The Business Times

The Right Way to Build a Modern Retail Firm

There's a danger in relying on benchmarks. Operating models need to be tied to a retailer's unique strategy.

By Andy Noble and Louis Lim

Published on January 28, 2016
min read


This article originally appeared on The Business Times Singapore (subscription required). Most retailers recognise the importance of combining the best of digital technologies and physical stores to profitably create a seamless and consistent customer experience across channels. There's a good reason for this. Their most valuable customers are engaging with them across all channels: store, mobile, social and online. Some retailers find that these omnichannel customers spend two times to five times more than customers who buy in only one channel. But many retailers tell us it is difficult to build the right organisation to deliver on their omnichannel strategy. It's easy to make mistakes that have disastrous consequences. Consider the rough path taken by an early leader in omnichannel. The retailer recognised the need for highly aligned assortments and chose to make every merchant an omnichannel merchant, with responsibility across both physical stores and digital channels. While the principle of alignment and shared vision was right, most of the merchants found the small digital business to be a distraction from the physical stores. Many had no experience with digital and ignored the business altogether. Digital growth stalled, even while the online market expanded by 15 per cent. When the leadership team recognised the error, it moved quickly to reinstate a digital team, this time setting goals to dramatically accelerate digital growth. However, a year later, the company found itself with highly divergent assortments, poor communications around key programmes and events, and misaligned incentives around inventory management. Growth stalled for a second year. Where did this retailer go off course? It had twice tried to use structure to solve a problem without making the corresponding investments and clarifications in capabilities, alignment and decision rights. By the time the retailer addressed these issues the following year - the third reorganisation in as many years - it had fallen from first place to third place among its competitors in digital sales. This is not an unusual experience, and it highlights the dangers that retailers encounter by not making the right organisational changes required to support an omnichannel strategy. For every company that loses its place in digital sales, we see a rival that moves up the ranks, using the disruption presented by digital retailing to gain market share. Our analysis and work with hundreds of clients across retail sectors to navigate the omnichannel journey has helped us identify the three rules required to build a modern retail organisation. Read more at the Business Times Singapore (subscription required). Andrew Noble is partner in the Boston office of Bain & Company, and Louis Lim is a partner in Bain's Singapore office. Both are members of the firm's retail practice.

This article originally appeared on The Business Times Singapore (subscription required).

Most retailers recognise the importance of combining the best of digital technologies and physical stores to profitably create a seamless and consistent customer experience across channels. There's a good reason for this. Their most valuable customers are engaging with them across all channels: store, mobile, social and online. Some retailers find that these omnichannel customers spend two times to five times more than customers who buy in only one channel.

But many retailers tell us it is difficult to build the right organisation to deliver on their omnichannel strategy. It's easy to make mistakes that have disastrous consequences.

Consider the rough path taken by an early leader in omnichannel. The retailer recognised the need for highly aligned assortments and chose to make every merchant an omnichannel merchant, with responsibility across both physical stores and digital channels. While the principle of alignment and shared vision was right, most of the merchants found the small digital business to be a distraction from the physical stores. Many had no experience with digital and ignored the business altogether. Digital growth stalled, even while the online market expanded by 15 per cent.

When the leadership team recognised the error, it moved quickly to reinstate a digital team, this time setting goals to dramatically accelerate digital growth. However, a year later, the company found itself with highly divergent assortments, poor communications around key programmes and events, and misaligned incentives around inventory management. Growth stalled for a second year.

Where did this retailer go off course? It had twice tried to use structure to solve a problem without making the corresponding investments and clarifications in capabilities, alignment and decision rights. By the time the retailer addressed these issues the following year - the third reorganisation in as many years - it had fallen from first place to third place among its competitors in digital sales.

This is not an unusual experience, and it highlights the dangers that retailers encounter by not making the right organisational changes required to support an omnichannel strategy. For every company that loses its place in digital sales, we see a rival that moves up the ranks, using the disruption presented by digital retailing to gain market share. Our analysis and work with hundreds of clients across retail sectors to navigate the omnichannel journey has helped us identify the three rules required to build a modern retail organisation.

Andrew Noble is partner in the Boston office of Bain & Company, and Louis Lim is a partner in Bain's Singapore office. Both are members of the firm's retail practice.