It used to be that retailers added e-commerce operations to their businesses as an afterthought. Having witnessed the initial dotcom boom and crash, many were nervous about committing too much to such a strategy.
As a result, a lot of retailers initially went into it half-heartedly – perhaps passing on the responsibility for a website to one or two people within the business. Others went in more confidently, setting up separate departments, budgets and support functions dedicated to its formation and running.
E-commerce consultant and former Ted Baker and Burberry e-commerce director Martin Newman says: “Up until very recently most businesses didn’t know where to put e-commerce and didn’t know who to give responsibility to, so gave it to IT and then to marketing.”
For others, the standalone structure was necessary at the outset to stop the new technology getting lost in the day-to-day running of very traditional retailers. John Lewis gained its own e-commerce management team and specialist technology with the acquisition of the assets of Buy.com in 2001. John Lewis Direct managing director Robin Terrell says: “A lot of people came with that and Johnlewis.com was born. It was a tiny business at that stage and actually it was a very different type of business and required a very different thinking and approach. If it had been brought into the business at that point it probably would have been suffocated.”
But today strategies are changing. Retailers are increasingly realising that their websites should just be another part of their business and therefore should be run as such – incorporated into everyday decisions as much as their stores are. “At the moment, in the vast majority of cases, it’s a silo channel and you can understand why it developed that way but the optimum solution is for it to be integrated,” says Newman.
Habits change
IMRG chief executive James Roper says the shift in shopper habits is forcing such change. “The recession is accelerating the impact of the internet on traditional retail and is tending to highlight the role of the store as a display and leisure destination,” he says. “It’s quite clear that consumers are heading online big time. For the majority, it’s the first port of call – whether to buy or just research. It’s not just multichannel; it’s got to be cross channel so the customer should be able to have one view of the business and that demands an integrated structure.”
Newman says it is important for the retailer too. “There needs to be more of a single customer view if you want to be able to capture all the communication with the customer,” he says.
Roper believes that those running the internet side of a retailer’s business should be the same people that run the rest of the operation. “There is no doubt it should be the people that run any part of the business. It’s already becoming one and the same thing,” he says. “The chief executive should be running the whole thing and the marketing director should be marketing the whole thing.”
Having separate divisions – except where a retailer’s scale of operations may demand it – is an outdated model, Roper believes. “That’s where it all goes wrong because you are duplicating costs,” he says.
However, bringing the online side of thingsto the heart of the business could mean changing management. “Someone who is a traditional marketer may find themselves utterly at sea with the way that online marketing works now,” says Roper. “As a result, some companies are realising they have just got the wrong management team.”
Javelin Group director of strategy for multichannel Richard Wolff agrees that passing responsibility for the e-commerce side of the business to a traditional retail director who does not have e-commerce skills is asking for trouble.
Wolff, who has worked on multichannel strategies for the likes of B&Q and Mothercare, says: “When the responsibility gets given to a marketing director who doesn’t really understand e-commerce or multichannel, then that starts to impact on how they allocate budgets and the time spent on it.”
Similarly, the days of passing responsibility for a website to the IT team should be long gone, he advises. “IT directors typically took it on as their project but now more businesses are defining it as part of their strategy,” he says.
However, replacing traditional directors with years of stores experience with e-commerce operators could harm the bricks-and-mortar business and Wolff believes it is hard to find a blend of people with enough experience of both. “At the most senior level there are very few people that really ‘get it’ but I don’t know if you would expect one person to do both,” he says.
Instead, experts urge retailers to start adding e-commerce directors – or at the very least e-commerce champions – to their board to sit alongside their traditional peers. “You have to have a voice at the top table and if you are not discussing multichannel then you really should be,” says Wolff.
Newman agrees. “One of the key issues is that if there isn’t someone like me with that breadth of experience on the board, then the strategic decisions behind the technology and the structure is very often flawed,” he says.
Wolff believes that integration can go too far. “I’m not sure a complete integration really works.If you don’t have someone with real responsibility for e-commerce and a team focused on it it’s very hard to give it the attention it deserves,” he says.
He believes the best option is a blend of a separate e-commerce trading team using central support functions. “You will get more out of having a dedicated focus on the business than by trying to over integrate the business,” Wolff says. “With things like IT and logistics, it makes sense to be integrated with the rest of the business but where the issue comes is how much you integrate your marketing and merchandising capability. There is a big advantage in having a head of direct or e-commerce responsible for strategy and marketing, and then having service level agreements with operations for things like IT and logistics.”
At John Lewis, Terrell says the e-commerce side is being brought closer to the rest of the business to offer a true multichannel approach, although it still has its own support functions such as IT, finance and HR at present. “We made the decision to set it up asa complete own entity and that has had benefits,”says Terrell. “But as e-commerce and multichannel retail has become more popular, the customer expectations are that they are dealing with one John Lewis so they expect the same level of customer service and so on.”
Terrell believes that what is needed is not so much organisational integration as organisational alignment. “There will always be a John Lewis Direct business unit because there are very different skillsets. However, although we are standalone there are still resources we will use at the centre, so it’s not entirely standalone,” he says.
Strategy Integration
The idea of strategy integration, rather than necessarily physical integration, seems to be a common theme among retailers to date – although whether it is nervousness or just resistance to changing such structure is another matter.
At Marks & Spencer, the company’s internet business runs on an Amazon platform, with a dedicated team within the retailer’s IT group that sits with the M&S Direct team. The division itself is headed by Carl Leaver, supported by M&S Direct trading director Dave Hughes. It has its own marketing team.
“They have a specific set of skills to drive traffic to the website and to drive sales. They employ an integrated marketing approach across all corporate campaigns through appropriate use of email and digital media alongside mainstream media and also report into the wider M&S marketing team to ensure consistency of messaging and branding, etc,” says a spokeswoman for the chain.
However, she insists that the strategy is fully integrated within the business and that the retailer’s many new initiatives in the online arena shows that e-commerce is championed within the business.
Argos says its set-up is similar. Head of multichannel Paul Emslie says: “Multichannel is an established part of the Argos business and is integrated into the company at almost every level while retaining the autonomy to operate as an individual sales channel.”
Wolff believes that whether fully integrated, standalone but using central support functions or operating as a completely separate part of the business, communication is absolutely key. “Online has to work really closely with the rest of the business to ensure planning, strategy and day to day promotions etc are communicated throughout the business,” he says.
And store staff must be taught to embrace onlineas a complementary, rather than competing, channel, says Roper. “One of the traditional problems has been store staff being alienated by online and not being rewarded for sales that have gone online. But it’s changing.” For example, he says, John Lewis sees the online option as a customer service tool and is now offering it as an alternative if something isn’t in stock, in-store.
To compete as a successful multichannel retailer really does require that you think as one department and business – whether that is how such departments are actually physically structured or not.
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