NEWSLETTER FEBRUARY 2016
Financial & Operations View of Design-To-Purchase
When furniture retailers start with virtual and augmented reality they often focus on the marketing aspects and metrics like traffic increase, conversion rates, omni-channel performance, and long-term use are carefully monitored. In contrast, the operations impacts of deploying a design-to-purchase platform rarely attract as much attention and in many cases are completely ignored in the return-of-investment analysis. However, as exemplified by Montana, when the other business aspects are also considered the technology business case becomes significantly broader and often the business process savings alone are sufficient for achieving a positive ROI. Example financial impacts of design-to-purchase platform are
Effectiveness of Sales Personnel
Instead of being engaged with the customer the sales personnel spend significant percentage of their time also on the "secondary" activities: They go through brochures to find the product information, verify product availability and allowed combinations, and enter the product and configuration details into the ordering systems. When the retailer deploys a design-to-purchase platform most of these tasks are removed: As the sales person demonstrates the product alternatives to the customer, e.g. on an iPad in the showroom, with integration to the retailer’s systems she/he has all the time the most recent product and pricing information available. And once the customer decides to buy a product the order can be directly placed without a need to “re-enter” the information just discussed with the customer.
To determine the savings in a particular retailer case typically requires detailed time-and-motion studies but even with coarse estimates the savings potential becomes apparent. For example, for 10,000 sales with 25% conversation rate, average 3 minutes of extra time spent per customer visit and $25 cost per hour the “lost” sales time equates to a $50k saving opportunity. Although a 100% utilisation of sales personnel is impossible in real-life when the impacts of faster sales conversion and reduction in the lost-opportunity costs (i.e. walk-outs during the busy periods) are factored in the real financial impact is actually significantly higher. Particularly significant the savings are in residential retail and commercial areas where deep customer engagement is required, e.g. (re)drawing customer floor-plans for designs (commercial furniture) or estimating materials and providing work-orders for installation (home improvement, tiles, flooring, kitchens, etc.)
Reduction in Sales Error Costs
Data entry errors, created by busy sales staff, can cause a significant cost to the retailer. Based on the furniture industry studies correcting a delivery error can cost up to 5x more than the initial delivery and as such a delivery issue can easily take the customer sales to red. On the whole business levels this means that, for example, with 10,000 deliveries, an industry average sales error rate of 2%, and an average $250s cost of correcting a delivery error, the retailer’s margins take a $50,000 hit. Furthermore, when the intangible damages are also considered, such as the stock item being not-available-for-sale (NAS), the damage to the reputation created by the social-consumer, and the lost repeat-customer, the cost of a sales error is multiplied. With the design-to-purchase platform these errors are practically removed as the product demonstrated to the customer is directly ordered from the application and no manual data-entry is required.
More Effective Use of Floorspace
As the sales people are able to demonstrate full-catalogue of products and combinations to the customers using the virtual/augmented reality tool less physical floor-space is required in the showroom. While the actual impact depends on the store design even a small area reduction – let alone being able to operate a smaller number of large showrooms - results in tens of thousands of dollars savings per year.
Lower Sales Material Costs
When the product and sales information is delivered and updated digitally, less physical sales collateral is required and the in-store and customer sales "material" is always up-to-date. Furthermore, should physical brochures also be produced, the collateral production costs can be reduced by utilising the platform 3D models for creating the required measurement drawings and rendered pictures.
Improved Sales Training
People buy from sales people with great product knowledge. Equipped with good information and the resulting confidence, they can better solve customer’s problem and typically have up to 60% higher conversion rate than their peers. By doubling as a cost-effective sales channel, a design-to-purchase platform helps the retailer to cost-effectively improve the sales personnel knowledge, provide them information on the latest design trends, and give them new ideas for upselling and cross-selling opportunities (e.g. <a href="http://rockofeye.com.au/newsletter_june_2015">Fagmoebler</a>). If the sales floor personnel are equipped with tablets they have the training knowledge with them also in the real sales situations (i.e.product info, theme rooms, example configurations, and design-idea templates).
Newsflash: Allsteel Launches Sales Tool with VividPlatform
European Online-Only Retailer Launches 3D Room Planner
Design Your Home (DYH.com), an online-only furniture retailer operating in eight countries across Europe, has introduced a new 3D Room Planner and the first European designer community – all based on the VividPlatform. By launching the 3D Room Planner DYH.com wants to provide ‘the coolest online and app furniture shopping experience in Europe’. They also want to make the modern social customers’ buying cycle completely seamless by cross-integrating the design platform, e-Commerce, social-media, design blogs, and interior design services.
The 3D Room Planner enables the online customers to design with the DYH.com products and to find just the right combinations and configurations for their own interior style - while all the time being able to see how the products would look and fit in their home. Since most of the furniture fabrics and options are available only as swatch samples even in the traditional retailers’ showrooms, the 3D Room Planner helps DYH.com to take their customer shopping experience on par and beyond of that of a traditional brick-and-mortar store, missing only the touch-and-feel of the in-store experience but providing the customer a better idea how the products will fit in their home.
The DYH.com ‘Interior Community’ enables the customers to exchange and evaluate interior design ideas and evolve with the interior professionals and other customers. As Hans-Joachim Bischoff, Board of Design Your Home Holding Sweden says: "Imagine, you want to rearrange your house or dining room into something more modern and stylish. You would prefer to use the advices of an interior designer. However, this person is really expensive. Now everyone can virtually create her/his own interior on DYH.com with real furniture and adjust colours. A second step, as a world premiere offered by DYH.com, is to provide experienced interior designers for interested customers."