March 1, 2013, 12:09 PM

Who's the boss?

Cynthia Kounaris of FitForCommerce argues retail organizational structures  have to change to face the reality of cross-channel commerce.

Cross-channel is not just a new buzzword. It is the way of the future—not only in shopping but also in corporate structures.

It is not enough that your technology is changing to support cross-channel sales. Your organization must, as well. In hundreds of e-commerce retailer consulting engagements over the past three years, FitForCommerce consultants have addressed the strong interest, and increased need, for multichannel businesses to assess how best to utilize cross-channel technologies and tools and create a true cross-channel organization.

At the end of 2012, we and e-commerce software provider hybris decided to dig a little deeper and survey how retailers were viewing cross-channel—as an opportunity, as a goal and as an organizational challenge. Eighty retail managers of varying sized companies completed the survey.

The survey results supported what we had seen in our consulting work. There is a desire to move organizationally from silos to synchronicity; from separate channels working relatively independently with their own teams, their own key performance indicators, their own technologies and their own objectives, to a holistic, "customer-centric" view of the business, with cross-functional teams, integrated technologies and tools, and cross-channel revenue goals. More than 57% of survey respondents said that developing cross-channel capability was crucial to their continued growth. And often, the survey revealed, it is the e-commerce team charged with making it all happen.

Obstacles abound

This transition, however, is often slow, complex and challenging. There are longstanding barriers to effecting change and it takes strong leadership and the ability and willingness of the corporate culture to adapt. There are conflicting goals and, often, conflicting management direction at various levels. Indeed, just 34% of respondents said the change to address cross-channel needs was "happening quickly" at their organizations, while 47% said it was happening at a "moderate pace" and the rest, 19%, said "not at all."

But what retailers have to understand is that having a "mobile person" and a "web person" and a "store person" is the way of the past, not the very near future. Retail teams need to have a good understanding of how each channel works, and how they work together. Channels need to be aligned to ensure that a business is based on customer expectations, rather than in-house factions or channel-specific drivers and goals.

When it comes to reporting structures for cross-channel responsibility, 56% of the respondents have cross-channel managers reporting directly to the C-level as opposed to reporting lower in the organization. In many cases, it is the e-commerce executive who is responsible for cross-channel management, so a separate head of cross-channel has been hard to justify to C-level management at a lot of retailers.

However, some retailers are creating such positions. In February, department store retailer Belk Inc. named Dorlisa Flur as executive vice president of omnichannel, reporting to chief operating officer John R. Belk. In January, Macy's Inc. went one step further, creating a C-level level job—chief omnichannel officer—reporting directly to CEO Terry Lundgren. Robert B. Harrison has the job.

For executives in such positions to be effective, compensation should be based on cross-channel success metrics. These include cross-channel promotional use and coupon redemption, web-influenced retail revenue, pick-up-in-store revenue, store e-mail sign-ups and customer reactivation. More than 40% of our survey respondents cited these as effective metrics in defining cross-channel success.

E-commerce takes the lead

Interestingly—but considering the technologies most likely to be used to drive cross-channel revenue, not surprisingly—we found that cross-channel efforts are largely driven by e-commerce.

52% of survey respondents said the CEO owned driving cross-channel revenue, but that was followed by 38% saying the e-commerce leader. Other responses were split fairly equally among top merchants, retail channel leads and chief information officers.

E-commerce is as important as any other channel in the cross-channel organizational model but, with the growing influence of the web on retail sales, it will often be the catalyst for deeper integration. While search marketing or product data normalization are functions typically driven by e-commerce, they serve core cross-channel business goals. The systems and processes are the enablers, but it is the people and the coordination of their efforts organizationally across channels that are needed to achieve those goals.

Our survey also revealed that, at this juncture, the bulk of cross-channel responsibility is being given to—or assumed by—the e-commerce team, and retailers are expanding those teams. 78% of the retailers surveyed plan on adding new positions to the e-commerce team in the coming year.

Many key cross-channel responsibilities—search marketing, content management, product data management and copywriting—report into e-commerce in more than 50% of the responding companies, giving e-commerce ownership of driving the synthesis of product and brand presentation across channels. Additionally, in roughly half the retailers surveyed, operational responsibilities such as inventory planning, customer service and even cross-channel budgeting are under the purview of e-commerce leadership.

If this becomes a trend, the e-commerce organization may become the kernel of the fully synthesized corporate retail organization that will evolve necessarily to sustain success in a cross-channel world. This may not require that e-commerce revenues are on par with retail stores, but full recognition that the role of digital channels and skills—such as e-commerce, mobile and social—are as important to the multichannel enterprise as stores and traditional retail marketing media.

In redefining their organizations to support cross-channel, we also see many senior management teams default to hiring a stronger vice president of e-commerce—ideally one with roots and experience in other channels. The goal is to elevate the vice president to lead cross-channel as the rest of the organization buys in and the puzzle gets sorted out. This tendency to seek a stronger e-commerce leader to drive cross-channel is another phenomenon propelling e-commerce as an enabler of cross-channel organizational, and operational, change.

A culture change

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