With the rise of the omnichannel comes the idea that consumers aren’t just telling retailers what to sell them, but how to do sell it to them as well.
An online transaction consists of more than an exchange of goods for money. The seller must weigh considerations of price, speed of delivery, returns policy and the overall experience of shopping on its website. Each those elements must be tweaked in order to achieve the optimal balance of profit and customer satisfaction.
Some say the best answer can be crowdsourced. Santiago Gallino, a professor at The Wharton School at the University of Pennsylvania, oversaw a survey of retail managers to assess what their customers really wanted from online sellers. The results could help e-tailers to make the right tradeoffs between cost and service.
Gallino described the exercise at a recent seminar in San Francisco sponsored by Penn Wharton Entrepreneurship and the Jay H. Baker Retailing Center. The study looked at five elements that characterize an online sale: order fulfillment, returns policy, price, amount of information about the product, and branding (for either the product or the retailer).
A simple gray jacket illustrates the complexity of the equation. The survey described five delivery options: free shipment within two or five business days, a $20 charge for two business days, $10 for five business days, and no charge for picking up the jacket at the store.
The price of the jacket went from $110 to $150 in $10 increments. Returns options included free by mail or in store, and a charge from $6 to $12 for return by mail. Product information ranged from none at all to 3D visualization and virtual chatting with a customer representative. As for branding, the experiment included five major retailers: Amazon.com, The North Face, Macy’s, Dick’s Sporting Goods and Nordstrom.
Researchers posed similar hypotheticals for books, electronics and cookware. In essence, questions that were frequently aimed at product design were now being asked on the services side.
Obviously, there’s no one perfect formula that holds true for all retailers and product categories. Still, the researchers were able to gain new insight into online customer sentiment. They found that 30 percent of a decision to purchase a product was driven by the retailer’s delivery policy, 30 percent by price, and the remaining 40 percent divided among returns policy, product information and identity of the retailer.
Gallino calls it “the wisdom of the managerial crowd.” In all, the researchers gathered information from more than 400 brand managers, who varied widely in depth of knowledge, diversity and independent status. The result was far more accurate than could be obtained from a single expert, he claimed.
How many managers make up a “wise” crowd? Four hundred could be considered excessive. Researchers experimented with varying sample sizes. Their conclusion: “Once you hit 10 managers, you’re already pretty good,” said Gallino. “With 20, you’re almost as good as 50.”
Crowdsourcing provides a view from on high, but it’s just as important to understand the omnichannel retailer’s experience at ground level. The Wharton seminar also featured representatives of two fledgling online merchandisers.
Bloomwell bills itself as a direct-to-consumer seller of stylish maternity clothing that “you actually want to wear.” Co-founders Miriam Bloom Williams and Tara Elwell Henning are retail industry veterans who met at Louis Vuitton a decade ago. Williams said the company’s challenge is to adjust to the fast-changing needs of the women who wear its products. Customers are constantly inquiring about which sizes they should buy.
Williams and Henning started the company with their own form of crowdsourcing – a survey of 60 friends about their favored maternity styles, and where they shopped. Within 36 hours they 700 responses and had uncovered a “visceral reaction,” Williams said. With that initial data in hand, they created a product line that was intended “to empower women.”
Bloomwell launched with just nine styles, but the line quickly grew more complex. At the outset, the company is focusing on “evergreen” styles, but is also contemplating a selection of seasonal products. That’s likely to create new challenges with the China-based factory. Offshore production is necessary because domestic manufacturers can’t meet the company’s needs for volume and variety, Williams says.
Madison Reed offers hair-color products with “salon-quality results.” It began life as a pure online retailer, but has recently added a physical presence through popup shops. That way, the company can advise customers in person as to the best color and how to apply it, said Emily Fan, vice president of supply chain and operations.
Fan heads up a small supply-chain team of just three other members. Shipping is the company’s biggest challenge. “Everyone wants faster and cheaper, but it keeps getting more expensive,” she says, adding that she’s struggling to keep shipping costs at last year’s levels.
A second pain point is the difficulty of working with suppliers. “They’re just slow,” says Fan. “You give them a purchase order with quantity and ship dates, and unless you babysit them, they miss dates. It’s a full-time job to manage suppliers.”
Madison Reed also must work around overseas holidays, such as Chinese New Year, which causes a month-long shutdown of factories, and the month of August in Italy, when a large percentage of workers are on vacation. Currently the company is seeking out alternative sourcing, possibly in Brazil.
Both Bloomwell and Madison Reed face problems that are typical of young, small e-tailers: the difficulties of securing reliable suppliers, matching their offerings to the demanding needs of the customer, and handling growth. But wisdom – whether crowdsourced or otherwise – is bound to come with experience.
“When you’re trying to scale, it’s not going to be perfect, and that’s OK,” says Fan. “It’s hard when you have high standards, but you can’t have that at this level. You need to be good enough, and move on.”