Read through the article on Omnichannel. Identify one retailer that has implemented an Omnichannel manager and comment on their progress. Have they been successful?
Comment on someone else's thread and provide your perspective on whether you agree/disagree with their position. Provide support for your perspective.
untitled R E P R I N T N U M B E R 5 4 4 1 2 S U M M E R 2 0 1 3 V O L . 5 4 N O. 4 Competing in the Age of Omnichannel Retailing By Erik Brynjolfsson, Yu Jeffrey Hu and Mohammad S. Rahman COURTESY OF REDLASER, SHOPKICK, FOURSQUARE BRANDON MCDONALD, of Nashville, Tennessee, visited a local Best Buy to purchase a digital single-lens reflex camera. After browsing through the available products, he decided that he liked the Nikon D5100. To verify the price, he scanned the barcode with the RedLaser app on his smartphone. McDonald found that Amazon.com’s price was lower than Best Buy’s, so he purchased the camera from Amazon using his phone as he stood in the store. Although he and his wife had intended to return home with a camera that day, to save money they were willing to wait two days for the item to be sent. Tasmia Kashem, a Burbank, California, resident, went to the Beverly Center mall in Los Angeles to shop for shoes. After browsing at Nine West, a fashion retail chain store, Kashem didn’t see anything she liked. As she was leaving the store, an associate offered to show her additional collections on an iPad. Upon scanning through the online offerings and reading reviews, Kashem decided to preorder a new style that was arriving at the store the following week. Examples such as these illustrate how recent technology advances in mo- bile computing and augmented reality are blurring the boundaries between traditional and Internet retailing, enabling retailers to interact with consumers Competing in the Age of Omnichannel Retailing As technology blurs the distinctions between physical and online retailing, retailers and their supply-chain partners will need to rethink their competitive strategies. BY ERIK BRYNJOLFSSON, YU JEFFREY HU AND MOHAMMAD S. RAHMAN D I G I T A L T R A N S F O R M AT I O N THE LEADING QUESTION How is technology changing the retail landscape? FINDINGS The distinctions be- tween physical and online retailing are vanishing. Advanced technolo- gies on smartphones and other devices are merging touch- and-feel information in the physical world with online content, creating an omnichannel environment. Online and offline retailers may need to compete in new and innovative ways. SUMMER 2013 MIT SLOAN MANAGEMENT REVIEW 23 Mobile technology can help all retailers, both online and offline, ex- pand their markets and reach new customers. 24 MIT SLOAN MANAGEMENT REVIEW SUMMER 2013 SLOANREVIEW.MIT.EDU D I G I T A L T R A N S F O R M AT I O N through multiple touch points and expose them to a rich blend of offline sensory information and online content. (See “About the Research.”) In the United States today, more than 50% of cell phone owners have smartphones, and more than 70% of these have used their devices for comparison shopping,1 a habit that is becoming increasingly common worldwide. In the past, brick-and-mortar retail stores were unique in allowing consumers to touch and feel merchandise and provide instant gratification; In- ternet retailers, meanwhile, tried to woo shoppers with wide product selection, low prices and con- tent such as product reviews and ratings. As the retailing industry evolves toward a seamless “om- nichannel retailing” experience, the distinctions between physical and online will vanish, turning the world into a showroom without walls. The retail industry is shifting toward a concierge model geared toward helping consumers, rather than focusing only on transactions and deliveries. For example, physical retail spaces will be augmented by virtual content accessible from smartphones and other devices such as Google Glass, Google’s wearable computer. As the multichannel retailing experience breaks down old barriers such as geog- raphy and consumer ignorance, it will become critically important for retailers and their supply- chain partners in other industries to rethink their competitive strategies. (See “Successful Strategies for Omnichannel Retailing.”) Enabling Technologies The growing prevalence of location-based applica- tions on mobile devices is a critical enabler of these changes. According to the Pew Research Center, 74% of U.S. smartphone users used their phones to obtain location-based information in 2012.2 Retailers are taking advantage of opportunities cre- ated by location-based applications. Walgreens, for example, has teamed up with Foursquare, a loca- tion-based social networking website, to offer customers electronic coupons on their phones the moment they enter a Walgreens store. Saks Fifth Avenue has also worked with Foursquare to steer consumers toward physical locations by offering goodies (such as high-end brand Nars lipstick). Macy’s offers free Wi-Fi in its stores; consumers can scan QR codes on products to see online product reviews, prices and exclusive video content on fash- ion trends, advice and tips. In some cases, the location-based applications aren’t managed by the retailers but by third parties. For instance, RedLaser, an eBay company, allows consumers to scan UPC codes to determine whether specific products are available nearby and at what price. Mobile applications themselves are becoming increasingly advanced. For example, Loopt, of Mountain View, California, provides real-time loca- tion-based services aimed at specific users and popular locations. Retailers can use Loopt as a vir- tual loyalty card, allowing them to connect directly with consumers based on their location. Loopt users can find friends nearby and receive coupons and rewards for checking into specific locations. Another app called Doot enables users to leave public or pri- vate messages for friends or family members at restaurants or stores; the messages are activated when the designated people reach the sites. Augmented reality technologies involving smart- phones and devices are merging touch-and-feel information in the physical world with online con- tent in the digital world. Google Glass, for instance, ABOUT THE RESEARCH This research is part of an ongoing program examining the competition between online and offline markets and how IT-enabled tools have made it possible for companies to take advantage of both channels.i To shed light on the impact of geography on the com- petition between online and offline, we obtained a data set from a medium-sized retailing company that sells the same assortment of women’s clothing through a printed catalog and an Internet website. This data set, which included transaction and location details for each consumer, was combined with the number of local women’s clothing stores avail- able to each respective consumer. Consumers in our sample were similar to the overall U.S. population as measured by the number of local stores nearby. For example, 24% of the U.S. population has no women’s clothing stores within five miles, compared to 27% of consumers in our sample; 45% of the U.S. population has access to fewer than seven stores (the median of the number of stores in our sample) within five miles. We empirically studied how the level of competition between Internet retailers and traditional stores varied across products. We found that Internet retailers faced signifi- cant competition from brick-and-mortar retailers when selling mainstream products but were virtually immune from competition when selling niche products. Further- more, because the Internet channel sold proportionately more niche products than the catalog channel, the competition between the Internet channel and local stores was less intense than the competition between the catalog channel and local stores. The methods we introduced can be used to analyze cross-channel competition in other product categories, and they suggest that managers need to take into account the types of products they sell when assessing competitive strategies. For example, all else being equal, demand for popular products on the Internet from a consumer with seven physical clothing stores nearby (the median number) would be 4.2% less than from a consumer with no stores nearby. Thus, the amount of local retail competition has a sig- nificant effect on consumer Internet demand for popular products. However, the impact of local market structures on consumer Internet demand for niche products is negligible. www.sloanreview.mit.edu SLOANREVIEW.MIT.EDU SUMMER 2013 MIT SLOAN MANAGEMENT REVIEW 25 exposes consumers to a blend of offline and online information and lets them purchase products from either traditional or online channels. EBay’s Fashion app and Amazon’s Flow app offer additional exam- ples: eBay’s Fashion allows consumers to try on clothing virtually, while Amazon’s Flow app lets shoppers point a smartphone camera at a book or DVD to see Amazon’s price and customer reviews. Opportunities and Challenges Mobile technology is well on its way to changing consumer behavior and expectations. Indeed, it can help retailers, both online and offline, reach new consumers and expand their markets. As John Donahoe, CEO of eBay, has observed: “Mobile is bringing the Internet to you seven days a week, 24 hours a day, on your time, at your convenience, where you want to be. We’re finding out how people shop now: They’re standing in a line at Starbucks, let’s say, and they start browsing on eBay. They see something they want and they buy it right there.”3 Similarly, apps from retailers such as Wal-Mart, Target and Macy’s allow consumers to search for products and prices available locally. By giving con- sumers more accurate information about product availability in local stores, retailers can draw in peo- ple who might otherwise have only looked for products online. The enhanced search capability is especially helpful with niche products, which are not always available in local outlets.4 Apple’s Siri app for the iPhone, for example, can make recommendations (based on location and other factors) that consumers may not have even heard of, directing out-of-town visitors to local specialty stores or restaurants. Crowd opin- ion websites such as Yelp can help spread consumer reviews broadly. While customer reviews on Yelp and other sites can have major impacts on inde- pendent stores and restaurants — both positive and negative — their impact on better-known chains tends to be less significant.5 Meanwhile, the availability of product price and availability information, the ability of consumers to shop online and pick up products in local stores, and SUCCESSFUL STRATEGIES