't even 50 years old yet.

Now, to my point.

In our world, we keep hearing about specialists ... folks who know everything about 3% of a business.

• PPC Marketing Expert.
• Web Analytics Guru.
• Digital Marketing Specialist.
• Omnichannel Thought Leader.
• Social Media Ninja.
• Catalog and Multichannel Marketer.

This is like being Gus Johnson when he covered the Canadian Football League on ESPN2.  You have tremendous depth, but only in a tiny slice of the world.  Mr. Johnson pushed his career in areas where he had no experience ... he gained experience ... and then moved on to new challenges.  This allowed him to gain a breadth of experience that few can match.

Even if you love working in a tiny niche of the total ecosystem (and that's fine), obtain varied skills within that niche.  If you're the PPC expert at your company, go sit down with a merchant and learn about the products your customers purchase.  If you are the social media ninja, sit down with your finance team and learn how to calculate profit.  If you are the digital marketing specialist, sit down with your inventory management team, and learn how they measure success.  If you are the web analytics guru, spend time with your IT team, and learn how they structure databases.

In almost all cases, it is beneficial to gain merchandise knowledge.  More than half of my projects in the past six months illustrate challenges with merchandise and product development ... increasingly, channels are not the reason for success, but instead, merchandise is the cause of success or failure.  Maybe it's always been this way, huh?  

Learn how to measure merchandise performance ... new items, existing items, discontinued items, category performance ... it all matters, and matters more than the performance of marketing channels.

Use Gus Johnson as an example of building a diversified resume, resulting in an announcing assignment at the highest level - Champions League Soccer.  Notice that he did multiple jobs at the same time - use that as an example for how you might manage your career.  Maybe you need to have a small, part-time job that compliments your skill-set.

Thoughts?