Inside Deckers Brands Omnichannel Transformation

The retail industry is in the midst of an omnichannel revolution, led by increased consumer confidence in web and mobile shopping, said John Kalinich, senior vice president of omnichannel and e-commerce at Deckers Brands, parent company of brands such as UGG and Teva, in his keynote address at the Demandware XChange conference in Las Vegas yesterday.

"The retail industry is at a tipping point, and companies need to have a sound digital strategy to succeed," he added.

A multichannel and international retailer, Deckers Brands started noticing some shifts in its business roughly 18 months ago. for example, there was less strore traffic, although brick-and-mortar revenues remained steady; and website traffic, particularly from mobile devices, was steadily increasing. Deckers Brands decided to conduct a market analysis to identify the trends and technologies that would shape the future of its business. Here's what that market analysis revealed:

• There's been a convergence in the retail industry, and the consumer is now in control. Technology, and particularly smartphones, has enabled this phenomenon.
• Consumers are digitally savvy. They have more choices readily available to them (e.g., mobile payments), and they're taking advantage of those options.
• Consumers expect more from retailers than ever before. From inventory transparency across channels to personalized offers to a robust and engaging website experience, retailers must be able to deliver on these consumer demands.
• Digital technologies give consumers more power.

Upon finishing its market analysis, one thing became clear to Deckers Brands: it needed to change to grow and prosper, not just be average.

"We needed to use digital as a gamechanger for our brands, not just an enabler," Kalinich said. "Digital needed to be part of the solution for eliminating the pain points of our customers, he added." And not only did Deckers need to communicate this message to consumers, it had to shift peoples' mind-sets within the organization as well.

The first step was to align Deckers' teams around customers, not channels. Previously, teams were siloed around the three parts of Deckers business: brick-and-mortar, e-commerce, wholesale.

"The people, processes and technology used to be specific to channel," said Kalinich. That has since changed. Deckers has made its corporate structure horizontal, rather than vertical, connecting teams in the process.

It take some convincing of Deckers Brands leadership that this was the right thing to do. As Kalinich recalled, he needed to prove that this would benefit the business. He cited higher customer retention rates, which in turn leads to increased sales and profits, and a more streamlined business that would cut costs and maximize assets. For example, inventory is now shared amongst all channels, where previously it was siloed.

"At the heart of Deckers omnichannel transformation is data. It's used to lead strategy, and has quickly become the company's most valuable asset," Kalinich said. "Data is the basis for setting our vision, convincing internal stakeholders and executing on our plan," he added.

A Scrum Worth Having
In addition to data, Deckers is relying on technology to lead it into the future. The goal is to align the company's disparate systems to provide a singular view of the customer — what they've purchased, how have they engaged, are they using multiple channels, etc. Deckers needed its digital development team to execute more quickly, but it was limited due to its size and resources. Deckers options were limited. It could hire more people. Have its current developers work harder. Both of those options weren't feasible.

So Deckers came to another solution: Work on the right work (i.e., projects that will move the needle, cut costs, increase customer engagement). To aid in the process of deciding what's the "right work," Deckers has implemented Scrum methodology for its software development initiatives. Common teams will come up with and vote on the development projects that should be worked on first.

The Scrum program, which is an agile framework for completing complex projects such as software development, was piloted six months ago with one team comprised of members from IT, web development, supply chain, international, marketing and executive leadership. The program has since added a second team.

"Adopting Scrum methodology has been transformational for our teams," said Kalinich, who noted that the company has entered its "flow rate." Yet he acknowledged that there's plenty of work left to be done.

"What Deckers is doing is already working. The company recently reported second-quarter earnings and revenues were up 20 percent year-over-year. As long as we keep the consumer at the center of everything we do, we'll ultimately be successful," said Kalinich.