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Omni-channel Retailing

Burberry, the renowned British luxury brand, reported another strong quarter of sales growth in July. This would not be surprising a few years ago. The world of dear fashion has had a number of bright years after the crisis thanks to the growing appetite for luxury from China. In the time when Western world suffered under the weight of a meagre economic growth, it was the growing class of wealthy Chinese entrepreneurs and government officials that the luxury brands have turned their attention to.
 
Published 25 September 2014 in .týždeň
 
More recently, however, the crackdown on corruption and conspicuous spending launched by China’s president Xi Jinping in 2012, have seen the tides turn. In a country where “justice” is dictated by the party-driven court system, the government officials have become much more careful about their spending excesses. An expensive Swiss watch on the wrist of a local bureaucrat could be a steady one way ticket into the realms of Chinese “soviet-era” prison system.
This has hit the luxury market and many of Burberry’s rivals are struggling. Louis Vuitton and Gucci have seen their retail sales growth collapse to below 5 per cent from about 10 three years ago (http://uk.reuters.com/article/2014/07/10/uk-burberry-groupsales-idUKKBN0FF0X820140710). Burberry, however, goes from strength to strength, reporting double-digit sales growth during the first quarter of 2014.
Burberry’s success is not dependent on the fickle fortunes of one country, because the company has sensed and adapted to the human psyche changed by the financial crisis. People have become much more careful with their purchases. According to WSL’s CEO of strategy retail unit, Wendy Liebmann, shoppers are no longer prepared to overpay for anything. MIT’s recent report, “Beyond the Checkout Cart”, argues that 80% of store shoppers check prices online, with one-third accessing the information on their mobile device while inside the actual store. Visiting store several times before making a purchase is the new “norm”, as is consulting several digital channels, including emails, websites, social networks and search engines.
In-store experience, customer service and personal attention have always been the essential elements of the luxury shopping experience. This is no longer sufficient. A person’s decision to buy is a delicate balance between emotional connection with the product, sensation of the moment and unconscious rational decision-making. Because people have become more hesitant, running a great “brick-and-mortar” retail store is not enough. Instead, retailers must own several “channels” through which they maintain the attention of consumers in order to hit that precious moment, which leads to purchase.
In the “omni-channel” retail environment, it is the combination of a work of art retail store, high definition top class online shop and interactive presence on a social network that leads to a successful sale. All channels are used simultaneously and information about customer is tracked and used to enhance the experience. After the customer visits a physical store, his preferences are saved on a store’s iPad, so that his dreamt-of product comes up first when he visits the retailer’s website later. Still unsure, the customer is targeted by subliminal messages on his Facebook profile. Having many disseminated channels creates multiple touch points and helps to build consumer stronger brand experience holistically. Burberry has become the epitome of omni-channel luxury retail. Its highly celebrated online shop and architecturally impressive retail stores have been combined with interactive campaigns such as Burberry Kisses, which allowed users to send letters sealed with a virtual kiss to friends and loved ones.
The virtues of omni-channel strategy are by far not exclusive to the big players. Indeed, smaller and nimbler companies can incorporate these methods easier. Having many retail channels requires better inventory management. Retailers must be able to fulfill customer orders quickly, whether they come from mobile, online or during a physical visit to the store. Visibility over inventory levels is key, as retailer must give customer the ability to pay in one store and pick up products in another. Large fashion retailers, such as Macy’s in US are already converting their prime location retail stores to storage space, in order to be able to do this.  This can be a costly exercise for large retailers, but an opportunity for small retailers, who often have integrated supply chain. Alain Delon, the Slovakian high-end fashion label, combines newly opened online store with in-store inventory management and regular enthusiast Facebook posts.
In past, the success of a salesman was based on the art of persuasion. Today, customers have usurped the power. Retail has become an ongoing discussion with the customer, rather than a pursuit of a one-off transaction. The advent of digital technologies has opened another industry to the disruption from small businesses, original ideas and innovation.

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