Myer is hoping better use of its vast data troves for an improved omni-channel shopping experience will boost sales after it failed to meet the targets it set for the first years of its transformation plan.
The retailer today slashed its sales and profit targets after admitting its five-year transformation plan would need to be reworked.
The plan, launched two years ago, had targeted sales growth of more than 3 percent between 2016 and 2020, faster growth in earnings than sales by this year, and a lift in sales per square metre of 20 percent by 2020.
It has now dropped these targets and is instead aiming to improve sales per square metre by 10 percent over the next three years, and cut the cost of doing business by 50 basis points.
CEO Richard Umbers admitted to investors today that the retail environment was changing faster than Myer had anticipated.
He has “recalibrated’ the five-year New Myer strategy to focus more on “unique experiences” like food outlets and barber shops to attract and retain shoppers for longer, and to place more prominence on the retailer’s e-commerce offerings through better use of the data in its Myer One loyalty program.
“Customers are increasingly shopping online, and traffic to shopping centres and physical stores is declining,” Umbers said.
“Today we signalled a heightened focus on the growth of our very successful omni-channel business as well as experiential retail to create inspiring destinations.”
Up to 19 more Myer stores of its total 63 outlets may be closed as the retailer refocuses on omni-channel. It has closed 10 stores since 2012.
It has identified its omni-channel customers as the most valuable: those who shop both online and in store represent only 10 percent of its Myer One customer base, but they account for 22 percent of sales.
Similarly omni-channel customers tend to spend two times more than the average shopper, and will visit Myer seven times more per year than an average customer.
This omni-channel customer base grew by 13 percent in FY17, and the retailer has set out a plan to significantly increase this segment.
It has identified four focus areas - all underpinned by Myer One data and insights - it thinks will facilitate omni-channel growth: connected experiences, convenience, personalisation, and innovation.
Gold in the data
Myer’s five million loyalty program members contribute 68 percent of the retailer’s sales through their 27 million annual transactions.
It is the third largest loyalty program in Australia and “an enabler to everything we do”, according to chief digital and data officer Mark Cripsey.
With a trove of data on where these customers live and shop, what their favourite products are, and how they like to engage with the company, Myer has a “truly unique competitive advantage", general manager of loyalty, data and insights Bernard Wilson said.
“The first part of Myer’s omni-channel journey was being available outside of bricks and mortar, delivering a strong online proposition and a truly omni-channel. Now it is time to overlay our data asset to make our customers’ lives even easier,” Wilson told investors.
“With Myer One … we don’t just know our customers, we know them as unique individuals and we can use that in every interaction with them. With this data we can form a view about a customer’s life stage, affluence, sensitivity to price, their preferred offers and promotions … the list goes on.”
The strategy now is to “massively dial up” personalised omni-channel connections, driven by Myer One data and through Myer's new Salesforce multi-channel marketing platform.
“Imagine if we could grow this group by 10 percent. That growth and the relative value would deliver $30 million in annualised sales,” Wilson said.
Myer has recorded a ten times increase in click-through rates for personalised interactions than for those that aren’t personalised.
Last year the retailer combined its Myer One and online customer databases to create a single view of a Myer One customer.
One of the first outcomes of that investment is an early version of a natural language search function in the Myer iOS app that will allow customers to browse and search for products using voice commands on their mobile device.
The tool will enter testing with customers in beta mode early next year, Cripsey said.
Myer has also made use of its loyalty data to address issues with its customer-facing services.
One issue that became apparent was that many Myer One customers who visited the site with an intention to buy did not. They were dropping out after putting items in their cart because the checkout experience - particularly on mobile - was too painful.
Improving this function meant the sales conversion on mobile is now higher than on desktop, Cripsey said.
However, investors noted that Myer One had not been very effective in generating sales growth in the ten years since the program launched, and questioned what was different now.
Umbers said data analysis technologies had improved to the point where there was now a greater ability to obtain valuable insights from the data.
Behind the scenes
Work is also concurrently underway to improve many of the back office systems that underpin Myer’s operations.
Earlier this year it outsourced its customer contact centre to Melbourne-based OracleCMS and its digital services to LogicalMagic to cut costs and increase efficiency, and procured a new Oracle merchandise planning system to improve its buying decisions.
It also starting rolling out a Kronos cloud-based workforce management system to replace a manual, Excel-based process that was labour intensive to manage and required “lots and lots of forms”.
The Kronos system - which gives team members mobile access to their roster and the ability to clock in and out and swap shifts from their phone, and Myer the ability to forecast labour and auto-schedule - is already reaping big results. The rollout is expected to be complete this month.
Similarly, an iPad app for staff members to use in the pick-and-pack process has delivered a $2.53 reduction in the fulfilment cost per order in the year it has been in trial, Cripsey said.
Myer fulfills online orders from its stores, rather than a distribution centre, because it says this approach is more productive and allows for more fulfilment options like same-day delivery and click and collect.
“We are proud of what we have done and our numbers, but we are by no means complacent. Customers are evolving at a rapid pace and we need to evolve with them,” Cripsey said.