TOWARDS OMNI-‐CHANNEL RETAILING: HOW TO MANAGE YOUR CUSTOMER ACROSS ENDLESS CHANNELS

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TOWARDS OMNI-‐CHANNEL RETAILING: HOW TO

MANAGE YOUR CUSTOMER ACROSS ENDLESS

CHANNELS

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Towards Omni-‐Channel Retailing:

‘How to manage your customers across endless channels.’

University of Groningen

Faculty of Economics and Business:

Master of Science Business Administration

Organizational & Management Control

&

Master of Science Marketing Management

June 11, 2014

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PREFACE

This master thesis is the last step to finish my master Business Administration in the specialization Organizational & Management Control in combination with the master Marketing Management at the University of Groningen.

Writing this thesis would not have been possible without the help of many people. First of all, I would like to thank the three consultants; Samir Selimi, Christian van Someren and Jerry Stam, for their input, constructive feedback on our model and their creative ideas for writing our results and research as a whole. Without their practical input, building this model and testing it in practice would not have been possible.

Secondly, I would like to thank Drs. D.P. Tavenier for his supervision during the entire process. His guidance, his enthusiasm about this topic and his interesting ideas made it possible to finish this thesis. I really enjoyed the conversations we had about the great changes within the retail industry nowadays and the interesting ideas for this research that came forward from these conversations. Besides, I would like to thank Prof. Dr. L.M. Sloot for being my co-‐supervisor, who made it possible for me to write this combined Marketing Management and Organizational & Management Control thesis.

Lastly I would like to express my gratitude to my friends and family for their support during my whole studies and for giving me the motivation to finish this thesis. A special thanks to my thesis-‐buddy Esther Nijboer, without her support and her endless ideas we would not have come up with the model as presented in this thesis.

I hope you enjoy reading this thesis. Rianne van der Heiden, Groningen, June 2014

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ABSTRACT

Omni-‐channel retailing has become an important subject within the retail industry: customers are passing retailers by through demanding seamlessly integrated customer experiences despite the different channels they use to interact with organizations. But, how do retail organization evolve into these omni-‐channel retailers? What capabilities do they have to develop, implement and measure to become omni-‐channel retailers to avoid losing market share? This question will be answered with the use of multiple case studies within the Dutch Fashion retail market. To test these retailers within practice, an Omni-‐channel Capability Maturity Model is set up, in which all relevant capabilities of the different stages towards omni-‐ channel retailing are specified. This is the first research that investigates a comprehensive capability maturity model retailers can use to manage this transition towards customer-‐centric retailing. With the use of six case studies within the current Dutch fashion retail market, this research indicates the progression of this (part of the) market segment towards omni-‐channel retailing. The results show the current position of the six retailers within the market and indicate how they can improve their operations to become omni-‐channel players. As the results indicate, retailers have to consider four categories of capabilities within this transition: logistics, customer, technology and organization. The results clearly show that retailers should start with the development of a clear omni-‐channel strategy including a new business proposition, business model and key performance indicators. To implement this omni-‐channel strategy throughout the entire organization, they first should set up centralized, top-‐down management. Setting up an integrated and aligned structure around the customer journey, with all relevant customer data being stored centrally within the organization, is a second prerequisite for setting up the rest of the omni-‐channel capabilities within the organization. This paper builds to the current literature on this topic by clearly describing the stages of multi-‐channel, cross-‐ channel and omni-‐channel retailing within this transition and by building a comprehensive Omni-‐channel Capability Maturity Model that can be used to investigate retailers’ progression towards omni-‐channel retailing within practice.

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INTRODUCTION ... 1

1.1 Background ... 1 1.2 Problem Statement ... 3 1.4 Structure ... 4

THEORY ... 5

2.1 Introduction ... 5 2.2 Organizational Change ... 5

2.2.1 Incremental versus radical change ... 5

2.3 Management Control In Change ... 7

2.3.1 Types of management control ... 7

2.3.1.1 Results control ... 7

2.3.1.2 Action control ... 8

2.3.1.3 Personnel control ... 8

2.3.1.4 Cultural control ... 8

2.3.2 Agency and Stewardship theory ... 9

2.3.2.1 Agency theory ... 9

2.3.2.2 Stewardship theory ... 9

2.3.3 Management control systems in change ... 10

2.3.3.1 Key performance indicators ... 11

2.3.4 Disruptive change in retailing ... 11

2.3.4.1 Traditional-‐channel retailers ... 12

2.3.4.2 Multi-‐channel retailers ... 12

2.3.4.3 Cross-‐channel retailers ... 13

2.3.4.4 Omni-‐channel retailers ... 13

2.3.4.5 No-‐channel retailers ... 13

2.4 Maturity Models ... 15

2.4.1 Types of maturity models ... 15

2.4.2 Elements of the maturity model ... 16

2.4.2.1 Corporate strategy ... 16

2.4.2.2 Logistics ... 17

2.4.2.3 Customer ... 18

2.4.2.4 Technology ... 18

2.4.2.5 Organization ... 18

2.4.2.6 Key performance indicators ... 19

2.5 The Omni-‐Channel Capability Maturity Model. ... 20

2.5.1 The multi-‐channel organization. ... 20

2.5.1.1 Logistics ... 20

2.5.1.2 Customer ... 21

2.5.1.5 Key Performance Indicators ... 22

2.5.2 The cross-‐channel organization. ... 22

2.5.2.1 Logistics ... 22

2.5.2.2 Customer ... 23

2.5.3 The omni-‐channel organization. ... 24

2.5.3.1 Logistics ... 24

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2.5.4 The omni-‐channel capability maturity model. ... 28

METHODOLOGY ... 30

3.1 Introduction ... 30

3.2 Research Methodology ... 30

3.2.1 Designing the capability-‐maturity model ... 30

3.3 Data Collection ... 31

3.3.1 Desk Research ... 32

3.3.1.1 Measuring omni-‐channel progression. ... 32

3.3.2 Semi-‐structured interviews with experts in the field ... 34

3.4 Case Studies ... 34 3.4.1 Hunkemöller ... 35 3.4.2 Livera ... 35 3.4.3 Mango ... 36 3.4.4 The Sting ... 37 3.4.5 Vero Moda ... 37 3.4.6 WE Fashion ... 37 3.5 Data Analysis ... 38

RESULTS ... 39

4.1 Introduction ... 39 4.2.1 Logistics ... 40 4.2.2 Customer ... 42 4.2.3 Technology ... 43 4.2.4 Organization ... 44 4.2.5 Overall Position ... 46

DISCUSSION & CONCLUSION ... 48

5.1 Introduction ... 48

5.2 Discussion ... 48

5.3 Conclusion ... 51

5.4 Theoretical Implications ... 53

5.5 Managerial Implications ... 54

5.6 Limitations And Future research ... 55

REFERENCES ... 58

6.1 Books And Articles ... 58

6.2 Interviews ... 67

6.3 Websites ... 68

APPENDIX I. CASE STUDIES OF THE DUTCH FASHION RETAILERS ... 69

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I.3.2 Customer ... 75

I.3.3 Technology ... 76

I.3.4 Organization ... 76

I.4 The Sting ... 77

I.4.1 Logistics ... 77

I.5 Vero Moda ... 80

I.6 WE Fashion ... 83

APPENDIX II. INTERVIEW TRANSCRIPTS ... 87

II.1 Interview Samir Selimi (Capgemini Consulting) 1 maart 2014 ... 87

II.2 Interview Jerry Stam (IBM Consulting) 17 maart 2014 ... 90

II.3 Interview Christian van Someren (Spark Optimus) 19 maart 2014 ... 94

II.4 Interview Samir Selimi (Capgemini Consulting) 5 april 2014 ... 99

II.5 Interview Jerry Stam (IBM Consulting) 21 mei 2014 ... 102

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INTRODUCTION

1.1 Background

Recent developments in the retail industry have dramatically changed the way in which traditional brick-‐and-‐mortar shops can survive in the market. The revolutionary character of the retailing industry of today’s world forces traditional brick-‐and-‐mortar shops to change into omni-‐channel retailers, since those retailers dominate today’s retail landscape (Zhang et al., 2010). Traditional brick-‐and-‐mortar retailers are increasingly being pushed into additional online sales channels and pure online retailers are

pushed into opening stores to allow their customers to have physical interaction and the pick-‐up or drop-‐ off of products (Lang & Bressolles, 2013). Opposed to these trends, traditional brick-‐and-‐mortar stores sales still largely dominates the sales of the retail industry in numbers. 55% of the consumers only buy in brick-‐and-‐mortar stores compared to 35% of the consumers buying omni-‐channel and 10% of the

consumers buying online. The best future prospects are those of omni-‐channel retailers, combining both offline and online, since 55% of the consumers will change channels in orienting on their purchases by 2015, while physical stores are losing their share. These numbers are presented in figure 1.1 (Retail2020, 2011).

What is striking in this market is the fact that there is a shift in the market in the transition towards omni-‐channel retailing. The online market is already an expanded market, however this online market is mostly based upon non-‐tangible services sold via omni-‐channel strategies. However, this market is getting saturated, since every expansion in this market is a cannibalization of offline sales. For non-‐tangibles the peak of the growth is already reached. The market now shifts towards the transition of retailers selling tangible products becoming omni-‐ channel retailers. This growth is realized both in the non-‐food and food sectors. It can be concluded that the omni-‐channel retailing industry is making the change from non-‐tangible omni-‐channel retailing towards tangible omni-‐channel retailing. This shift will have major impacts on the way in which retailers have to organize themselves to be able to manage the logistical process coming forward from this transition towards tangible omni-‐channel retailing (Shopping 2020, 2013; Selimi, 2014b). 55% _37% 10% 9% 35% _55% 2011 2015 (Expected)

The future of retail

Omnichannel Pure Online Physical Stores

Figure 1.1 The future of Retail (Source: Retail2020,

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The high growth rates of the online non-‐food retail sector in the Dutch market, which grew over 11% in the first half of 2013 compared to the decrease 3,5% in the offline non-‐food retail sector, show the potential of focusing on retailing opportunities via an omni-‐channel strategy. Despite the recession and a low willingness to purchase of customers, the online market is growing (CBS, 2013; Lang, 2010). The market shows total of 8,8 million online shoppers, purchasing more than 46 million times a year. The most important driver of the online shopping market is this strong growth in the total number of purchases online; research indicates that compared to the first half of 2012 the market shows a growth of 10% in the first half of 2013 (see figure 1.2). The market segments that show the highest growth rates are the clothing (+14%) and telecom (+12%) segments (see figure 1.3 (Blauw Research, 2013)). These trends and numbers clearly show a disruption of the traditional retail market, in which consumers make a step from offline shopping towards omni-‐channel shopping.

The opportunities of this omni-‐channel strategy are endless, however, there are also some serious challenges retailers have to deal with, since online sales is not only a new way of sales, but also requires a completely different business model (Zhang et al., 2010; Heinemann & Schwarzl, 2010). As the boundaries between traditional and Internet retailing are blurring, retailers experience interactions with their customers through multiple touch points, which provide them with a great amount of offline purchase information and online content. Besides, consumer demands shift, consumers ask for a seamlessly integrated omni-‐channel customer experience in which the distinctions between physical and online are vanished (Brynjolfsson, Hu & Rahman, 2013).

With the use of online retailing, retailers face an expanded opportunity to create a cognitively and esthetically rich shopping environment, not imitable in the non-‐electronic shopping world (Childers, et al., 2001). However, those online retailers are the ones who are failing to deliver the services consumers asked offline (Dennis, Harris & Sandhu, 2002). Consumers are being putt off shopping online by poor after sales service and unreliable delivery

1.990 million +5% 395 million +14% 685 million +12%

Growth biggest market segments (Compared to 2012-‐1)

Travel Clothing

Figure 1.3 Growth rates biggest market segments (Source:

Blauw Research, 2013). 8,5 million buyers 8,8 million buyers Growth: 10% 40 42 44 46 2012-‐1 2013-‐1 N u m b er o f p u rc h ase s p er y ea r (M il li on s)

Growth total number of online

purchases per year

Figure 1.2 Growth number of online purchases (Source:

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(Verdict, 2000). So, these different ways of interacting with customers require different ways of operations. Not only do retailers need to change their business model, they also have to deal with lots of operational issues (Lang, 2010). To be able to operate an omni-‐channel retailing experience, a retailer must be able to change his business strategy and manage its operations in a very different way compared to the traditional retailing setting he previously operated (Lang & Bressolles, 2013).

While deciding to add additional channels to sales results in concerns about cannibalization and negative spillover (Deleersnyder et al., 2002; Falk et al., 2007), research also indicates that the operation of multiple channels can have positive consequences for financial performance (Geyskens, Gielens & Dekimpe, 2002). Sources of increased financial performance due to an omni-‐channel strategy can be divided into access to new, low-‐cost markets; increased customer satisfaction and loyalty; and the creation of a strategic advantage.

1.2 Problem Statement

The existing literature on the transition from a traditional retail strategy towards an omni-‐channel strategy is scarce. Some research is done to discover the different categories organizations can be placed in related to the transition from single channel organizations towards omni-‐channel organizations. This research concludes with the importance of integrating customer data within all different channels to be able to deliver a consistent customer experience across channels (Oh, Teo, Sambamurthy, 2012; Strang, 2013; Bardwell, 2013). However, no clear research focuses on the internal and external capabilities that are needed on the middle-‐ to long-‐term to reach this aspiration of becoming an omni-‐channel retailer. Especially this type of research is important, since it allows organizations to design their strategy in such a way that they are able to make the transition towards an omni-‐channel retailer and being able to put customer experiences at the very core of their operations.

1.3 Purpose and Significance

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The results of this research can be compared with existing literature on the capabilities needed to operate an traditional retail organization, to give insights in the differences between these two stages and the capabilities traditional retailers need to develop to change towards omni-‐channel retailers. Besides this research will indicate the difficulties organizations experience within this transition towards omni-‐channel retailing and a customer focus across different channels. Research on becoming customer-‐centric (Boulding et al., 2005; Shah et al., 2006) has indicated that traditional organizations experience different barriers when transforming into customer-‐centric organizations. Organizing this customer-‐centric focus across all different organizational channels and integrating the customer experience at the heart of a organizations’ operations (omni-‐channel retailing), is likely to be subject to even more barriers than traditional retailers would experience in becoming customer-‐centric.

The findings of this research give insights into the steps retailers need to take in 3 to 5 years to become omni-‐channel retailers and the capabilities needed to operate such a strategy. Besides, it becomes clear what difficulties retailers experience with respect to the capabilities needed to put the customer central across all organizational activities. These insights are highly valuable for the management of retail organizations experiencing this transition towards omni-‐ channel retailing, since it provides them with a guideline how to put their customer central and how to internally organize their operations to deliver a consistent and integrated customer experience across all channels. This is of fundamental importance for retail organizations, since it are the customers who are demanding this integrated experience (Strang, 2013). Therefor, the research question guiding this research is: ‘What capabilities do current Dutch Fashion retail

organizations have to develop, implement and measure within 3 to 5 years to facilitate the transition towards an omni-‐channel retail strategy, to at least maintain market share.’

1.4 Structure

This research focuses on an investigation of six clothing retailers within the Dutch retail market. The remaining of this research is organized as follows: Section 2 provides an overview of the relevant concepts used to study the phenomena in practice. In the third section the research methods are described and the cases are introduced. Section 4 presents the results of the case study. Lastly, section 6 provides a discussion of the found results and ends with a conclusion with theoretical and managerial options for future research.

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THEORY

2.1 Introduction

This section elaborates on the existing literature regarding the different concepts used in this research. It starts with an explanation of the concept organizational change with its management control and performance measurement issues, which provides the basis for the transition towards omni-‐channel. Then, the different categories of retailers within the transition towards omni-‐channel are presented. Followed by a discussion of different types of maturity models and an elaboration on the elements we chose for our capability maturity model. Lastly the different elements of our model are discussed for each category of retailer. This section concludes with the presentation of a capability-‐maturity model and a translation of the capabilities into key performance indicators.

2.2 Organizational Change

Organizational change has been widely discussed in academic literature. Organizational change can be seen as the need to implement changes in strategy, structure, process and culture to keep up with the immediate environment (Armenakis, Haker, Mossholder, 1993; Porras & Silvers, 1991). This type of change is triggered by relevant shifts in the environment that trigger an organization to formulate an intentionally generated response (Porras & Silvers, 1991). The reaction to change consists of four interrelated components: (1) a change intervention that alters (2) key organizational variables. These then impact (3) organizational members and their behaviors, resulting in changes in (4) organizational outcomes (Porras & Silvers, 1991). A change process consists of three phases: preparing the organization to accept the necessity of change thereby breaking down the existing status quo (unfreeze); altering the magnitude, direction or number of driving and resisting forces, thereby consequently shifting the equilibrium to a new level (move) and lastly reinforcing the new distribution of forces, thereby maintaining and stabilizing the new equilibrium (refreeze). Despite common sense might lean towards increasing the driving forces for change, an equal and opposite increase in resisting forces might result in no change and even greater tensions than before (Lewin, 1947).

2.2.1 Incremental versus radical change

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means that the firm focuses on fine-‐tuning products and processes in a step-‐by-‐step way (Laursen & Salter, 2006). Centralization has a negative effect on the adoption of incremental change; a better structure is to manage incremental change in a decentralized structure. Within this bottom-‐up approach, individuals at the lower levels receive authority to propose changes to improve their work, thereby providing a basis for smaller, incremental changes at the lower levels. This type of change is characterized by collaboration and great involvement of employees in identifying problems and solving them (Dewar & Dutton, 1986; Normann, 1971). To build trust and commitment, this type of change is advised. Another reason for bottom-‐up change relates to employees being closer to the market place and the core of the organization, they have knowledge of what should be changed within the organization (Bennis, 2000). Besides, as long as these changes are little related to new knowledge content, limited opposition can be expected and concentrated power cannot be seen as a necessary prerequisite for adoption (Dewar & Dutton, 1986; Normann, 1971).

Radical, or disruptive, change goes beyond adjustments to the status quo; this type of change requires an entirely new corporate strategy to operate a completely different business paradigm. The corporate strategy defines the patterns of decisions in a company that determines its objectives, purposes and goals; produces the principal policies and defines the range of business the company is to pursue (Foss, 1997). This corporate strategy should clearly communicate the value proposition the organization wants to deliver; it defines a way of competing in the market that does clearly communicate the unique value the organization delivers to its customers (Porter, 2001). For a company to change towards fundamentally different products, processes, practices, relationships, skills and norms, this corporate strategy should be altered to capture this new business paradigm (Dewar & Duttin, 1986). Radical change is clearly disruptive in nature, since the implementation of a different business paradigm disrupts the established pattern of understandings within the organization (Dewar & Duttin, 1986). Radical change involves the development or implementation of radical new technologies, which asks for new types of knowledge (Laursen & Salter, 2006). To be successful in this type of change, the entire business model has to transform towards the new business paradigm. Implementing this type of change requires a strong vision and mission, the creation of the new business paradigm and the creation of a roadmap towards achieving these future goals (Milgrom & Roberts, 1995; Yip, 2004).

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needs central coordination to align all processes, practices and business activities (Milgrom & Roberts, 1995; Yip, 2004). Only managers are able to allocate capital, resources and power throughout the organization and they have a helicopter view of the organization (Conger, 2000). Besides, disruptive changes in organizational processes and operations will result in great opposition from the workforce. A more concentrated power to implement this disruptive type of change is necessary to overcome this opposition. Lastly, strong leadership support from the top management will generate a sense of necessity for the change within the organization, resulting in less opposition from the lower levels (Normann, 1971).

2.3 Management Control In Change

According to Merchant & van der Stede (2012), management control relates to the control of the internal environment of an organization. Management control is defined by Anthony (1965) as the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objective. To be able to design an appropriate management control system, an organization needs to have a clear understanding of the objective and the appropriate strategy to reach this objective (Merchant & van der Stede, 2007).

2.3.1 Types of management control

Merchant & van der Stede (2012) distinguish four different types of control: results, action, personnel and cultural control. Whereas Ouchi (1979) distinguishes three types of control: market, bureaucracy and clan. The typology of Merchant & van der Stede thus provides one extra type of control, however all four can be related to the three types of Ouchi (1979). Both results control and market control rely on price mechanisms as the main type of control; both action control and bureaucracy control rely on rules and formal procedures; and personnel, cultural and clan control rely on traditions and routines (Ouchi, 1979; Merchant & van der Stede, 2012). Due to their more detailed and extended focus, the types of Merchant & van der Stede (2012) will be shortly discussed below.

2.3.1.1 Results control

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attract and retain employees that are confident about their abilities (personal limitations). The effectiveness of this type of control is determined by 3 condition; knowledge of the desired results, the ability to influence desired results and the ability to measure controllable results effectively (Merchant & van der Stede, 2012).

2.3.1.2 Action control

Action control relates to the control used to ensure that employees act in the organizations best interest. This type of control can be seen as the most direct form of control by continuously monitoring decisions and actions. Four different forms of action control can be identified:

-‐ Behavioral constraints: making it impossible/difficult to do things that should not be done. These constraints can be divided in physical and administrative behavioral constraints.

-‐ Pre-‐action reviews: controlling the employee’s action plans.

-‐ Action accountability: holding employees accountable for the actions they take.

-‐ Redundancy: assigning more employees to a task than strictly necessary, to increase the probability of a task being fulfilled.

The effectiveness of this type of control depends upon the knowledge of the desired actions and the ability to ensure that the desired actions are taken (Merchant & van der Stede, 2012).

2.3.1.3 Personnel control

Personnel controls build on employees’ tendencies to control and motivate themselves. This type of control ensures that employees understand what the organization wants, thereby clarifying expectations. Second, they help ensure that each employee is able to do a good job by providing them with the capabilities and resources necessary. Lastly, they increase the likelihood of self-‐monitoring. This type of controls can be implemented with the use of selection and placement; training and job design and provision of the necessary resources (Merchant & van der Stede, 2012).

2.3.1.4 Cultural control

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2.3.2 Agency and Stewardship theory

2.3.2.1 Agency theory

Agency theory assumes that different interests (goal conflicts) exist between owners and employees, which leads to managerial problems (Eisenhardt, 1989). What can be considered the cause of this agency problem is information asymmetry between the agent and the principal; agents will exploit principals with the superior information they have, resulting in the principals not being able to ensure that the agent is acting in their best interest. Unless they are effectively monitored or incentivized not to do so, this self-‐interested behavior will occur (Miller & Sardais, 2011). Different interests cause these conflicted interests; shareholders focus mainly of financial return, while managers’ interest also lies on non-‐financial returns (Aghion & Bolton, 1992). This agency theory is closely linked to management control (Eisenhardt, 1989), especially to the distinction between behavioral versus output control of Ouchi (1979), since task programmability can be linked to behavioral control and measurable outputs lead to output control. With the use of a management control system, organizations are able to control these agency problems, since these management control systems measure the performance of a pre-‐specified set of measures and link incentives to these measures to guide behaviors of employees (Merchant & van der Stede, 2012).

2.3.2.2 Stewardship theory

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2.3.3 Management control systems in change

A management control system can broadly be defined to include everything managers do to help ensure that their organizations’ strategies and plans are carried out or modified (Merchant & van der Stede, 2012). According to the more narrow definition of Simons (1994) management control systems are the formal, information-‐based routines and procedures used by managers to maintain or alter patterns in organizational activities. Merchant & van der Stede (2012) state that optimal control does exist when the control losses – due to performance differences between what is theoretically possible according to the strategy and what can be expected with the management control systems in place -‐ are smaller than the costs of implementing more controls.

A management control system provides a means for gaining cooperation among collectives of individuals or organizational units who may share only partially congruent objectives and channels those efforts toward a specified set of organizational goals (Langfield-‐ Smith, 1997; Ouchi, 1979; Flamholtz, 1983). It provides the controls used to act upon a chosen strategy. To be able to provide incentives, multiple performance measures should be used, since a single performance measure could not be able to measure the phenomenon completely (Hölmstrom, 1979). Implementing a new strategy encompasses allocating resources and designing suitable administrative systems, including management control systems, to control the new business paradigm (Preble, 1992, Langfield-‐Smith, 1997; Ouchi, 1979). There seems to be a paradox in the control of radical innovations, on the one hand there is a need for organic systems to encourage innovations within the organization, but at the same time, these radical innovations need a tight control system to curb excessive innovation (Chenhall, 2003).

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2.3.3.1 Key performance indicators

Within a management control system, key performance indicators can be defined as items of information, collected at regular intervals, to track the performance of a system (Fitz-‐ Gibbon, 1990). They must be established to measure progress towards reaching the objectives set (Parmenter, 2010; Fitz-‐Gibbon, 1990). These key performance indicators represent a set of measures focusing on those aspects of organizational performance that are most critical for the current and future success of the organization. They relate to nonfinancial measures, which are frequently measured and acted on by the senior management team; they clearly indicate what actions are required by staff-‐members and they tie responsibility to a team or individual.

These key performance indicators can be divided into different categories: -‐ Quantitative indicators: presented as a number.

-‐ Practical indicators: the interface with the existing processes of the company. -‐ Directional indicators: specify whether the organization is performing better or not. -‐ Actionable indicators: sufficient in a control system to effect change (Giese et al., 2010). Within traditional retail settings, the most important customer related key performance indicators relate to customer satisfaction, customer loyalty, sales per customer and store visits (Reinartz, Krafft & Hoyer, 2004). However, within an omni-‐channel, customer-‐centric strategy, customer centric performance measures have become more important. Therefore, it seems logic that more customer related metrics should be included within the key performance indicators of omni-‐channel retailers.

2.3.4 Disruptive change in retailing

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market that is characterized by unrelenting change, escalating customer expectations and intense competition (Sorescu et al., 2011, Strang, 2013).

Within the transition of traditional retail organizations towards an omni-‐channel strategy, or even a no-‐channel strategy (which can be considered the ultimate future state), different categories of retailers can be distinguished, as shown in figure 2.1.

Figure 2.1 The different categories in the transition towards No-‐channel retailing

2.3.4.1 Traditional-‐channel retailers

The traditional, brick-‐and-‐mortar retail organization is based upon one channel, the physical store, in which the vendor and customer interact face to face to generate sales. This strategy provides one independent touch point to customers (Strang, 2013). In store merchandise is displayed to make it possible for consumers to look at them, try and touch them and take them home immediately. The role of the sales associate is to provide customers with information about products and assist them in experiencing the product in store (Enders & Jelassi, 2000). All of the functions required in the customer-‐buying cycle are fulfilled with the use of one channel (Stone, Hobbs, & Khaleeli, 2002). However, consumers are passing traditional retailers by, since they experience the comfort of omni-‐channel retailing causing them to become less tolerant for the experiences in stores (Rigby, 2011). This traditional-‐ channel retail model can thus be seen as the starting point of a lot of traditional retailers expanding towards an additional online sales channel and even different business models. Since this stage is the starting point of retailers going online and most ambitious retailers are already beyond this stage, capabilities of this stage would not be influencing the design and implementation of online channels of retailers. Therefor this stage is left out in the design of the maturity model.

2.3.4.2 Multi-‐channel retailers

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traditional retailers to become present online (Strang, 2013). Retailers began to see the importance of adding an online channel in the early 90s and the advantages an online channel has over traditional brick-‐and-‐mortar stores (Rigby, 2011). This step towards a multi-‐channel organization is driven by a product-‐centric need to expand current sales of retailers (Strang, 2013). Multi-‐channel retailing refers to retailers selling products to consumers through multiple, independent retail channels. It relates to the variety of channels firms use to interact and transact with their customers, which are all used as stand-‐alone pipelines towards the customer (Zhang, 2009; Rangaswamy & Van Bruggen, 2005; Strang, 2013). Within the customer-‐buying cycle, several channels are used and they need to be designed, maintained and measured appropriately (Stone, Hobbs, & Khaleeli, 2002).

2.3.4.3 Cross-‐channel retailers

Cross-‐channel retailing relates to a retailer starting to offer common branding and messaging across channels (Strang, 2013). Despite the fact that the retailer has multiple channels, which are still seen as independent of each other, they all communicate to the customer as an integrated organization. The customer moves from one to another channel during their shopping experience, but perceives the multiple channels as part of the same brand. The cross-‐channel experience is driven by retailers trying to expand their sales (Strang, 2013).

2.3.4.4 Omni-‐channel retailers

Omni-‐channel retailing reflects the fact that retailers are able to seamlessly interact with customers through countless channels—websites, physical stores, kiosks, direct mail and catalogues, call centers, social media, mobile devices, gaming consoles, televisions, networked appliances, home services, and more (Hobkirk, 2013; Rigby, 2011). The most important factor distinguishing omni-‐channel retailing from the other stages is customer-‐centricity (Selimi, 2014a; Stam, 2014a; Van Someren, 2014). The retailer has to place the customers’ experience at the very center of their thinking and planning process and manage a seamlessly integrated customer experience despite the different channels used (Bardwell, 2013; Shah, et al., 2006).

2.3.4.5 No-‐channel retailers

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additional channels will be used in the future, but it seems to be that the amount of additional channels used will grow enormously. To be able to manage this future state it becomes necessary that it should not matter which channels you use. An omni-‐channel organization does integrate all channels used, but is still organized around these different channels. A no-‐channel organization is organized around the customer offering, in which the focus lies on commerce, not on commerce through all different channels. This future state online represent two channels: online and offline, without making a distinction between all channels in between. This new business model requires a new mind-‐set, new capabilities and even a completely different organization, leaving the concept of the channel-‐organization in the past (PwC, 2014; Stam, 2014a; Van Someren, 2014).

To categorize the different retailers with respect to their progress within the different categories of retailers towards omni-‐channel retailing, a positioning model is developed, which is presented in figure 2.2. The horizontal axis shows a continuum from a product-‐centric orientation towards a customer-‐centric business orientation. As becomes clear from the theory, the more a retailer tends towards omni-‐channel or even no-‐channel retailing, the more it becomes focused on customer centricity. Initially, in the traditional-‐channel, the multi-‐channel and the cross-‐channel categories, the focus lies on the product-‐centric business paradigm: selling as many products to customers as possible via different channels. When considering the omni-‐channel and no-‐channel retailers, it becomes clear that their business paradigm shifts towards a complete focus on the customer. It no longer matters how many products are sold to customers, but retailers focus on satisfying the even more demanding customers. The customer becomes the core of the business operations. The continuum shows that different categories tend more and more towards this customer-‐centric business approach.

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Even within the same category of retailers, differences in progression can be shown within a single glance.

Figure 2.2 Positioning model of the progress of the different categories towards integration and customer centricity

2.4 Maturity Models

Maturity models are designed to assist organizations to tackle pressures to gain and retain competitive advantage. (de Bruin, et al., 2005). These models can be seen as a basis for improvement, due to their evaluative and comparative nature. Maturity models are designed to assess the maturity of a specific domain based on set of specified criteria (Ahern, Clouse & Turner, 2004; Hakes, 1996). Maturity assessments can be performed either by an external auditor or by self-‐assessments (Fraser, Moultrie & Gregory, 2002).

2.4.1 Types of maturity models

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focus on top-‐levels (Fraser et al., 2002). Hybrids & Likert-‐like questionnaires can be seen as a simple form of maturity models. Likert-‐scale questionnaire can be considered a simple form of a maturity model if the question is a statement of “good practice” and the respondent has to indicate a score the relative performance of an organization on this practice. If this kind of Likert-‐scale questionnaire also includes definitions of maturity, one can typify this model as a hybrid (Fraser et al., 2002). The Capability Maturity Model has a more formal and complex architecture. This type of model differs from the maturity model in the way that it describes the capabilities needed to reach maturity. Capabilities relate to a set of key process areas necessary to be achieved to evolve to a next maturity level. These key process areas describe each level of maturity within the model, so the model does not provide individual descriptions of each activity at each maturity level (Fraser et al., 2002). The Capability maturity model is not prescriptive, it does not prescribe organizations how to improve to a next maturity level but it does describe an organization at each level of maturity without specifying how to get there. The model that is build in this section can be seen as a capability maturity model, since it present sets of key process areas that are necessary within the transition towards omni-‐channel retailing. It describes per category which key process areas are necessary to reach this stage.

2.4.2 Elements of the maturity model

The transition towards omni-‐channel retailing presents a major shift from a product-‐ centric business paradigm towards a customer-‐centric business paradigm. According to Chen & Popovich (2003) organizations should internally focus on and change the aspects of people, processes and technology to become customer-‐centric. However, to change towards omni-‐ channel retailing, attention should not only be focused on people, processes and technology, but instead on all different parts of the retailer, be it purchasing, marketing, logistics and most important one should also include external influences, like the customer, in the model (Stam, 2014a; Selimi, 2014a; Van Someren, 2014). To include every aspect of the retailer within the capability maturity model, we decided to focus on the aspects of: logistics, customer, technology and organization. These parts of the retailers’ business model do require the most significant changes to become omni-‐channel players (Stam, 2014a; van Someren, 2014; Selimi, 2014a&b).

2.4.2.1 Corporate strategy

TOWARDS OMNI-­‐CHANNEL RETAILING: HOW TO MANAGE YOUR CUSTOMER ACROSS ENDLESS CHANNELS

TOWARDS OMNI-­‐CHANNEL RETAILING: HOW TO