Express needs to deliver more speed around omni-channel transformation

Profile picture for user slauchlan By Stuart Lauchlan August 29, 2018
Summary:
Express by name, but not by nature - at least not when it comes to finding and enabling an optimal omni-channel retail mix.

express
US fashion chain Express is a perfect example of the dilemma facing so many in the retail sector today - its stores are a drag on the business and have been for some time, while online activity is keeping things afloat as turnaround efforts are put in place.

There are some signs of life - the firm has turned an $11.9 million loss this time last year into a $2.2 million dollar profit. But the contribution made by the stores is basically flat, if no longer actually declining. Meanwhile e-commerce growth is surging ahead at 37% year-on-year, now accounting for a quarter of total sales, up from just under a fifth (19%) last year.

But the omni-channel Holy Grail of the right online/offline mix hasn’t been achieved yet, as CEO David Kornberg admits. He sees a number of key strategic priorities that need to be addressed in short order:

First, we need to drive customer acquisition and retention through more consistent product execution, more effective marketing spend and delivering a continuous and holistic brand and customer experience across all channels. This includes successful product introductions like extended sizing, building customer engagement through more personalized service offerings like styling and further growth in our next loyalty program.

Second, we need to continue driving retail sales through double-digit e-commerce growth while improving overall store productivity. We remain confident in the growth outlook for e-commerce and are focused on improving our store performance.

Third, we need to realize the benefits from our systems' investments and omni-channel capabilities. We have begun to see the initial positive results and expect to capture more significant benefits going forward.

The plan

So that's the basic set of goals. Now, what's being done about them? From an e-commerce perspective, Kornberg seems confident that Express knows what it’s doing and is executing on that:

I think the drivers of e-commerce, and we are pretty clear about it, have been the assortment, the mix of the assortment, the e-commerce exclusives, which have been a big driver of the business and our ability now to ship inventory from store, which is now in 400 stores. I think that also obviously a lot of work that we have done on the site in terms of ease and convenience of shopping has really helped us as well.

So really, clearly we have shown significant growth online. It is the direction of the future to be able to put on the 37% increase on top of 28% increase last year shows that we are doing the right things and it's really not just one thing or another, it is the full mix of the work that we are doing online that's delivering the results.

While the stores qua stores may not be performing, they do serve a useful purpose in driving digital initiatives, he adds:

E-commerce is also benefiting from our newly expanded omni-channel capabilities. The percentage of e-commerce orders fulfilled by our approximately 400 active ship-from-store locations is growing rapidly and we continue to refine the algorithms to further increase fill rates and improve order processing efficiencies.

We also continue to test Buy Online, Pick Up In Store. In July, we added another five stores to the test in New York City and have installed lockers in certain locations to gain insight on the added convenience of self-service pickup and return. We have learned a lot through the test to-date and are working to optimize the profitability with the expectation that we will continue to methodically rollout this capability to select stores over the next 12 months.

But the store problem needs to be tackled, admits Kornberg:

Our retail stores continue to perform at a level below where we believe they are capable of performing. And while their role has evolved greatly as a result of our omni-channel transformation, their productivity remains an important lever in our profitability. We have various efforts underway to improve the performance trend. We have increased our inventory and marketing investment in core categories and are focused on strengthening the results. We are also evaluating the ability to drive productivity improvements by managing our overall inventory more efficiently. With ship-from-store now in place, we can hold more inventory in stores to ensure proper depth without added risk.

And there’s an increased spend on tech that is intended to support the overhaul of the existing real estate:

We have key technology investments underway that have the opportunity to drive overall retail store efficiency. We are in the process of rolling up an upgrade to our store Point-of-Sale system. We are currently testing RFID in 15 stores to understand the potential for increased sales from improved inventory accuracy and that moving forward with the planned implementation of our new assortment planning system.

As for the goal of customer acquisition and retention, the watchwords here are loyalty and personalization. Kornberg says:

As it relates to customer retention, we continue to be pleased with the trends we are seeing in our loyalty program. Express NEXT is a compelling and recognize loyalty program in the industry and we continue to see growth in members as well as in Express NEXT credit card customers. We are confident that we will be able to leverage our investments in data analytics to increase customer acquisition and retention. We recently consolidated all of our customer data in-house, which provides us unique to leverage our data more holistically and with greater precision. And we have a number of projects underway to increase overall personalization with our customers to drive improved conversion and purchase metrics.

My take

Kornberg is talking the talk, but it’s taking time for the strategic plans to turn into concrete benefits. The big problem is that things just aren’t moving fast enough. For a fashion retailer to be in the position in 2018 of still being in test mode when it comes to Buy Online, Pick Up In Store says it all really. This retailer is just not travelling at express speed when it comes to omni-channel transformation.