The value is not just the product you just sold, because the customer was already at the checkout. The real value is upselling something at the checkout, or upselling that I have you in another channel. With multichannel, it's a bit like having two different teams under the same banner of Legia Warsaw playing against each other. That's an almost unimaginable situation. Yes, and in omnichannel it's cooperation. Omnichannel is again a natural progression when we start thinking more from the customer's perspective. If you approach building e-commerce as technology and launching a channel, that is inherently wrong. For me, the key element of omnichannel is that I will naturally be in various channels with the customer, because I'll be in the app, on the website, have a phone customer service center, on Instagram. And again, these worlds communicate with each other.
Hi, this is Ewa Wysocka. And this is my channel 'o e-commerce', where together with industry practitioners I will look behind the scenes of the most interesting e-commerce business models, from direct to consumer, through subscriptions, marketplaces, to food delivery and e-grocery. We will analyze strategy and look for sources of success. If you are interested, subscribe to this channel, leave a thumbs up, leave comments. The more of us, the easier it will be for me to develop this channel. Bye.
Today my guest is once again Marcin Czyczerski. For some it may be a bit of deja vu, because just recently Marcin was here and you were also dressed in black, I thought.
I am often dressed in black.
Interesting.
I'll introduce Marcin again. I'll say why in such a short time Marcin appeared here for the second time.
So Marcin Czyczerski - partner at GCG, a consulting firm specializing in business transformation and digitalization, recently established but already carrying out very interesting projects, among others in e-commerce, but also a member of supervisory boards, e.g. Esotiq, Polish Mountain Railways, CCC, Rainbow Tours, Wittchen, maybe something else?
Has anything appeared in the last few weeks?
Of course, former CEO of CCC Group and Modivo.
Why is Marcin here again? First, the last episode with you was really very well received by my audience. I'll also say it achieved the highest number of views so far. So people want to watch you. I also received a lot of individual feedback about that episode. I thought it would be worth extending this conversation, especially because there was one question that I didn't ask you. We talked mainly about multibrands, the fashion industry, and there was a question about the topic of omnichannel in fashion, but also in the multibrand e-commerce model. And I thought it would be nice to touch on that topic, because omnichannel is a bit of a keyword lately. It often appears. Many people talk about it. It's a very strategic decision for many companies. But then I thought it's actually not just one question, it's a whole river of a topic, an episode-long topic. And because your experience is very broad, I would like us to talk about this topic today. Single-channel, multi-channel, omnichannel. We'll also explain why there are actually three ways of channeling, not just two, i.e., single and omni. And we'll talk about it in a broader perspective. How it looks in the case of direct to consumer e-commerce businesses, how it looks in the case of multibrands and marketplaces. This will be an interesting conversation because we think marketplaces are not multichannel, but it turns out that's not entirely true. So we'll also dive into that a bit less than the other two. So, ready?
Yes, I am. Thanks for the invitation. Maybe this time you'll also not ask some question, and we'll have an opportunity to make a series of meetings.
Exactly, it will continue. Skip one. There was another topic, but I won't reveal it now.
For now, let's focus on channels. I would like to start by having you, maybe with my help, explain to the viewers what single-channel, multi-channel, and omnichannel are all about, because it's often said single-channel, omnichannel. What is this all about? How would you put it into business language, but simple, so that everyone on the other side understands.
I think single-channel is a natural state of affairs that appears, stemming from the fact that everyone starts somewhere. Brick-and-mortar stores, e.g. Pepco, Primark, start, they have stores, and adding another channel is a certain effort. They probably ask themselves if it pays off, if it's for them, or for this product. And the same with e-commerce. If someone starts in e-commerce, selling previously mentioned dog food cans, then they don't necessarily think about... Digital native, right? Yes, they don't necessarily have to think about the physical channel. It's not necessarily that the physical channel has to be such an interesting solution for that particular company or brand. Often entrepreneurs who see their development opportunities also notice other distribution channels, e.g., through some DIY networks. So naturally, an additional distribution network arises for them. Then we are dealing with some unique multichannel. And omnichannel is again a natural progression when we start thinking more from the customer's perspective. We don't just look at the sales channels themselves, because omnichannel is not only about sales channels. It actually includes the channels of contact with the customer, informing the customer, and it doesn't necessarily have to be confined to the topic that e-commerce is an app/website through which we sell. It can also be social media, where we provide additional information, show the product, reassure the customer. So when we start looking at how the customer makes decisions, how the customer performs their purchasing actions, we naturally start reaching for other channels. And we start to connect these channels, better or worse. And omnichannel for me is a situation where, from the customer's perspective, seamlessly, we start navigating the customer through our entire, let's say, path in a good, effective way for the customer. And fluid. Probably also such that, in general, these various channels are somehow integrated and the experience is integrated.
And that is probably very difficult, right? Because even in my podcast I hosted a few founders. First of all, I focused on e-commerce, so here was for example Marek Gut from Your KAYA, he talked about how Your KAYA actually unlocked its growth by entering Rossmann. But that's not a fully integrated experience, because the customer buying at Rossmann is not entirely present in the purchase funnel that was created at the very beginning of Your KAYA's existence based on their own e-commerce. Of course, they try to integrate it in some sense, but it's much more difficult because a large part of control is transferred to the retail chain.
Here I would rather talk about multichannel and a certain, especially for emerging brands, a kind of credibility through presence on the shelves of top-recognized retail chains. And that's a slightly different aspect, again maybe for another discussion. Is it difficult or easy? It probably depends on the approach. If you have big players who are effective in this field, I would boldly name three: Inditex, LPP, and CCC. Well, these companies at some point had/have a dogma of simply being that way, and then it's... You don't consider whether it's difficult or easy. It just has to be, because it's also a simple answer in the fashion world, where you touch the product, where e-commerce is important, you really have no other way. It's something completely natural. Therefore, deliberating whether it's difficult or not is an improperly posed question. The question is how the customer moves through our world. If they move through various channels, and there is enough research showing that they do, well then let's do it.
Yes, but you just touched heavily on very large companies, but also the fashion segment, which is probably in some sense specific, and these are companies that don't give up control to other distributors. They take full control. Over their distribution network. Well, LPP is also a producer, but they create their own boutiques. These clothes cannot be... Well, maybe on Vinted you can buy these clothes second-hand, sold through someone else, but the sales channels are in their hands. Now the question, in this area of direct to consumer e-commerce, diving specifically into... I would like us to talk about direct to consumer, multibrand, and marketplace. In direct to consumer e-commerce, is it actually a solution for every brand? And how could it look? Because many companies I deal with start by adding channels, through working with networks, i.e., entities that already have some developed commercial infrastructure, and they enter partnerships, give up some control, and in the back of their minds consider whether to build their own points of sale in the real world, but that is often a very high cost. It may be insurmountable for some producers, and also in some industries it may not make sense, right? For example, in cosmetics or dietary supplements, building your own points of sale may not necessarily be the right solution, because the consumer is used to buying supplements in a pharmacy and cosmetics in Rossmann. But it's probably an individual matter in each separate situation.
And I would rather say that I would start from the fact that if I have a product, a brand in D2C that has potential, I would take care that the vector of seeking development opportunities looks at which other channels I can appear on, what will give me a potential effect. If we take, for example, the Bestseller group, which has many budget brands, it is on Zalando, it has its own e-commerce, it has a huge network of stores in the German market. And the story there is about how to simply sell more, while building your brand properly. And this element of coherence, I have the impression, appears more at the level of product perception, and at the level of moving between channels, it will naturally be lost, so it's hard to give a definitive answer whether it's for everyone. I would say, having a brand that is developing, I would look at how to sell more of it. Where can I appear with it? And later I would probably check whether this definitely doesn't cause a headache for my customer in terms of post-sale handling of that product in various channels. But that's a secondary answer, you could say.
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So you would simply look at how much I can expand on the market thanks to these different channels?
At Tribe47, we often encounter this issue when working with, say, medium-sized clients, who have for example a well-performing e-commerce, whether to make the move towards offline channels. They think about it because it often requires investment, or building a network of salespeople who will further push the product, or working on a pricing strategy that must change. If I let in distributors, let other entities sell my product, I have to be very careful about the prices at which it will be sold, whether I can build a relationship that ensures my product won't be devalued by those trade partners. And then there's the second question: whether to try to do it somehow on your own? I even had a conversation recently with a company in the fashion segment that is doing well and is constantly debating whether they should invest in their own boutiques and they are calculating the costs. And the cost is high. And the question is whether they have to do it to grow, for example, on the Polish market, or whether it's better to skip it and look at another market and focus on the e-commerce channel that is working well for them here.
But omnichannel for me, Ewa, is not a story about having e-commerce and therefore must have stores, or having stores and therefore must have e-commerce. Logic would suggest that there are certainly situations where it is right and correct. Look at Notino, which from the e-commerce world is entering physical stores, and those stores are considered a point of difference for that brand. However, it's probably not the right option for everyone. For me, the key element of omnichannel is that I will naturally be in various channels with the customer. Because of, for example, various digital ones. Yes, because I'll be in the app, on the website, have a phone customer service center, on Instagram. And again, these worlds communicate with each other and either help you as a customer to be in my world and make quick decisions to buy this product from me, or they are completely disjointed worlds and we do a 'mindfuck' to the customer, causing them to get lost in the decision and maybe jump away to think, and in the meantime they are attacked by another brand that does it better. So omnichannel for me is not about forcibly adding another sales channel. If you're from e-commerce, then hello. I'm saying that building a physical network - there are specialists for that. Those points where you can build - galleries, are not great partners either, but they are not random, easy partners, you can't do it from this case. If you again have a large network, you are Primark, Pepco etc., and you come up with e-commerce, then again it's not so easy to do. This is a difficult case. There are different competencies, and it doesn't mean we've sewn them together.
Exactly, on the other hand, I hosted Grzegorz Bielecki from Frisco. He also talked about how Frisco actually built its advantage by being single-channel and focusing only on one channel, completely in order to be the first and most popular online supermarket. At no point did they consider adding, say, a physical network. They wanted to be associated with that one channel, and he says that is its advantage over other supermarkets that were first offline and tried to integrate the online element. And it often simply didn't work out because it required a completely different process, also delivering the product to the customer, a completely different organization, warehouses, everything. And that adding was, in the case of those online supermarkets, a way to not gain that advantage in the world of online sales in this case.
Probably so. I'll repeat again, building the world of omnichannel is not for everyone, and I don't know every model. I certainly don't know Frisco, and maybe that's indeed the case. From that perspective, I would always look for the possibility of reaching for something new. And from this perspective, I don't know, Amazon once tested with some, say, points for fresh food delivery, a la our InPost etc. It sometimes succeeds, sometimes fails. However, as long as, according to the theory of disruptive change, the company has positive EBITDA and a good cash conversion cycle, it should think whether there is not something that it could slightly develop its model around, so as not to surprise itself at some point that it is beautifully winding down with this model, but no longer has that EBITDA and cash conversion that would allow for such free investment in technology, new solutions. So it's probably not for everyone, but I would recommend an open mind and thinking about whether to develop your sales model further and tie it appropriately.
Yes, expanding our conversation a bit to the whole retail. Well, I know that for you, omnichannel, you try to step away from the traditional, offline channel. I think it's great what you're saying, that omnichannel can also be building integrated digital channels. But the offline always appears, if only because in retail, most people still make purchasing decisions in the real world. The percentage of retail sales in Poland is still mainly in the offline world, with e-commerce in second place. Yes, of course those percentages are growing on the e-commerce side. Probably fashion is currently one of the most developed segments, followed by appliances, electronics, furniture. But for example, food is just a tiny percentage of the market that buys online. Most people still buy offline. And from that perspective, if someone has high ambitions, wants to build a large company, can they do it without, say, leaving e-commerce into offline, for example on the Polish market? Is that the question... I know you'll push back, but I would say... For example, should a company that is starting operations and has very high ambitions push the topic of going beyond e-commerce?
High ambitions are good. Easy to burn out on them. And as long as you don't have the scale that would allow you to maintain strictly retail, physical competencies, then it's probably worth postponing it. So it's probably a solution for those who have already built scale. If you have a smaller scale of 50/100 million, then forcibly jumping into boutiques can be difficult. Look at Answear, which probably does a billion złoty in revenue and has a flag store, physical, for contact with the brand, more event-oriented. They decided, having about 800 million in revenue, so at that point they considered that maybe this is the time to try. So if you are doing 30 million in e-commerce, it's probably not worth trying to go into physical stores, because it's a big cost, both of the stores themselves and the coordination of these stores by a different team. And often these physical stores develop in such a way that the team that was doing physical sales suddenly starts doing e-commerce. Yes, and that doesn't work. And vice versa, it doesn't quite work, and rarely are the competencies so developed on both sides that you can do it coherently, and that requires scale, I would say. And again, answering about food, in my opinion it's not quite like that either. Look at how the box diet is developing, which is again a clever flick... A very online segment. With physical delivery to home. So generally, we can say we've moved on, we no longer buy products to process in the store, but ready-made from the internet, so sooner or later the market will look for elements that will also cause food to enter e-commerce to a greater extent. But indeed, I have the impression that products like fashion, what else? Probably electronics. They are more strongly dedicated to being omnichannel, because these are situations where... And again, for fashion, you have 60-70% depending on research and personal experiences of customers who, when making a transaction in a store or e-commerce, were in at least two channels. Previously verifying the price, comparing, touching whether it's smooth, rough. The so-called ROPO effect, Research Online, Purchase Offline, or the opposite. And that's also interesting. I think both effects are equally important. The key element is definitely the preparation for the purchase somewhere in the digital world and finalizing it in the physical store. It is stronger, which also means that the power of e-commerce in the fashion world is more important than the percentages of e-commerce share in total sales would show. This e-commerce, it is growing in fashion, but it is less appreciated than it would... Than it deserves.
Tell me a bit about the solutions used by eobuwie.pl, Modivo, because I think it was quite innovative in Poland, opening such points where you could come and compare, order a few boxes there, try on the shoes, see, and make a decision based on that. How did you integrate that? What was the idea for creating such a solution?
The idea was based a bit on... Apple Stores for shoes, but it was, you could say, somewhat its opposite. That is, when you enter an Apple store, you have contact with the physical product. Somewhat like a showroom that can bring it from the back, or you can have it brought there. Here it was the opposite: you appeared in the store and you didn't have that contact with the product. Only online, right? You only had it either online, or you had to call it from the back, so it's not a natural approach to how customers buy. But this element of innovation of these stores was certainly ultra-important for building the image, especially of eobuwie.pl, as a very innovative network. However, this thread, aside from other things that the CCC Group is doing today, that they are rather making physical stores with a digital, e-commerce aspect, is a more proper path than making a store into an internet kiosk, right? But again, going back to what I said, not every omnichannel solution will be for everyone. Yes, it's worth testing different things, trying, and building a model that will be winning, unique. Everyone, certainly from this perspective in this industry, learns by looking at Inditex, and as I observe such more conceptual stores that appear in Madrid, Barcelona, Inditex doesn't stop changing, trying to do various things in the omnichannel area.
Yes, can you tell a bit more about what they are doing now?
I don't know. Well, you have some Stradivarius that has a great, it's more of a gimmick for me than... Because it's also a store that you could say is a flagship. You have some small, what to call them, cubes, where you can smell various perfume scents, order them there. You have a nice place for click and collect. You have a nice place, designed for digital omnichannel returns. So you have in a very ultra-modern, but also very well-presented world, not over-digitalized. Such elements that build your image as a brand that is, on one hand, innovative, but on the other hand, simply focused on how the customer makes decisions. And now, if you relate this to the Spanish specifics, it's a market that everyone always says has huge potential, that this market has huge e-commerce potential, because the e-commerce share is lower and it's always lower, and it's always said it has higher potential because the base is lower. But in Spain, 80% of trade takes place on high streets, on main shopping streets. With the Spanish tradition of walking back and forth until late evening. Therefore, the specifics of trade there are also somewhat different. It is not so much located in shopping malls, but in stores, and those stores then have to be omnichannel-ready, prepared for the fact that from this store I will order something to my home, or order something to the store and pick it up as I happen to pass by. Therefore, it's nice to see these new Inditex concepts, the concept that is supposed to be a counterweight to Primark, or their Lefties. There are many such things, but they are not over-digitalized. It's not that element of the digital world. It's a physical world, well integrated into the digital world. And it's a producer doing it through their own points.
And so summarizing the direct to consumer, to give a perspective. There are always three paths again. You can be only online, but be omnichannel because you have several different ways to interact with the customer: app, website, social media. And do it well. One example that comes to mind, which has always fascinated me from the dietary supplement world, is the brand AG1. They actually sell only through their own website. But the experience is brilliantly integrated. They have influencers promoting them. They have great communication that they control. They have one product whose sales grow year after year. Amazing, because it contradicts everything I usually tell clients. One product dangerous at the start, one channel, an online one, without even entering marketplaces. They only and exclusively through their own website. Amazing and rare example. And then there is the possibility of experimenting with trade partners, which as we said for some companies can be an opening to a larger scale, reaching more customers, but there are some problems with this model, precisely control. And finally, such experimenting with a bit of flair, right? What you are talking about now, creating such a boutique experience combined with some digital, right? Where the user can see something but order it online. And it's fully integrated, the online and physical worlds. I think it also requires significant expenditures to come up with something like that and then implement it.
