E-commerce gets a seat at the table

June 1, 2016 03:43 PM

When Rose Hamilton was hired as the Vitamin Shoppe’s first chief digital officer in November, she found herself in an unusual place: She was stepping into a role that wasn’t just unique to her, but new to the retailer altogether.

As chief digital officer, Hamilton is tasked with making sure all facets of the business, including merchandising, fulfillment and in-store teams, think about digital technology.

“We aren’t thinking about e-commerce as just a channel, we’re thinking about how technology can enable our customers to engage with the brand,” she says. That’s increasingly important as a growing number of the retailer’s customers shop across multiple channels, including online, mobile and its physical stores.

Hamilton’s not alone in defining a new “chief” digital job title and responsibilities. In the past year, five major retailers—Target Corp., Boot Barn Inc., LVMH, and Nike Inc.—have all created chief digital officer positions within their executive leadership teams. Even more retailers are adding executives with significant e-commerce experience to their senior management teams, including The Container Store Inc. and West Marine Products.

There’s good reason that retail chains are giving e-commerce executives, and those with significant online experience, increasingly important positions within their organizations: that’s where their growth is coming from. Online sales grew 14.6% year over year last year, while retail store sales grew 3.1%, according to the U.S. Commerce Department. Take sales of automobile and fuel out of the equation and e-commerce made up 10.5% of overall retail sales in 2015, the first time it accounted for a double digit percentage of retail sales. And those figures undersell e-commerce’s total influence because they don’t account for omnichannel shoppers who browse or research online but buy in a store. As e-commerce’s market share grows and consumers increasingly shop across multiple channels, many retailers are reacting by rethinking their organizational structures to reflect the new reality. By putting executives familiar with e-commerce in their executive ranks, these retailers hope that the same types of insights that helped drive their growth online can translate across the entire company.

“[Digital] has been a significant sales driver for us,” says Jason Goldberger, who Target last month promoted from president of and mobile to the newly created chief digital officer role. “From a guest perspective, as we survey our guests, digital is an increasingly important part of their relationship with us. As a member of the leadership committee, I’ll be involved with my peers across the company as we make the key decisions to drive Target forward.”

Hamilton oversees about 60 employees across all facets of the business including e-commerce, customer care, social media and analytics. She reports directly to CEO Colin Watts. That’s a marked departure from the way Vitamin Shoppe operated before she arrived. The retail chain previously had a vice president of e-commerce, who reported to the company’s chief marketing officer.

But after then-vice president of e-commerce Stephen Bontempo left last September, the retailer rethought the position—and its executive ranks on the whole. With more consumers shopping across multiple channels, Vitamin Shoppe decided to create the more senior role that enables it to have a more holistic view of its customers.

“We’re really looking at the entire customer journey,” Hamilton says.

Hamilton was uniquely qualified to handle that role. She’s held director-or-above e-commerce positions with retailers including Best Buy Co. Inc., Chico’s FAS Inc., and Pet360 (acquired by PetSmart Inc. in 2014), where she was the e-retailer’s chief marketing officer. Moving laterally and working in a number of different roles, from e-commerce manager with Wilsons Leather to chief marketing officer at Pet360, has helped her adjust to her new role because she has either worked directly with or had many different departments report to her.

“I can sit across the table from supply chain and understand the challenges because I understand the back end,” she says. “I can work with the merchandising team and gain trust. Having had [information technology] and merchandising report into me, I’ve been able to get under the hood when it comes to category planning.”

For many retailers, including Vitamin Shoppe, having an executive who can focus on the entire customer journey enables them to piece together a more cohesive shopping experience. That’s increasingly important as the number of retailers offering omnichannel features, such as the option to buy an item online and pick it up in a store, is rapidly growing. For instance, 95 retailers in the 2016 Top 500 Guide offered the service in 2015, a 50.8% jump from the 63 that offered it in 2014, according to Internet Retailer’s

Buy online, pick up in-store has been a key feature that has helped The Home Depot Inc. grow its online sales 36.9% in 2014 and another 24.1% last year. After all, the retailer had more than one-third of its online orders picked up in store in 2014, a figure that grew to more than 40% in 2015.

It was that success that led department store chain J.C. Penney Co. Inc. to take notice. J.C. Penney last August hired Home Depot’s vice president of online Mike Amend as its executive vice president of omnichannel, in part due to his role spearheading Home Depot’s buy online, pickup in-store initiative. He reports directly to CEO Marvin Ellison.

Getting online shoppers in their stores is of paramount importance for J.C. Penney because the retailer has been successful at upselling and cross-selling to those online shoppers. Almost 40% of online shoppers who pick up an order in a J.C. Penney store wind up buying something else when they pick up their online order, Ellison told analysts during the retailer’s first quarter earnings call.

“All associates support omnichannel at J.C. Penney, and each individual is critical to ensuring we maintain a seamless shopping experience at every customer touch point,” Amend says, meaning every time that a shopper interacts with the brand.

J.C. Penney’s online sales grew by 16.0% online in 2015 to $1.415 billion, up from $1.220 billion in 2014, according to Ellison attributes the growth to improvements in the connection between online and offline shopping. Conversely, its store sales grew by a fraction of that, 1.6% year-over-year to $11.215 billion, up from $11.037 billion in 2014. To help drive more growth across the retailer, Ellison is ramping up the retailer’s omnichannel efforts. For example, the retailer is in the midst of an initiative to offer same-day pickup of online orders in all of its stores in time for the back-to-school shopping season to help capture that potential in-store revenue from online shoppers.

West Marine CEO Matt Hyde shares a similar view of omnichannel retailing to Ellison. An e-commerce veteran who launched REI’s website 20 years ago, Hyde has changed West Marine’s organizational culture since taking over in 2012 so that everyone—from store associates to senior management—focuses on converting a sale, regardless of channel.

For instance, West Marine trains new store associates how to navigate the retailer’s website and help shoppers in the store find something online that might be out of stock in that particular store. That involves engaging store associates in role-playing exercises to better train them on the store’s systems. To help encourage store managers to promote the online side of West Marine’s business, the retailer implemented a cash incentive program for store managers that rewards them based on the online sales generated in a designated area surrounding the store.

“If somebody walks into a store and is looking for a particular bilge pump and we don’t have the exact bilge pump that the customer is looking for, then they end up ordering it through the store systems online, they end up ordering it on their cellphone when they’re standing in the store with the associate, or if they go home and they live in the area and they order it on their computer at home, any of those situations, the store is getting credit,” Hyde says, declining to detail the specifics of the program.

One problem facing retailers looking to put an executive in place to bridge the online, offline divide is that there aren’t that many Hamiltons, Hydes and Amends out there.

“It’s difficult for [retailers] to find people with a track level of success in senior level, transformative e-commerce roles,” says Margot McShane, who co-leads the consumer digital practice at recruiting firm Russell Reynolds Associates. “The market is still nascent even though it’s not a new role at all.”

With the combination of a competitive employment market and a dearth of talent who have the right combination of leadership and technical skills, at least one recruiter says retailers may want to look to other industries, such as hotels, to find candidates who have skill sets that might translate.

“It’s still a struggle to find someone who comes from the world of e-commerce to run stores and figure out a way to stitch it all together,” says Anthony Laudico, head of the digital practice at executive search firm Spencer Stuart and a recruiter who says he has helped Wal-Mart Stores Inc., Wayfair Inc., and Kate Spade LLC fill executive positions. “If that’s the question, you have to think about which other businesses have done this. Marriott is an omnichannel business. They take reservations online, they work with outsource providers, and they have physical locations from which they can take data.”

Laudico says thinking outside of retail could potentially save merchants some headaches when it comes to filling an executive-level opening and result in a great new hire.

“The real challenge is understanding what the market looks like outside of retail and how people can use those skills,” he says. “If organizations can maybe let go of ‘we need to hire the best person from consumer retail’ to ‘we need to hire the best person who is a great digital person who understands mobile, data and insights, who understands how to use data cross channel’ and you’re willing to look at people from those industries, that’s where we’re seeing people make decisions [on candidates] where those searches don’t take a year-and-a-half.”

One example of a company going outside of the retail industry to find a digital executive is Nike, which hired Adam Sussman away from social gaming provider Zynga Inc. in 2014 and promoted him to chief digital officer in February. Sussman’s lack of retail experience prior to joining Nike wasn’t a problem, says Nike Brand president Trevor Edwards. In fact, it’s those skills he developed in other businesses that Edwards sees as an asset in helping move Nike forward.

“Adam’s wealth of experience in digital, consumer technology and strategy leadership makes him the perfect person to tackle tomorrow’s challenges today,” Edwards says.

That’s important because digital’s reach extends far beyond websites and mobile apps. For example, Forrester Research Inc. projects the web is going to impact $1.618 trillion in offline sales alone by the end of this decade, up 25.4% from a projected $1.290 trillion this year. With that much money at stake, it seems likely that more retail chains will be looking for executives who can help them look holistically at how digital influences their entire organization.




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