The Omnichannel Approach: Promises and Problems

  Omnichannel panelists, from left, Karl Haller, Marie Driscoll, David Lobaugh and Colleen Conklin, with moderator Karen Fluharty.

 

Omnichannel panelists, from left, Karl Haller, Marie Driscoll, David Lobaugh and Colleen Conklin, with moderator Karen Fluharty.

Karen Fluharty, moderator of Omnichannel Strategies for Outlet Retailers and Developers, posed four key questions for her panelists. Each of the queries involved the challenges and opportunities in adapting to the technical changes in brand messaging, branded merchandising, consumer behavior and shopper expectations. An edited transcript of the discussion, held at the 2014 VRN Fall Outlet Convention, follows.

FLUHARTY: How should outlet center developers respond to the omnichannel environment?

CONKLIN: Shopping is fun: Buy on the phone, why drive 60 miles? Well, outlet centers have 120 stores, and they are meeting spaces where people can come together and engage with the brands. We have to extend the life of that experience and work at ensuring that our retailers deliver on the promise.

DRISCOLL: Yes, shopping is ultimately social. We want to see and touch what the world has to offer. The omnishopper is spending 1.3 to 1.4 times as much as a single-channel shopper. Omni is making it a more joyful experience.

HALLER: Agreed, it is a lot more than strategy tools and tech. It is about processes, people, organizational structures and metrics. Take for example the Bonobos guide shop – how do we measure the sales by squarefoot [when the purchase begins online]? The metrics have to evolve.

LOBAUGH: Online sales of apparel, in particular, are growing fast–omni is driving this. A Forrester Research study from January 2014 showed that shoppers expect omni. Seventy-one percent expect to view all store inventory online, and 50 percent expect to be able to buy online and pickup in-store.

FLUHARTY: What are the implications: Do we see this as diminishing percentage-rent structure...or treat it as add-on sales? Where do sales get credited?

HALLER: There is a significant battle brewing between developers and states and localities over the sales tax. When you have BAGA – Buy Anywhere Get Anywhere – there can be 20 different scenarios. But does it matter what tech rails you rode? The store’s wifi, the outlet center’s wifi, your own phone’s 3G? We are looking at five years of sausagemaking; new tax systems may be five to 10 years out.

DRISCOLL: Shoppers don’t care how you figure out the back end. Outlet centers could in this sense evolve to be more like malls, charging less percentage rent and more CAM rent. But the upside is there; [Macy’s chairman] Terry Lundgren says shoppers who buy online and pickup in-store are good: You get 100 percent of the purchase price – with no shipping cost – and then they spend another 25 percent in-store.

LOBAUGH: It is certainly going to affect the way leases are written. We could see something like an affiliate sales commission, a transferable model. Credit is not so hard to trace to a store; we think that’s going to translate to better income for center operators. It will seem ancient to have charged 10 percent of gross sales and have 30-day rents.

FLUHARTY: So many of the new influences are transactional. With Macy’s Shazam app, mobile phone viewers of Macy’s fashion show clicked on a second screen to buy what they saw on the first. Burberry has just launched its Buy Button on Twitter, with a similar potential.

DRISCOLL: At this season’s New York Fashion Week, Versace’s audience could choose an item by mobile while watching the runway show, then walk to the Fifth Avenue store and buy it with no wait.

LOBAUGH: Prediction: Whoever can do what Pinterest does and do it in a commerce sense, curate for sale, will win.

HALLER: Another example is the Saks style link [available as a mobile app]. We’re getting closer to “everything will be able to be transacted upon.” If you like what the characters are wearing on a show, just scan and buy.

DRISCOLL: These apps are meeting the needs of the brands. The only way to maintain some level of profitability is to have less markdown. Demand will directly connect to fulfillment.

CONKLIN: Developers don’t sell anything. Our challenge is how to embrace that and pull together with the brands. Geofence, help consumers target shops before they arrive; track their browsing at one part of a center, and then garner offers through relevant retailers. From the retailer’s standpoint, the challenge is how to leverage your developer.

FLUHARTY: Yes, and one way developers can help is to repurpose information from retailers via their own Facebook, Twitter, etc.

FLUHARTY: Made-for-outlet goods. As brands produce more, how do outlet divisions leverage their share of voice?

DRISCOLL: The supply chain is getting faster; outlets must produce fashion product more quickly. There is no time to develop a broad and shallow full price line and then slice out the color and size for outlet. Now this brings more fashion risk: you have to develop the lines simultaneously. Still, look at Nordstrom: positive 5.2 percent comps at Rack, and negative 1.7 percent at the mainline stores.

CONKLIN: There once was a stigma about made-for-outlet goods. Now there is clearly a demand by consumers for that product. We have outlet exclusives now.

FLUHARTY: For the brand, the marketing messages for the different lines have to be simultaneous, too. The message used to be, there are sweaters “like that” in our outlets – now we say, we have that sweater

HALLER: The evolution is happening quickly. Multibrand retailers are going all in for MFO. The monobrands are mixed. It comes down to the brand. Brand managers have to think about the economic values of the business and the risk to sales by channel and the risk to the brand.

FLUHARTY: What are outlet center developers doing to embrace the technology that makes omnichannel possible?

CONKLIN: We have to do more to understand what retailers are doing. Be more like ShopKick, a branded umbrella mobile app thatprovides special offers to customers when they are on the property, and tie that in to delivery.

HALLER: Developers must provide infrastructure: wifi, beacons, etc. and leverage the qualitative information they gather on the customers: Do they want valet parking? Bus service? Share your customer insights – what’s happing in the outlet center?

FLUHARTY: This brings up ownership of data. How do we deal with this in the wifi generation?

HALLER: I recently walked the Easton-Columbus, Ohio mall. They have mall-wide wifi– but your phone asks you to constantly choose store vs. mall wifi. This creates a fragmented experience. My digital trail doesn’t exist in one space. The opportunity is there for the developer who can package and sell the info back to the tenants.

DRISCOLL: Macy’s has a Santa app – make an appointment and save 30 to 60 minutes to shop, and the same with dining there – why stand in a line? It is the simple things; when you are great on the details you can make an experience pleasant.

FLUHARTY: To sum up, I think we can agree that retail is an evolving animal, and outlet center people need to ponder: How do we monetize that change?

CONKLIN: Shopping is fun: Buy on the phone, why drive 60 miles? Well, outlet centers have 120 stores, and they are meeting spaces where people can come together and engage with the brands. We have to extend the life of that experience and work at ensuring that our retailers deliver on the promise.

DRISCOLL: Yes, shopping is ultimately social. We want to see and touch what the world has to offer. The omnishopper is spending 1.3 to 1.4 times as much as a single-channel shopper. Omni is making it a more joyful experience.

HALLER: Agreed, it is a lot more than strategy tools and tech. It is about processes, people, organizational structures and metrics. Take for example the Bonobos guide shop – how do we measure the sales by squarefoot [when the purchase begins online]? The metrics have to evolve.

LOBAUGH: Online sales of apparel, in particular, are growing fast–omni is driving this. A Forrester Research study from January 2014 showed that shoppers expect omni. Seventy-one percent expect to view all store inventory online, and 50 percent expect to be able to buy online and pickup in-store.

FLUHARTY: What are the implications: Do we see this as diminishing percentage-rent structure...or treat it as add-on sales? Where do sales get credited?

HALLER: There is a significant battle brewing between developers and states and localities over the sales tax. When you have BAGA – Buy Anywhere Get Anywhere – there can be 20 different scenarios. But does it matter what tech rails you rode? The store’s wifi, the outlet center’s wifi, your own phone’s 3G? We are looking at five years of sausagemaking; new tax systems may be five to 10 years out.

DRISCOLL: Shoppers don’t care how you figure out the back end. Outlet centers could in this sense evolve to be more like malls, charging less percentage rent and more CAM rent. But the upside is there; [Macy’s chairman] Terry Lundgren says shoppers who buy online and pickup in-store are good: You get 100 percent of the purchase price – with no shipping cost – and then they spend another 25 percent in-store.

LOBAUGH: It is certainly going to affect the way leases are written. We could see something like an affiliate sales commission, a transferable model. Credit is not so hard to trace to a store; we think that’s going to translate to better income for center operators. It will seem ancient to have charged 10 percent of gross sales and have 30-day rents.

FLUHARTY: So many of the new influences are transactional. With Macy’s Shazam app, mobile phone viewers of Macy’s fashion show clicked on a second screen to buy what they saw on the first. Burberry has just launched its Buy Button on Twitter, with a similar potential.

DRISCOLL: At this season’s New York Fashion Week, Versace’s audience could choose an item by mobile while watching the runway show, then walk to the Fifth Avenue store and buy it with no wait.

LOBAUGH: Prediction: Whoever can do what Pinterest does and do it in a commerce sense, curate for sale, will win.

HALLER: Another example is the Saks style link [available as a mobile app]. We’re getting closer to “everything will be able to be transacted upon.” If you like what the characters are wearing on a show, just scan and buy.

DRISCOLL: These apps are meeting the needs of the brands. The only way to maintain some level of profitability is to have less markdown. Demand will directly connect to fulfillment.

CONKLIN: Developers don’t sell anything. Our challenge is how to embrace that and pull together with the brands. Geofence, help consumers target shops before they arrive; track their browsing at one part of a center, and then garner offers through relevant retailers. From the retailer’s standpoint, the challenge is how to leverage your developer.

FLUHARTY: Yes, and one way developers can help is to repurpose information from retailers via their own Facebook, Twitter, etc.

FLUHARTY: Made-for-outlet goods. As brands produce more, how do outlet divisions leverage their share of voice?

DRISCOLL: The supply chain is getting faster; outlets must produce fashion product more quickly. There is no time to develop a broad and shallow full price line and then slice out the color and size for outlet. Now this brings more fashion risk: you have to develop the lines simultaneously. Still, look at Nordstrom: positive 5.2 percent comps at Rack, and negative 1.7 percent at the mainline stores.

CONKLIN: There once was a stigma about made-for-outlet goods. Now there is clearly a demand by consumers for that product. We have outlet exclusives now.

FLUHARTY: For the brand, the marketing messages for the different lines have to be simultaneous, too. The message used to be, there are sweaters “like that” in our outlets – now we say, we have that sweater

HALLER: The evolution is happening quickly. Multibrand retailers are going all in for MFO. The monobrands are mixed. It comes down to the brand. Brand managers have to think about the economic values of the business and the risk to sales by channel and the risk to the brand.

FLUHARTY: What are outlet center developers doing to embrace the technology that makes omnichannel possible?

CONKLIN: We have to do more to understand what retailers are doing. Be more like ShopKick, a branded umbrella mobile app thatprovides special offers to customers when they are on the property, and tie that in to delivery.

HALLER: Developers must provide infrastructure: wifi, beacons, etc. and leverage the qualitative information they gather on the customers: Do they want valet parking? Bus service? Share your customer insights – what’s happing in the outlet center?

FLUHARTY: This brings up ownership of data. How do we deal with this in the wifi generation?

HALLER: I recently walked the Easton-Columbus, Ohio mall. They have mall-wide wifi– but your phone asks you to constantly choose store vs. mall wifi. This creates a fragmented experience. My digital trail doesn’t exist in one space. The opportunity is there for the developer who can package and sell the info back to the tenants.

DRISCOLL: Macy’s has a Santa app – make an appointment and save 30 to 60 minutes to shop, and the same with dining there – why stand in a line? It is the simple things; when you are great on the details you can make an experience pleasant.

FLUHARTY: To sum up, I think we can agree that retail is an evolving animal, and outlet center people need to ponder: How do we monetize that change?