Category Archives: Customer Experience

Is this the end of multichannel retail?

Jessops went into administration late last week at the cost of hundreds of jobs. According to administrator PWC on 11th January Jessops will close all 190 stores after discussions with suppliers made it clear that support for ongoing trading wasn’t there. This week there was similar news for HMV although it is hoped that a buyer can be found.Jessops appomts administrators

I have written before about Jessops, using them as an example of multichannel retail to question whether the model has a future. I hoped that it would have but wonder whether the failure of Jessops and HMV is a problem waiting to happen for other, niche retailers and in the longer term even more diverse retailers.

Let’s deal with the financials first. Jessops had its problems but last June reported rising revenues up 1.3% and earnings up nearly 30% on 2010. Online sales had risen nearly 80% and accounted for 32% of the business with 70% of online customers choosing to collect their purchases in store.

The problem is that despite agreeing a debt for equity swap with HSBC in 2009 (who at the time wrote off £34m and were still owed £30m at time of collapse) the company still serviced significant debt, estimated to be £80 million. In the last published accounts to 1st January 2012 the company recorded a loss of £909,000 and paid interest of £411,000. Interestingly, the profit before interest, non-recurring items, reversal of intercompany impairments and taxation for the period was £0.2 compaired with a loss in the previous period.

It also paid its 5 or 6 Directors £1,478,000 with the highest paid earning £408,000. This seems a lot given the profitability of the firm and even its relative size – just 190 stores and £236 million. Perhaps it is indicative of the market and Jessops needed to attract good people and in fact couldn’t hold on to Trevor Moore who resigned as CEO to join HMV in August 2012. (HMV also had huge debts as a result of private equity transactions and they were servicing an estimated £176.1m)

So, I could argue that if Jessops wasn’t saddled with debt, had a management team that it could afford and a little more time they could start to deliver a regular profit. But I’m not going to do that.

The music and film industry is particularly vulnerable and HMV’s own estimates were that by 2015 over 90% of music and film sales will be online. They were late to go online and diversification with acquisitions of online brands didn’t pay off. Much of their strategy was driven around getting out of the music and film business and with good reason.

Music and film are not products in the same way that a camera or washing machine is. The tire kicking part of the buying process doesn’t take place with the physical product and is driven by trailers, adverts and recommendations. As soon as broadband speeds reach the stage when they support streaming high-definition video everywhere, people will no longer need physical media at all – assuming the licensing rules are sorted out. So HMV faced a very different problem to Jessops and simply didn’t react quick enough.

Jessops sell a physical product and one sufficiently technical and complex that quite a lot of people want to look at it, pick it up, try it, touch it, literally get to grips with it. They need somewhere to do this but are not tied to purchase from the same place. In fact with the rise of mobile commerce price checking is taking place online often whilst in store. It places retailers with physical stores and the associated overheads at a huge disadvantage.

This is a challenge facing all retailers and I suspect most won’t know how much it is impacting them. They will know that sales are going online and that footfall or sales in store is reducing but trying to understand the relationship between the two is very difficult. Click and collect is all well and good but at some tipping point in the not too distant future online will outstrip retail by a sufficiently large margin that the store will in reality be a glorified warehouse and showroom.

What can retailers do about it? Here are a few suggestions:

  • Change the way they think about products: Jessops could have looked to the mobile phone industry and created propositions that built-in customer loyalty. Why couldn’t a camera be sold on contract over two years and bundled with tech support, a number of prints each month, storage for photo’s online and other parts of the proposition? Niche market shops should think differently about how they differentiate.
  • Brands to pay: Get brands to pay them for displaying their goods to offset the cost of the retail space. Not all brands are going to want to open showrooms and it will be inefficient for them to do so.
  • Measurement: Implement better multichannel measurement techniques so they can understand how hard the store asset is working for them.
  • Differentiate on experience: Retailers have the opportunity to create an experience because of their stores. This is rarely exploited to its fullest potential.

I think multichannel retail, and by this I mean online and offline as the main distinction, will survive but in the future the supply chain will be completely different. If retailers are going to survive they will need to look further ahead or suffer the same fate as HMV, Jessops and all the others that have closed.

Sainsbury’s moves away from HR and customer service

Back in July 2010, Sainsbury’s announced that it was scrapping the HR Director role and creating instead a single role that would encapsulate HR and Customer services. The new Customer Services & Colleague Director, in addition to having one of the longest business cards, would take responsibility for HR, customer services, sponsorship, corporate responsibility, and both corporate and internal communications. A huge role then, and massive undertaking that was described by Gwyn Burr, who was promoted from the role of customer service director, as “an opportunity for HR to become much more focused on strategic delivery”.

So, fast forward 30 months to the announcement that Burr will leave Sainsburys in March 2013 and that Angie Risley, current Lloyds Bank Group HRD will take over as Sainsbury’s Group HRD. It was clear from this announcement that this also signifies a demerger of the customer service and HR roles so should we conclude that the initiative failed?

It was only in 2004 that Sainsbury’s first created the position of Customer Service Director with Justin King, then and still CEO, bringing in ex-Asda colleague Gwyn Burr to the role. At the time he felt the customer service needed to be improved dramatically and although Burr sat on the Board she remained a contractor. She also held, and continues to hold, a number of non-Executive Director roles and whilst this isn’t unusual for board members perhaps in this case it indicates that the move was always temporary.

Certainly Sainsbury’s customer service has improved and they have now moved ahead of their rivals. With various initiatives over the past few years the retailer has tackled the causes of poor customer service with training and technology initiatives as well as better use of the web and the introduction of Click-and-Collect, which has been rolled out to more than 900 stores.

The evidence would suggest that we shouldn’t read into this latest announcement that the HR/Customer Service mash-up initiative has failed. Perhaps the greater focus on strategic delivery has worked and now Sainsbury’s is simply putting in place an organization structure that will keep it moving. We will certainly be watching with interest.

 

Sport and social media – west coast perspective

Brendon Kensell, Managing Partner of Kensell & Co, an M&A and corporate growth consultancy, has just posted a piece on sports and social media.  Some of the stats Kensell quotes are astounding with 460 million fans who ‘like’ sports teams on Facebook and almost 100 million fans ‘follow’ teams on Twitter. But he suggests fans are getting frustrated with the one-way nature of Twitter and that the time is right for new sports social media start-up – JockTalk.

JockTalk provides fans and athletes with far richer engagement opportunities than are currently available through existing social media platforms. Because JockTalk publishes to Twitter and Facebook fans who are not interested in richer engagement can still listen to what the athletes they follow have to say. But, for those fans who want a proper, two-way conversation JockTalk provides the ideal platform.

JockTalk fills a number of the holes that exist in Twitter. It allows for 300 characters instead of 140 available in Twitter and the different is incredible. I wonder who decided 140 characters was enough? It is hard to even ask the question in 140 characters and whilst it does avoid waffle for athletes and fans they seem to need and want more.

Sports social media is changing and whilst existing platforms like Twitter and Facebook are trying to keep up, the time is right for a new player.

 

James Bond: 6 seconds premature

I can’t remember seeing James Bond wearing two timepieces but presumably he has too since being equipped with an Omega Seamaster. Encouraged as a fan of the films and in the market for a ‘watch for life’ type purchase I succumbed and invested most of my savings in a shiny new James Bond Seamaster Omega watch. I am not proud of being so easily swayed by the marketing people but as they say, I am what I am.

However, my suspicions about the Omega Seamaster’s timekeeping ability were first raised when I was popping champagne corks at a New Year’s even party nearly 5 minutes ahead of everyone else. That has its advantages of course, but was slightly concerning considering the size of my recent investment. I reset the watch and checked it regularly through January but it was gaining time at an alarming rate (would be funnier if it had an alarm) so I took it back to the shop.

The watch was sent back to Omega who kept it ‘extra long’ to make sure it worked perfectly, or at least that is how the 9 and not 6 week turnaround time was explained and I picked it back up in April. The watch continued to gain time and so I wrote to Omega and shared my disappointment and my concern that I didn’t know what to do next. Here is the letter they sent back:

first page of letter received from Omega
Omega, at least the arrival of the letter was timely

The letter goes on to page 2:page 2 of letter from Omega

As it happens, I haven’t been contacted in ‘short’ by Mr Mike Webb but no matter. I can’t see how any explanation that an Omega watch is ‘OK’ if it has a tolerance of -1 to +6 seconds is going to help me. However, if he does call I will suggest he gives James a ring. For him it could be the difference between life and death.

In defence of Morrisons

Yesterday, Mycustomer.com reported that retailers were losing millions because of poorly integrated touchpoints. It goes on to say many are playing catch-up and can’t understand why “retailers are allowing sub-standard websites to damage online sales opportunities”. Of course in an ideal world all major retailers would be investing in the digital channel but I think Morrisons has a defendable argument as to why they are late. I should say from the outset this is my analysis and I don’t have an inside track on what Morrisons is doing.

If you drive down the M5 between Bristol and Exeter you will see one reason why, in Morrisons case the website is not currently the centre of attention. They are investing £95million in a new regional distribution centre and the project is slightly behind. However, it is a very important project in support of allowing Morrisons to distribute nationally.

The group is also only half-way through an IT infrastructure roll out at an estimated cost of £310m. The project, called “Evolve” will be completed in 2013 and is a five year upgrade of virtually every system and process the business has. The upgrade will support the groups planned expansion to 600 stores whilst saving support costs and providing operational benefits and efficiencies. Back in 2004 Morrisons also paid £3.35bn to acquire Safeway and has some problems integrating the 327 stores and IT systems into its own.

Also, Morrisons only announced that it would have a go at online sales in 2010 and even then was cautious because of keeping costs under control. Recent news compared Morrisons to the sales Tesco and Sainsburys are achieving online but that hardly seems fair given Tesco’s was the worlds first online grocer and Sainsbury started online in 1998. Having said that, the recent acquisition of a 10% stake in FreshDirect is designed to accelerate the groups knowledge of how to run an online business. They will actually get a seat on the board and the ability to learn about the systems and processes FreshDirect has. They also announced the acquisition of Kiddicare back in February who is an online retailer of cots, nappies and push-chairs.

8th September, Morrisons announced its interim results for the half year to 31st July 2011. Although Morrisons financial performance is good, they can only do so much. Revenue is up as was PBT (to £449m for the period) and cashflow was £667m, £97m up on the previous period but with higher outflows due to capital expenditure. They have also initiated the first phase of the planned £1bn equity retirement. As a result debt grew £238m to £1,055m but they do have a £1.26bn revolving credit facility available until 2016 and with £494m not drawn down.

Can they also invest in a major multi-channel, integrated customer experience programme? I would argue they already are by getting solid building blocks in place both in terms of systems and knowledge. This will put them in a very good position to accelerate development of mobile channels and possibly even overtake some of the competition.

The Numbers and Connections

“The success of human beings depends crucially, but precariously, on numbers and connections.” This quotation comes from chapter one titled “The collective brain” in Matt Ridley’s excellent book called “The Rational Optimist“. In this chapter Ridley describes a world that thrived due to the increasing connections between humans and the trade effect that resulted. He also talks about innovation networks and division of labour all enhanced by the increasing connections we have and diminished or even reversed when connections are lost.

With the rise of the Internet human beings have never been more connected and each day, as technology advances, social behaviour adapts and connections increase. This increases our ability to trade goods and ideas and innovation is enhanced. This got me thinking about “Crowd Sourcing” and how genuinely innovated this is.

I noticed that over the summer, First Direct launched the “First Direct Lab” – described as “crowdsourcing platform that will give customers a stake in the online and telephone bank’s digital marketing efforts”. I have a bit of a problem with this definition as I think it gives customers a voice, not a stake. There are no consequences for them offering poor advice. However, I can see it makes sense to engage more with customers and isn’t that just the point?

Crowdsourcing is simply another way to engage with customers in the same way that surveys and customer panels can. They facilitate a conversation rather than listen to the results of marketing efforts. There is significant evidence that they work and Gary Hamel, business guru, provided various evidence in his book “The future of management”.

So to my question about how genuinely innovative crowdsourcing is. My conclusion is that the technique is innovative based on the new technology available now and its ability to facilitate wider conversations. But ultimately, the idea is as innovative as the first person who said – “gather round you guys, what do you think about this?”.

The UK Customer Experience Awards

The UK Customer Experience Awards took place yesterday at a very large, very new hotel by Heathrow Terminal 5. So large and new is the Sofitel that some of the staff were struggling to offer directions. Heather Small was the celebrity in attendance and spoke passionately about her work with Barnado’s, the children’s charity she has supported for the past two years.

I was judging the utilities category and by all accounts got lucky, as my fellow judges in other categories had not enjoyed the high quality and interesting submissions I reviewed. The winner in this category was Ovo, an energy supplier that only has 40,000 customers, but this far exceeded their target of 8,000 and although they were honest enough to admit that competitive pricing had played it’s part, it was easy to see why customers would flock to this brand.

Ovo’s business is built upon a principle of being trusted by customers, something the founder believed was missing in the industry. It was interesting listening to the special investigations unit at EON talking about the issues the industry faces that are not of the current owners making. I hadn’t realised that before privatisation, different regions installed different meters. This meant that only one company would have engineers familiar with a specific meter and so now that we can choose our energy provider, it is possible that they do not have the skills to support the equipment in our homes and businesses. buying skills in from a competitor is not a recipe for good customer experience.

In spite of the difficulties in the industry, what set Ovo apart was that customer centricity drives the entire business. They are not about one department, with exceptional individuals delivering a great service, they are about customer insight driven decision making and empowered employees from top to bottom. This distinction is what separated the category I judged, and came through throughout the day.

The UK Customer Experience Awards are only two years old and are trying to establish a wider picture than just customer service awards. However, the room was dominated by customer service people, so much so that even our host, Don Hales had to correct himself after uttering “service” after “customer” instead of experience. But the motivation is right and if organisations Can be encouraged to consider how service supports the experience customers have then the transition period is worthwhile.

I haven’t bought a news paper in years but I buy The Times daily

I am now totally convinced that digital publications will be the salvation of the news print industry. I haven’t paid for a paper in years but now read The Times every day on my iPad and have subscribed to the digital package that offers web access plus The Times and Sunday Times for £2 per week.

The secret to sustainability by consumers comes from a change in habits because of your product or service and The Times iPad addition has definitely achieved that. My morning routine has now been adapted to ensure that my daily “paper” has been downloaded and the pictures are available for my commute.

Sainsbury’s combines HR with Customer Service

This week’s People Management magazine, the HR magazine of CIPD, featured an interview with Gwyn Burr, Sainsbury’s “Customer Service and Colleague Director” in which she described the changes t the organisation since she undertook the combined role in July 2010. The role was designed by Sainsbury’s CEO Justin King specifically so that Burr could “maximise her experience and personal strengths” and I wonder if it is due to an even wider opportunity that he has seen.

Many of the areas that Burr speaks about in the interview concern her commercial skills and how these are being leveraged into HR. There is also reference to customer focussed activities that are being repurposed for colleague initiatives and mention of touch-points with customers. If the move was born of pragmatism and promoting a talented individual only I would be surprised because I think it could be an inspired decision that takes HR in a direction I have long thought it should go – Customer Experience.

So much of customer experience excellence is about the strategy surrounding and the management of the touch-points that exist between organisations and their customers. Many of these touch-points are at the mercy of individuals within the organisation who are both expensive, compared to self-service, and unpredictable. What better way to align HR strategy with customer strategy than by bringing the two together?

I attended an event recently where research was presented by Gallup that highlighted the relationship between employee engagement and customer engagement. Organisations that had either only good customer or employee engagement performed at about the same level but those that had both out-performed the others by a factor of 2:1 (or thereabouts). That might seem obvious but what was interesting was that companies that had neither good customer engagement nor employee engagement performed better than those with only good performance in one area – customer or employee engagement.

Sainsbury’s has just focussed on customer services and HR at this stage but I wonder whether they will go further and widen the responsibilities if the initiative is a success? Should they or is there the potential for stripping some of the primary value away from marketing? I’d be interested in views on this.