Consumer Goods and Retail

U-Channel Retail“Transformation of the retail function toward a newmodel that is Ubiquitous, Universal and Unique”

Update Fall 2013

Photo of Frog Design

Content
Introduction

3

Evolving Customer Needs

4

Rapidly Evolving Technology as an Enabler of Customer-driven Innovations

5

U-Channel Retailing

6

Transforming Successfully towards a U-Channel Environment

8

Insights for the Executive

16

Contacts

17

Authors:
Dirk Luyten

Michael Opitz

Managing Partner Benelux
luyten.dirk@adlittle.com

Director, Germany
opitz.michael@adlittle.com

Francois-Joseph Van Audenhove

Sam De Jongh

Partner, Belgium
vanaudenhove.f@adlittle.com

Consultant, Belgium
dejongh.sam@adlittle.com

The authors would like to thank Volker Lemberg, Ségolène Jacmin, Arnaud Schoenmakers and Rémi Sapin for their valuable
contributions to this article and the underlying research.

Introduction
While retail has always been at the heart of everyday life, it has never stopped
evolving and has never been changing as rapidly as it is today. Although manyretailers are still transitioning to online retail, with varying degrees of success, the
new wave of change in retailing is already upon them. As new customer needs
emerge, today’s new technological solutions are supporting the development of
new business models.
This evolution naturally concerns the traditional high street retailers but also thewide spectrum of B2C companies with developed retail activities. This includes
banks, telecommunication operators, postal operators, utilities providers andmany more. In this article, we provide insights into how companies should
capitalize on this new form of “U-channel retailing”, which will profoundly remodel
the landscape of any company with a retail function and require them to begin to
scope the field, understand the challenges at hand and position themselves toseize the opportunities associated with this evolution.

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U-Channel Retail

Evolving Customer Needs
Figure 1: The 2030 customer

2013

Million people

100

1Peak spendingyears Senior population (>70 years) will grow 44%
by 2030
 New needs: Convenience, independence,
comfort, etc.
 New behavior: High spending generation that
does not expect to lower its living standard
when retiring

50
0

2030

100
50

2

Baby boomers

Greying
population

Culturally
diverseSmallerhouseholds

IT Savvy

By 2030, two demographic profiles will dominate the customer
base of retailers:
Greying baby boomers

2.

Millennials in peak consumption age

The baby-boomers – people born between 1945 and 1965 –are now entering a new phase never previously encountered:wealthy retirement. This paradigm shift will add new dimensions
to the baby-boomer segment in terms of required productofferings but most importantly in terms of customer experienceand service. Baby-boomers are adapting to and embracing
evolving technologies. By mid-2012, for instance, almost 60%
of US tablet owners were older than 35 and almost 20% wereolder than 551.

4

Source: comScore TabLens data

90-94

85-89

80-84

Millenials

Retailers are currently facing a significant change in customer
behavior, driven by demographics and the emergence oftechnological solutions. Customers now want to have the easeand flexibility of shopping whenever they want and wherever
they are, posing new challenges to the traditional retail function.

1.

75-79

70-74

65-69

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

20-24

15-19

5-9

10-14

0-4

0

1

Greying Baby Boomers

Consuming
responsibly

The millennials

 In peak spending years New needs: immediate satisfaction, being
connected, responsible consumption
 New behavior: Digital natives (tech-savvy,
social media), personalization

Note: distribution represents people in Europe, Northern
America, Australia/New Zealand and Japan
Source: UN Department of Economic and Social Affairs,
Arthur D. Little analysis

In parallel, the millennials generation – broadly defined as theInternet generation born between 1980 and 2000 – is now
entering its peak consumption age. This shift promises tohave a drastic impact on all forms of retailing. The millennial
customers have been categorized as technologically savvy,
socially influenced and socially influencing shoppers. Their
heightened technological literacy and their tendency for highinvolvement – such as through social media – pave the way
for radically changing business models. The key stimulus forbusiness model innovation will be the new needs that this groupbrings to the market, such as convenience, ultra-personalization
and authenticity; but these needs are bound to be met throughinnovative technology and communication models.
The 2030 customer base promises to be a dual one,balancing the comfort needs of greying baby-boomers and thetechnologically and socially enhanced shopping experienceneeds of the millennials. Responding to these two customer
groups will be difficult and will require both adding modularity
to the customer experience and letting the customer take thedriving seat in the buying process.

U-Channel Retail

Rapidly Evolving Technology as an
Enabler of Customer-driven Innovations
In parallel with evolving customer needs, the retail sector isexperiencing a strong technological push to provide customers
with new business models. New technologies such as
mobile payment, Quick Response codes (QR), Near Field
Communication (NFC) and image recognition are triggering newvalue offerings from retailers and enabling them to optimize
their operations (see Figure 2 for a selection of technology push
innovations).

While providing opportunities, these new technologies will
also pose significant challenges to retailers by taking themoutside their comfort zones. Choosing technological platforms
and solutions may require significant investment, requiring aclear and strong financial business case and having long-lasting
effects on the business. Furthermore, the increasing reliance ontechnology and the digitization of retail will contribute to blurring
the line between traditional retailers and telecommunication,
media and information companies.

The largest technological disruption remains the penetrationof mobile data and mobile devices. While some retailers arestill in the process of rolling out an online strategy, the mobile
revolution is already providing them with new challenges.
Although there is still room for growth through e-commerce, themobile revolution is creating new benefits for customers as well
as opportunities for retailers.

Figure 2: Future technology applications in retail
Applications

Technology

Mobileconnectivity

 Mobile comparison
 Mobile scanning

QR Code promotions
 Buy-on-the-go Advertising campaign  Virtual shops

NFC Mobile payment
 NFC based ordering

RFID Shopping assistance Mobile apps

Examples Wal-Mart iPhone  RedLaser mobile
self-checkout
scanning
 Delhaize direct
cube in train
station Wal-Mart and P&G
mobile truck

 Shopping assistance Google Wallet

 7-Eleven NFC
kiosk In-store security Rapid check-out

 Inventory mgt.
 Shelve mgt.

 C&A in store RFID  Shelve mgt.
tag

Social Media Brand building Customer

involvement
 S-commerce Coca Cola
 Lidl promotions

Real-time
data availability

 Product search
conversion

 Optimized productrecommendations

 Wal-Mart’s Polaris  Simply Market’s
search engine
electronic shelflabelsBiometrics/
Image recognition

 Personalization
 Product information

 Quick buying process

Augmented
reality Enhanced marketing  Interactive productcampaigns
testing

Robotization

 Inventory
management

 P&G Facebook
brand stores Ahold’s bol.com shopping app with book
image recognition
 Ikea virtual catalogue Goertz virtual shoe store Amazon’s acquisition of robot maker
Kiva Systems

Source: Arthur D. Little

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U-Channel Retail

U-Channel Retailing
In response to these evolving customer needs supported bythese new technologies, retailers are starting to develop a newform of retailing: U-channel retailing. U-channel retailing stands
for a retailing business model that is:nn

Ubiquitous: existing and being everywhere at the sametime; constantly encounterednn

Universal: affecting the world as a wholenn

Unique: one of a kind, unlike othersnn

Assembled by “U” the customer.

This requires an array of online, physical, mobile and mail-ordersales, product delivery and customer support channels. The
implications for retailers are tremendous for both front andback-end operations. This variety of customer channels requires
intensive coordination and cross-channel visibility to allow
for global order fulfillment, flawless communication routines
between all sub-systems and harmonized processes to serve
the customer fluently in their purchase as well as assist themwith after-sales service.

U-channel retailing implies a multiplication of client facing
channels designed to respond to new client needs.
In practice, tomorrow’s shopper may identify a product on theirmobile phone, read online reviews of it on their laptop, interact
with a sales agent via online chat, then ‘click-and-collect’ it froma pre-determined pick-up point in a physical store.

Figure 3: Development of touchpoints
U-Channel Retail
Ubiquitous:

Seamless integration of touch points along the buying process
Consumer Being everywhere at the sametime
 Constantly encountered by thecustomers

 Inform
Post and
Directmailing

SocialNetworks

 View
E-mailUniversal:

 Affecting the world as a whole

Leaflets

SMS

Distribution
networks

 Compare
ForumsandInternet

IVR

Unique: One of a kind, unlike others Retailers will offer customized
products and services to thebuyer’s choice

Videoconferencing

Distance
Selling

Collection
pointsAssembledby “U”

 Decisions will be centralized in
the hands of the customer
 Retailers will evolve towards apull mode

Source: Arthur D. Little

6

 Pay
 Deliver

Help &
hotlines
Services& aftersales

 Purchase
Doorstep
Selling

Agencies Test Select

Displaysandstalls

Shops

Vending
pointsMobileApplications

On lineshopping

Individual shopping ServiceU-Channel Retail

The transformation to U-channel retail has already started ascustomer behaviors are rapidly shifting in all markets. Research
has shown that omni-channel shoppers spend up to 15-30%
more than multi-channel shoppers and are trendsetters who
exhibit strong brand loyalty. Traditional retailers as well as
new entrants who develop new U-channel-oriented businessconcepts and solutions are gaining a first-mover advantage andpreliminary analysis indicates that they outperform their peersin terms of EBITDA margin and growth rate by 2% and 3%
respectively2. The shift to U-channel strategy poses a number ofkey questions for today’s retailers:nn

What will my business model(s) look like tomorrow?

nn

How should I adapt my channel strategy and value
proposition?

nn

What does this mean in terms of underlying technology
choices?

nn

How do I align my organization to realize an efficientbusiness transformation?

nn

How do I maintain ownership of my clients while digitizing
my business?

2

IDC Retail Insight

7

U-Channel RetailTransforming Successfully towards a
U-Channel Environment
The U-channel challenge is both a short and long-term race.
Developing true U-channel retailing is a multi-year program
requiring well-thought-out roadmaps. However, it is only by
beginning to think about it today that retailers will be able tocraft the organization, technology, process and partnerships
required to succeed in tomorrow’s retail environment and retain
ownership of their customers.
To begin this thinking, companies should follow a structured
approach:

1. Reflect on the new normal
The evolution of multi-channel retail does not impact all businessmodels and consumer segments in the same manner. Some
consumers will prefer the convenience, low-frills approach tomulti-channel while others will seek an enhanced service andexperience. As such, it is essential for retailers to understandhow U-channel affects their current and prospective customer
base. This requires retailers to review their current customer

segmentations and project themselves into their desiredcustomer base.

2. Assess current state
Today’s retail activities all encompass different forms of multichannel elements. However, it remains difficult for organizations
to assess their level of readiness for U-channel retail, bothfrom an external perspective (in channel strategy and value
proposition) and from an organizational, inside-out view (inculture, processes landscape, governance, IT architecture andworkforce practices).

3. Define desired state
Bringing the understanding of the new normal and the maturity
assessment of U-channel practices together will enable
companies to project themselves into the future and define their
desired future state. Future states should be defined in termsof external offerings to the customer and should provide a clear
vision of how internal processes and functions will need to
evolve to support tomorrow’s company.

Figure 4: U-channel transformation approach

1
CultureChannelstrategy
Value
proposition
Process
landscapeGovernanceITarchitecture

Reflect on the
new normal

 Describe how UChannel influences yourcurrent and prospective
customers
 Derive updated needbased segmentation

2

Assess current state Assess current state on
the seven U-channel
domains
1. Culture
2. Channel strategy
3. Value proposition
4. Process landscape
5. Governance
6. IT architecture
7. Workplace 2.0

3Define desired state Define desired state per
U-Channel domain
 Define modification to
CRM packages− Value proposition− Channel strategy
 Assess potential of newtechnologies
 Provide a clear vision on
tomorrow’s internal
processes and functions
 Evaluate impact oftransformational
projects on overall
operational architecture

Workplace 2.0
Communication and Change Management
Source: Arthur D. Little

8

4 Business case androadmap
 Define adjustment projects
in all operational areas
 Evaluate make/buy options
for all components oftarget operationalarchitecture Calculation of businesscases
 Development of time plan
per element
 Finalize roadmap in termsof internal transformational
components
 Definition of
implementation
responsibilities

U-Channel Retail

4. Business case and roadmap
As always, financial and time constraints play a significant rolein a transformation program. At a stage where the industry
is dabbling with new retail concepts, it remains difficult todistinguish proven, valuable concepts from marketing stunts.
Within a transformation program, all business cases should beclearly evaluated and a development plan should incorporate
uncertainty regarding technologies and customer behavior.
We believe that in order to assess and develop comprehensive
U-channel strategies, retailers need to address seven key
dimensions:Figure 5:

Domains to be addressed to migrate to Uchannel retail
2
ChannelStrategy

1

3

CultureValue
proposition

U-channel
framework

7

Process
landscape6

5ITarchitecture

Governance

1. Culture
U-channel retailing requires a cultural shift from “delivering
products” to “delivering solutions” and from “selling to theclient” to “helping the client to buy”. In this context, technology
will play an increasingly central role and evolve from controlenhancing tools to experience-enhancing tools, providing
customers and staff with comprehensive and dynamic
information on value proposition and offerings. This will require
staff at all levels (in front and back offices) to further develop
their “technology familiarity” and entrepreneurship as they
respond in real time to customer inquiries that will dynamically
uncover additional customer needs. To that effect, corporate
culture will need to evolve toward one that enables easier
introduction of radical innovation and new venture models are
required to enable transformation.

2. Channel strategy

4Workplace 2.0

challenges but they will all have to deliver on these dimensions
before performing optimally as a U-channel retailer.

Source: Arthur D. Little

Migrating to a U-channel retailing model requires progressin parallel on each of these dimensions. Within individualcompanies some dimensions may be more advanced thanothers and some may require more important and fundamental
transformations. Retailers coming from different backgrounds– think bricks and mortar vs. e-commerce – will face different

Channel strategy needs to reflect the evolution of customer
purchase and consumption habits and match the evolving needsof different customer segments and product categories. In manycases, customer-oriented access channels need to be multiplied
to increase customer capture and be better integrated witheach other. At the same time, the concept of channels in itself
may disappear, to be replaced by “touch points,” as channel
integration will make it difficult to distinguish one channel fromanother and the concept of “physical channels” will gradually be
replaced by “solution offering.”
Full online/offline integration and alignment on the marketing
4Ps (product, place, price and promotion) will be required tomaintain “one face to the customer” and avoid misalignmentof customer and product information. At the same time,
adaptations need to be made to the product mix to reflect
difference in cost structure across channels. Of particularimportance for retailers will also be the further development ofbrand positioning and services via social networks.
Finally, the role of the traditional bricks-and-mortar channel will
also evolve, implying a key re-evaluation of store format, layout
and location strategy.

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U-Channel Retail

Case study 1:
Tesco – Pioneering U-channel transformation

Case study 2:
Emmas Enkel – A new entrant U-channel retailer

The UK retailer Tesco is one of the pioneers in developing
U-channel solutions to respond to changing customer
needs and evolving technology. Over recent years, Tesco
has embarked on an extensive transformation program
addressing client-facing channels and internal processes
simultaneously.

Emmas Enkel, the Düsseldorf-based food retail start-up
founded in 2011, is already becoming a household namein retail innovation. The company was recently rewarded
for its innovative “Mom and Pop store” concept. Thisconsists of reinventing a traditional grocery corner shop into
an innovative cross-channel concept integrating modern
technology.

Some of Tesco’s key initiatives include:nnMultiplication of channels and touch points: To
answer to the new omni-channel trend, Tesco developed
online, mobile, drive-through and self-service storesnext to its traditional physical stores. The new mobile
site, which was awarded the golden Channel Innovation
Award 2012, significantly improved sales and ROI on
mobile efforts.

nn

Implementation of data-driven decision-making:
To leverage data capture, Tesco implemented a newdata analytics model to aid decision-making and drive
assortment and pricing in line with customer demand.

nn

Investing in IT architecture: In order to support themultiplication of channels in a seamless environment,
Tesco invested $100 million in a new IT architecture,enabling all channels to run on a unique IT platform.

nn

Optimizing merchandising processes: In order toshorten merchandising processes and assortmentlayout, Tesco invested in the deployment of virtual
reality software. This software enables merchandisers
to effectively visualize store aisles and to simulate
various product assortment and layouts prior to store
implementation.

nn

Workforce productivity through collaborative
platforms: Tesco is launching Microsoft Office 365
to foster global collaboration and sharing across thecompany. In addition, the role of Office 365 is supportinga culture shift for Tesco employees, putting technology
and flexible working in their hands.

Through its multiple initiatives, Tesco has developed a solid
reputation as a leading U-channel retailer. Its focus on
innovative business models has already led it to capture
57% of the UK online grocery shopping market and thecompany plans to leverage these platforms to international
markets as it transforms itself externally and internally.

10

Emmas Enkel provides several shopping channels anddelivery options. Customers can either hand a shopping list
to an assistant, who will pack the items while they relax inthe lounge area, or they can buy the goods online using an
iPad or a smartphone and either wait in-store or have thegoods delivered at home. Alternatively, customers passing
by during opening hours can make use of a QR code walloutside the store displaying more than 400 products.
In mid-2012 Emmas Enkel launched a pilot project in colla­boration with Vodafone to add a fifth channel, consistingof a virtual multi-touch wall inside the store, offering asimilar experience to the use of a tablet or smartphone. The
scanning app does not require QR codes but recognizes
the displayed products. Payment then occurs via a mobile
app. Advantages of such a virtual wall are the smaller store
size required and lower rental costs. Two thirds of the store
area is dedicated to warehouse space. Emmas Enkel uses
this virtual wall to offer a very innovative and optimized
product assortment. Unlike a fixed printed poster, it canconstantly be updated to adapt to local preferences and canbe changed to better fit the time of day.
For Vodafone, the pilot project is part of its strategy to
network different sectors with mobility, security, cloud andmachine-to-machine (M2M) solutions. A prototype wall will
be installed in mid-2013 at Vodafone’s new corporate HQ in
Düsseldorf, providing Emmas Enkel with good exposure to
more than 5,000 people working there. The platform wasdeveloped by SALT Solutions, which provides integrated
solutions along the process chain.
Emmas Enkel is enjoying high growth and the share of
its online business has increased tremendously. While in
the first month after opening about 10% of sales weregenerated online, they accounted for more than 50% ofsales after six months. In March 2013 the company openeda branch in Essen, 40 kilometers from Düsseldorf, and more
stores are being planned, as well as other virtual walls withinterested companies .

U-Channel Retail

3. Value proposition
The retailer’s value proposition needs to be redefined in termsof customer segment and product categories as customers may
react differently based on the moment in time at which they
are being addressed (e.g. private life vs. professional life) andadopt different purchasing modes from one product category toanother. In order to optimize their value proposition, retailers willneed to increasingly evolve towards a modular approach basedon a physical and virtual backbone.
While traditional value propositions (e.g. price, quality, depth andwidth of assortment) are expected to remain important, they
will need to be complemented by additional services and value
offerings (e.g. fast delivery, seamless shopping and personalized
shopping experience) to respond to evolving customer needs.
Alongside the development of additional services (making
optimal use of channel multiplication), retailers also need tostrengthen their value proposition in the physical store, which is
expected to remain a key component of the retail experience.
Key differentiating aspects to consider include the introductionof new store formats and concepts, the use of innovativetechnologies to improve the quality and speed of the buying
process and the development of learning initiatives to further
improve customer experience.

4. Process landscape
Along with the transformation from traditional to U-channel
retailing, retailers will need to ensure that their key processes
evolve from lean to agile. Whereas the emphasis on processsimplicity and automation will remain in order to reach cost
efficiency throughout the value chains, it will also become
essential to adjust processes to become more responsive
through increased flexibility. Much like IT agile practices,
processes will require optimization across the value chain
to connect all (internal and external) operators and individual
application modules onto shared platforms to increase flexibility
and optimize outputs.
Of paramount importance will be the further development ofcustomer intimacy and CRM processes, along with the data
analytics processes required to manage “big data sets”, asFigure 6: U-channel diagnosis – sanitized example

5
4
3
2

CultureSource: Arthur D. Little

Channelstrategy

Value proposition
Maturity level of the organization

Process landscape

Governance

IT Architecture

Skills and capabilities

Support functions

Back office processes

Front-line staff processes

Technical support

Flexibility

Security and confidentiality

Functional coverage

Technical / MIS governance

Third parties Integration

Project orientation

Organization structure

Flexibility and adaptability

Outbound logistics

Merchandising & asset mgt.

Inbound logistics

Procurement

Assortment planningIntelligence & data analytics

CRM 2.0

Advertising / Marketing

Delivery and after-sales

Payment

Product selection

Seamless integration

Touchpoints

Online channels

Physical channels

Culture agility

Customer centric

Maturity level0

Product / service offering

1

Workforce 2.0

Maturity level of benchmarked companies

11

U-Channel Retail

retailers increasingly need to understand and influence thespecific expectations of consumers in order to stimulate sales.
Logistics and stock management processes (stocking andreplenishment, picking and packing and delivery) also need to bereviewed to reflect channel multiplication due to an increasing
number of operators and increased customer expectations inareas such as improved visibility on stock, extended delivery
time (toward 24/7), home delivery, tracking and extended
service reliability.

5. GovernanceU-channel retailing will provide considerable opportunities interms of organizational learning and synergy generation. In
order to realize these gains, information will need to be shared
and aligned across channels to obtain enriched views and share
best practices. The built-in agility we discussed in the process
landscape will also need to be reflected in fast decision-making
and fast corrections, while the number of actors involved
in implementing decisions will increase. Clear allocation of
responsibilities between channel manager and support functions(marketing, purchasing and category managers) will be requiredas the importance of real-time collaborative decisions will
increase.
Furthermore, project orientation will need to be further
developed in organizations to sustain continuous improvement
and allow for flawless integration of new “touch points” while
avoiding disruption to operations.

more in the area of mobile applications. In the online world,
artificial intelligence, semantic analysis, data mining and image
recognition need to be combined into powerful point solutions
enabled by 4G capacity, while the in-store usage of (bi-directional
ultra-low power) NFC solutions will see the emergence of a richoffer of real-time CRM solutions.

The evolving retail function across industries
Classical high-street retailers often capture the spotlight
but retail as a function is evolving globally. Other industries
have taken the lead and developed offerings which are
addressing evolving customer needs and capitalizing on
new technologies.
nn

Banking: Banks are leading the way in developing
channels and touch points for their clients. This
sector has capitalized on new channels to streamline
operations and reduce non-value-adding activities.
Today, account balances are checked on mobile phones,
transfers are made online and advice is provided inretail branches. By charging clients for non-value-adding
activities, banks are incentivizing their customer baseand reducing their own process costs.

nn

Postal operators: Postal operators around the world
are reviewing their channel strategy as a means ofenhancing the post office experience. Through thedevelopment of automated parcel sending and delivery
boxes or home-printed stamps they are able to extend
their footprint at a minimal cost while increasing
convenience for customers.

nn

Telecom operators: Traditional telecom operators arebeing challenged from many directions and have to
streamline their operations and become increasingly
virtual. Operators are increasingly enabling the purchaseof products and services online and through mobile
applications. Similarly, as the number of device andnetwork access points increases, operators aredeveloping single client recognition and multi-platform
offerings, e.g. at home, on the move and at Wi-Fi
hotspots.

6. IT architecture
IT architecture will need to evolve in line with business
requirements and should support and strive towards a shortertime to market for both on and offline offerings. IT architecture
will need to reflect the need for efficient data-sharing and rapid
integration of new business process modules from internal orexternal parties. Data should be kept separate from applications
or functions, in order to remain dynamic and provide highervalue knowledge. In the past, retail IT was all about mainframes
and POS technology that provided the only link between thestore and the corporate centers. The future is not only centeredaround using the cloud in the area of data centers, operating
systems, storage, back-ups and related security, but much

12

U-Channel Retail

7. Workplace 2.0
Tomorrow’s workforce will gain in interactivity. As customers
become better informed and linked to multiple channels, clientfacing functions will need to face a similar evolution in order tocompete with information provided by the internet.
Front-line staff functions will evolve in line with selected value
propositions that may involve additional features ranging
from specialist product advice to assisting in a more efficientbuying process. Ideally, sales functions will be in a position
to “augment” customer needs as they respond in real time
to customer inquiries in the store that will uncover additionalcustomer needs. These may reside in any of the available valuechain options, such as store pick-up or home delivery, but also inpure sell-on opportunities that consumers may normally satisfy
in other retail stores; thereby potentially increasing ticket values

as cross-channel sell-on capabilities develop. Support functions
will also see important reshuffling as technology relianceincreases and the stress on innovation and project management
continues to grow. New functions, such as social network
agents and data miners, will need to be introduced.
These evolutions will require employees to master a different
set of skills and capabilities, requiring retailers to adapt their core
HR processes (recruitment, training, assessment and careerdevelopment) and develop new incentives schemes for staff at
all levels.
Many retailers have started this process and are developing
best practices in responding to the U-channel challenge. Figure
7 provides a selection of best practices across the different
dimensions of the U-channel framework.

Figure 7: Best practice examples
Dimension

Best-practice example

1. Culture Nordstrom‘s inclusion of agile software development in retail innovation through in-store innovation labs

2. Channel strategy

 Coolblue‘s transition from online pure-play to brick-and-mortar stores in order to answer customer needs for direct
product contact and same-day deliveries
 Nespresso’s seamless integration of new channels and touch points (e.g. boutiques, bars, mobile, interactive sales
kiosks) through unique customer identification by means of a customer's coffee machine serial number
 Burberry's new flagship store in London replicates the at-home online shopping experience by bringing theonline/mobile and physical store into one place

3. Value proposition

 Chefday’s new offer of exclusive video recipes from New York's most famous chefs, combined with delivery of all
the ingredients needed to create the meals to the customer's doorstep
 Shopkick’s CRM app offers users rewards for walking into and buying items in partnering stores in the form of“kicks”. This is a fully automated process, as a signal is picked up by the customer's smartphone at the shop's
entrance. These kicks can then be traded in for coupons, reductions, iTunes gift cards or free restaurant meals

4. Process landscape Amazon’s acquisition of Kiva illustrates the shift of core competences from marketing and sales excellence tologistics excellence Oracle is providing retail assortment planning tools, supporting and automating assortment decision-making
processes through the incorporation of structured data and business intelligence

5. Governance Coca-Cola has developed a center of excellence for mobiles to ensure that all learning is collected and sharedthroughout the organization and licensing partners

6. IT architecture Retalix’s multi-channel IT platform offers a common IT architecture to support all different sales channels and touchpoints, based on a unified data layer, a unified business logic layer and a single client presentation layer across allchannels

7. Workforce 2.0

 Apple’s infamous Geniuses have revolutionized staff management by evaluating staff on their ability to help
customers solve problems and not on sales KPls

Source: Arthur D. Little

13

U-Channel RetailInsights for the Executive
Key trends observed for many years in the retail function are
gaining momentum as retailers are starting to address theissues and adapt their business models and value propositions.
While today’s adaptations often remain at a pilot stage, they are
the prequels to a more radical redefinition of the retail function.
Tomorrow’s retail function will evolve towards a U-channel
model; a retail model that is ubiquitous, universal and uniqueand that is assembled by the customer. This does not only
impact traditional high street retailers, but also all otherindustries that deal with “retail as a function”.The recipe forsuccess in U-channel retail will not be a one-size-fits-all modeland requires retailers and any other sector with a retail function
to revisit their fundamentals: who are our target customers
and how do we segment them, what will tomorrow’s businessmodel(s) and value proposition(s) be, which formats, technology
and partnerships will be required to capture customer value tothe greatest extent?
The migration towards U-channel retailing will be a positivechange for customers and retailers alike. It provides theopportunity to increase value creation for the retail function
and to rethink retailing business models both in the front andback office. Identifying the right strategy and business model
is not easy and will require many incremental and repetitive
steps. Nevertheless, today’s executive needs to scope the field,
understand the challenges at hand and set the direction for
future developments.

14

Contacts
If you would like more information or to arrange an informal discussion on the issues raised here andhow they affect your business, please contact:

Austria/Eastern Europe
Karim Tagataga.karim@adlittle.com

India
Srini Srinivasan
Srinivasan.srini@adlittle.com

Spain/Portugal
Salman Ali
ali.salman@adlittle.com

Belgium
Francois-Joseph Van Audenhove
vanaudenhove.f@adlittle.com

Italy
Saverio Caldani
caldani.saverio@adlittle.com

SwedenDaniel Roosroos.daniel@adlittle.com

BrazilMartin Mitteldorf
martin@whitemountain.com.br

Japan
Maki Kurosawa
kurosawa.maki@adlittle.com

Switzerland
Tatjana Kropp
kropp.tatjana@adlittle.com

China
Antoine Doyon
doyon.antoine@adlittle.com

Korea
Daessoon Honghong.daesoon@adlittle.com

UK
Richard Eagar
eagar.richard@adlittle.com

FranceAurélia Bettati
bettati.aurelia@adlittle.com

Middle East/ South East Asia
Thomas Kuruvilla
kuruvilla.thomas@adlittle.com

USA
John Brennan
brennan.john@adlittle.com

Germany
Wilhelm Lernerlerner.wilhelm@adlittle.com

The Netherlands
Martijn Eikelenboom
eikelenboom.martijn@adlittle.com

Mobile interaction
In the future, mobile connectivity will
expand beyond mobile devices. Every
product article could be seen as a data
point. This enables consumers to instantly
research for product information on
any device with image recognition –anywhere, anytime!

Arthur D. Little
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