Consumer Centricity in Branded Retailing

Fashion companies, especially Italian ones, have built their success over time thanks to on an orientation to the product and the wholesale selling channel, thus remaining, both for practical and ideological reasons, distant from the end customer. Today putting the customer at the center is a refrain in annual business reports; it drives change for companies in terms of customer engagement, organizational structure, and design of information systems. The talk is there, but few are the existing corporate practices for the design of consumer-centric business models. It is still considered normal for fashion and luxury companies to lose between 10 and 20% of potential sales due to seasonal stock-outs. It is thus common that a customer cannot return a product to a branded store different from the one where he/she made the original purchase; that the store does not recognize the customer already buying on the company website; that the customer is flooded with standardized communication that is irrelevant for him/her, while he/she cannot personally interact with the brand on social networks.

The state of the transformation of business models toward a consumer-centric logic was investigated by a SDA Bocconi research team in collaboration with the consulting firm Value Lab for the year 2016. The research, which made use of mystery shopping, interviews and organizational analysis, polled a sample of 30 large international fashion and luxury companies according to two perspectives. First, the completeness of the customer journey in its three phases (engagement, purchase, after-sale service) and through three types of contact points (physical: the store; digital: website and social media; human: sales staff). Secondly, the characteristics of processes and roles oriented to the end consumer (customer management activities).

While almost all the companies observed have designed a customer journey, the study points out that there are differences in terms of points of contact and engagement depending on the business model (luxury brands, designer brands, premium brands, and vertical retailers). Luxury and designer brands seem to excel at more traditional activities like human relations with the client (selling ceremony, clienteling). For example, in the boutiques their sales staff is multilingual, has a proactive approach to the customer in terms of suggestions and is able to reconstruct the history of his/her purchases. Results are opposite for vertical retailers who outline the journey in the interaction between physical and digital experiences, to engage the consumer online and then finalize the purchase in the physical store. Premium brands offer the best in-store interaction with the product (availability of models, colors and sizes, simplicity in trying out and purchasing), while in-store clienteling activities are poor and so are digital activities of customer engagement.

We then analyzed the organizational design of customer management activities, assessing whether these activities reported directly or not to the CEO and their degree of geographic articulation. Starting from the hypothesis according to which an organization is consumer-centric when customer management activities depend directly from the top and exhibit a high decentralization of structures to achieve better local reactivity.

Almost all vertical retailers present consumer-centric organizations in terms of internal reporting and local articulation of activities. Luxury brands come second, with a third of the sample presenting consumer-centric processes, while the designer and premium brands analyzed don't seem to have yet undertaken an organizational transformation in this regard. On the critical issue of the availability and use of consumer data, it emerges that companies now have a lot of data, thanks to the development of retail networks, CRM systems, easily traceable digital journeys. However, the majority of companies employ approximately 80% of their time to extract data and only 20% to process them, thus lacking the time to interpret them and develop valuable insights to improve supply strategy and customer experience. The road to consumer-centricity has been taken but the final destination is not yet in sight.