An RIS News Whitepaper

The Omnichannel
Value Proposition

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 The Omnichannel
Value Proposition

There is abundant evidence that the shopper preference for buying online and
picking up in a store has become part of mainstream retailing. It is a logical extension
of a digital mentality that has been embraced by all segments of shoppers who now
use personal technology in every aspect of their lives.

43% of adult online

shoppers buy
online and
pickup in stores.

S o u r c e : F o r r e s t e r N o r t h A m e r i c an
T e c h n o g r a p h i c s C o ns u m e r D e e p D i v e :
In v e s t i g a t i n g t h e C u s t o m e r L i f e C y c l e

Retailers are racing to catch up with the consumer’s desire for instant gratification.
Why wait for shipping when you can drive to the store and possess it today?
According to Forrester’s Technographics data, “buy online, pick-up in-store” is a
practice adopted by 43% of U.S. online adult shoppers.

Offering buy online pickup in-store clearly enables retailers to provide a service that
shoppers want, but it is especially important because it is a key step on the journey
to achieve omnichannel transformation. With 44% of shoppers citing omnichannel
factors as driving their likelihood to shop with a retailer, according to a 2013 UPS/
ComScore study, there is plenty of motivation for retailers to move toward the goal
of achieving an omnichannel transformation.

44% of shoppers cite

omnichannel factors as
driving their likelihood to
shop with a retailer.

S o u r c e : 2 0 1 3 UP S / c o m S c o r e s t u d y o f 3 , 0 0 0 U . S . s h o p p e r s .

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 The Omnichannel
Value Proposition

In the omnichannel world retailers need to offer buy online pick up in store, but that
is not where the transformation ends. The goal is to deliver seamless, synchronized
experiences to shoppers across all physical and digital channels. These services
include: product selection, order management, pricing and promotions, returns
handling, customer service, and more.

Fast-moving retailers have recognized the value of serving digitally-savvy shoppers

with omnichannel capabilities. Leaders in this fast-moving omnichannel group
are Nordstrom and Apple, which tied for first place in the 2013 RIS News report
“Omnichannel Readiness.” They were followed by Macy’s, Walmart and Target.
Retailers who don’t want to concede a growing segment of shoppers to these fast-
moving competitors are racing to catch up.

O m n i c h ann e l F a c t o r s T h a t i n c r e as e t h e
l i k e l i h o o d o f s h o p p i n g w i t h a r e ta i l e r

62% Ability to buy online and then make returns at the store

Push coupon/promotion to smartphone

when I’m in a store or close by 47%
44% Ability to buy online and pickup in store

Availability of an application designed for a tablet

41%
40% Option to conduct one-click checkout online

Ability to complete a purchase

in store using mobile device 37%
36% Availability of a mobile application for a smartphone

S o u r c e : 2 0 1 3 UP S / c o m S c o r e s t u d y o f 3 , 0 0 0 U . S . s h o p p e r s

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 The Omnichannel

4.5
Value Proposition

out of 5 shows the

powerful dislike
shoppers have of high
delivery costs.

S o u r c e : C o g n i z an t / RI S N e w s 2 0 1 3 S h o p p e r
Experience Study

Although convenience is a major influencer on customer purchase decisions,

shoppers are also looking for value as evidenced by their strong dislike
of high delivery costs. High cost of delivery was found to be the most
“disliked” aspect of making online purchases in a comprehensive survey
of 2,500 shoppers. It had a 4.5 rating on a scale where five represents the
maximum “dislike,” as reported in the Cognizant/RIS News “2013 Shopper
Experience Study.” While shoppers are willing to pay a reasonable fee, their
preference is free shipping and many retailers are offering it to them. For the
2013 holiday season, the National Retail Federation tracked more than 40
retailers that offered free shipping of online purchases.

When meeting customer demands retailers need to address the issue of

shipping costs as a significant factor in online purchases. One smart way to
do this is by offering buy online pick up in store, which increases shopper
trip frequency to stores, contributes to higher baskets through add on sales,
and improves customer satisfaction to nurture loyalty.

Clearly retailers are rolling out buy online and pick up in store as a way to
stay relevant with shoppers who not only dislike shipping fees but in many
cases prefer shopping in stores for key products. It is worth noting that the
in-store shopping experience remains three times as popular as e-commerce
when it comes to purchasing consumable products – 75% prefer in-store
shopping and 25% favor online, according to the “2013 Shopper Experience
Study” published by Cognizant and RIS News. The ratio drops to a virtual
tie when shoppers look to purchase specialty products — 53% prefer stores
and 47% prefer e-commerce.

3 to 1
Three times as many shoppers
for consumable products prefer
shopping in stores [75%]
compared to shopping online.

S o u r c e : C o g n i z an t / RI S N e w s 2 0 1 3 S h o p p e r E x p e r i e n c e S t u d y

December 2013 | 4

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 The Omnichannel
Value Proposition

Part of the reason for the differential has to do with the nature of consumable
products, which are often necessity purchases or intended for immediate
consumption. However, Amazon and others are rolling out fast fulfillment
services and subscription models that are intended to overcome the traditional
barriers for purchasing consumable products. No retail segment is immune to
the forces that are driving the omnichannel marketplace.

The upside of implementing omnichannel services and functions is that the

omnichannel shopper is 21% more profitable than a single-channel shopper,
according to the 2013 RIS/EKN Cross-Channel Trends Study. Serving these
high-value shoppers with omnichannel services is a smart way to earn and
maintain loyalty to your brand.

21% more profitable – omnichannel

shoppers versus single channel
shoppers.

S o u r c e : 2 0 1 3 RI S / EK N C r o ss - C h ann e l T r e nds S t u d y

No doubt the implementation of omnichannel services like order online and

pickup in-store will add cost to current retail budgets, but there is also a cost
for not adding them. A survey of retailers conducted by RIS News & EKN
for its 2013 Cross-Channel Study found that 4.5% of revenue is lost due to
unsynchronized processes, technologies and corporate structures that cannot
support omnichannel services and functions. This means that a billion-dollar
retailer stands to leave $45 million dollars on the table if it fails to invest
adequately in omnichannel strategies.

4.5%
lost revenue when processes,
technologies and corporate
structures are not fully
synchronized in a clear
omnichannel strategy

S o u r c e : 2 0 1 3 RI S / EK N C r o ss - C h ann e l T r e nds S t u d y

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 The Omnichannel
Value Proposition

31%
Retailers are beginning take note of these opportunities lost and
are beginning to ramp up their IT plans to support omnichannel
initiatives. By 2016 the percentage of retail IT budgets dedicated
to supporting cross-channel operations and initiatives will rise
to 31% in 2016, which is up from 18% in 2013 and 15% in 2012,
according to the 2013 RIS/EKN Cross-Channel Trends Study. But
the question for retailers is: Why wait until 2016? The customer
demand is here today and so is the technology opportunity and
competitive threat. Delaying omnichannel investment until 2016
the portion of the retail puts your organization at risk of falling behind your competition
IT budget dedicated to and losing business.
supporting cross-channel
As retailers plan to shape their omnichannel strategies for
initiatives and operations the shopper of the future many are focusing on supply chain
in 2016 capabilities that will deliver clear benefits to omnichannel
shoppers in a cost-effective way. When more than two out
of three retailers have omnichannel inventory management
capabilities in place it will be a huge disruptor and help tip
the balance of power for brick-and-mortar stores to effectively
compete against pure-play online retailers. However, many
retailers today have inventory locked into individual channels
and cannot provide omnichannel services in a scalable and
efficient way. They are also not able to optimize their inventory,

69%
pricing and logistics costs.

Strategies that help converge brick-and-mortar stores with

digital channels is clearly the future of retailing and retailers
who choose to be leaders in omnichannel transformation
will win customer loyalty and share of sales. With changes
in customer expectations, technology and competitors taking
place at an escalating pace, those who choose to be laggards
will lose. l
of retailers will have
shared inventory
across all of the selling
channels compared to
20% who have it today

S o u r c e ; 2 0 1 3 RI S / EK N C r o ss - C h ann e l
T r e nds S t u d y

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 Ab o u t t he A ut h or
Shannon Warner is an AVP within Cognizant Business Consulting, providing digital
transformation business advice to retail, consumer goods, manufacturing, travel,
hospitality and utilities/energy companies seeking to provide cohesive, relevant, value-
added customer experiences across bricks-and-mortar, Web, mobile, social media and
call center touchpoints. Shannon’s areas of expertise include digital commerce, digital
information strategy and management, customer experience management, digital
marketing and loyalty, and program management. She can be reached at Shannon.Warner@cognizant.com
| LinkedIn: www.linkedin.com/in/shannonlwarner/.

Ab o u t C ogniz an t ’s
O m nichanne l P rac t ic e
Cognizant’s Omnichannel Practice partners with organizations to discern how to leverage leading
technologies to stay focused on customers rather than channels. The omnichannel business model we
advocate emphasizes a seamless customer experience across all touch points, grounded in the right policies
and processes, and enabled by the right technologies and people. We offer a full range of Omnichannel
services, including Strategy and Roadmapping, Cross-Channel Integration, eCommerce Replatforming,
Digital Commerce Optimization, Mobile, International Commerce, Digital Marketing, Loyalty and CRM,
and Agile Delivery.

Ab o u t C ogniz an t
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business
process out sourcing services, dedicated to helping the world’s leading companies build stronger businesses.
Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction,
technology innovation, deep industry and business process expertise, and a global, collaborative workforce
that embodies the future of work. With over 50 delivery centers worldwide and approximately 166,400
employees as of September 30, 2013, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes
Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies
in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.

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