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Flevy Management Insights Case Study
Omni-Channel Strategy for SMB Furniture Retailer in North America

Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Hoshin to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, KPIs, best practices, and other tools developed from past client work. We followed this management consulting approach for this case study.

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Consider this scenario: A prominent SMB furniture retailer in North America is striving to implement a Hoshin strategy to navigate its digital transition challenge.

The retailer is confronting a 20% decline in in-store sales over the past 2 years, exacerbated by a competitive online marketplace and changing consumer preferences towards e-commerce platforms. Additionally, an internal assessment reveals significant gaps in digital capabilities and an underutilized online presence. The primary strategic objective is to establish a robust omni-channel presence that enhances customer engagement and drives sales across all platforms.

The organization in question, while successful in traditional brick-and-mortar operations, has recognized the urgent need to evolve in response to shifting market dynamics. The initial analysis suggests that the root of the strategic challenges lies in the retailer's slow digital adoption and a lack of integrated customer experience across channels.

Strategic Planning Analysis

The furniture retail industry is experiencing a significant transformation, driven by the rise of e-commerce and changing consumer expectations for convenience and personalized shopping experiences.

Examining the competitive landscape reveals:

  • Internal Rivalry: High, due to a saturated market with both large chains and small independent stores competing on price, quality, and customer experience.
  • Supplier Power: Moderate, as retailers often have multiple suppliers but may depend on a few for unique or high-quality items.
  • Buyer Power: High, with consumers having access to a wide range of options and information, leading to higher expectations and price sensitivity.
  • Threat of New Entrants: Moderate, given the significant investment required for inventory and physical stores, though lower for purely online entrants.
  • Threat of Substitutes: Low to moderate, as furniture needs are specific, but the risk lies in the shift towards renting or leasing furniture instead of purchasing.

Emerging trends include the growth of online furniture sales, increasing demand for eco-friendly and customizable products, and the integration of AR/VR technologies to enhance the online shopping experience. These shifts present both opportunities and risks:

  • Adoption of e-commerce and omni-channel strategies: Offers the opportunity to reach a broader audience and create a seamless customer experience but requires significant investment in digital infrastructure and capabilities.
  • Increasing consumer demand for sustainability: Presents an opportunity to differentiate through eco-friendly products but may increase costs and require changes in supply chain management.
  • Technological advancements in AR/VR: Can enhance the online shopping experience and potentially increase sales but necessitates upfront investment in technology and content creation.

Learn more about Customer Experience Supply Chain Management Retail Industry

For effective implementation, take a look at these Hoshin best practices:

Strategic Planning: Hoshin Kanri (Hoshin Planning) (153-slide PowerPoint deck and supporting ZIP)
Strategic Planning: A3 Hoshin Planning Process (113-slide PowerPoint deck and supporting Excel workbook)
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Internal Assessment

The retailer has established a strong brand in the traditional furniture market with a loyal customer base but faces challenges in digital marketing, e-commerce operations, and creating a cohesive customer experience across channels.

SWOT Analysis

Strengths include a well-known brand and a wide range of quality products. Opportunities lie in leveraging technology to enhance the online shopping experience and expanding into the e-commerce space. Weaknesses are evident in digital capabilities and the integration of online and offline channels. Threats include the intense competition from both traditional and online retailers and the rapid pace of technological change.

VRIO Analysis

The brand reputation and customer loyalty are valuable and rare but not fully exploited in the digital domain. Operational efficiency and digital marketing capabilities are neither rare nor costly to imitate, indicating areas for strategic improvement.

Capability Analysis

Success in the current market requires competencies in digital transformation, customer experience management, and agile supply chain operations. The retailer has strengths in traditional operations but must enhance its digital marketing, e-commerce, and data analytics capabilities to compete effectively.

Learn more about Digital Transformation Supply Chain Agile

Strategic Initiatives

Based on the industry analysis and internal assessment, the leadership team has identified the following strategic initiatives to be pursued over the next 18 months :

  • Digital Transformation and Omni-Channel Integration: This initiative aims to revamp the retailer's digital platforms and integrate them with physical stores to offer a seamless customer experience. The value creation lies in increased sales through improved customer engagement and retention. This will require investment in technology infrastructure, digital marketing, and training for staff.
  • Eco-friendly Product Line Expansion: Introducing a range of sustainable furniture products to meet growing consumer demand for eco-friendly options. The intended impact is to differentiate the brand and capture a niche market segment. This initiative will require sourcing sustainable materials and developing partnerships with eco-conscious suppliers.
  • Adoption of AR/VR Technologies: Implementing AR/VR tools on the e-commerce platform to enhance the online shopping experience, aiming to increase conversion rates and average order value. The value creation comes from leveraging technology to simulate in-store experiences online. Resources needed include technology investment and content development capabilities.

Learn more about Industry Analysis Value Creation Leadership

Hoshin Implementation KPIs

KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.

What gets measured gets managed.
     – Peter Drucker

  • Online Sales Growth: To measure the success of omni-channel integration and digital marketing efforts.
  • Customer Satisfaction Score (CSAT): To gauge the effectiveness of the new AR/VR shopping experience and overall omni-channel customer experience.
  • Eco-friendly Product Sales: To track the performance of the new eco-friendly product line and its impact on brand differentiation.

These KPIs will provide insights into the effectiveness of the strategic initiatives, highlighting areas of success and identifying opportunities for further improvement.

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Hoshin Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Hoshin. These resources below were developed by management consulting firms and Hoshin subject matter experts.

Hoshin Deliverables

These deliverables represent the outputs across all the strategic initiatives.
  • Omni-Channel Strategy Report (PPT)
  • Digital Transformation Roadmap (PPT)
  • Eco-friendly Product Line Business Case (Excel)
  • AR/VR Implementation Plan (PPT)

Explore more Hoshin deliverables

Digital Transformation and Omni-Channel Integration

The strategic initiative to integrate digital transformation and omni-channel capabilities was underpinned by the application of the Balanced Scorecard and the Blue Ocean Strategy frameworks. The Balanced Scorecard provided a comprehensive approach to strategic management, translating the organization's vision and strategy into a coherent set of performance measures. It was particularly useful for ensuring that the digital transformation efforts were aligned with the overall business strategy and objectives. Meanwhile, the Blue Ocean Strategy encouraged the organization to venture beyond competing in existing market spaces (red oceans) and instead create new market spaces (blue oceans), which was crucial for the omni-channel integration.

The organization deployed these frameworks through the following steps:

  • Developed a Balanced Scorecard that included financial, customer, internal business processes, and learning and growth perspectives to ensure that the digital transformation efforts were well-balanced and aligned with strategic objectives.
  • Conducted a series of workshops to identify untapped market spaces and non-customers, applying the Blue Ocean Strategy's tools such as the Strategy Canvas and the Four Actions Framework to the omni-channel initiative.
  • Mapped out the value proposition of the digital transformation within the newly identified market spaces, focusing on eliminating, reducing, raising, and creating factors that would lead to a leap in value for customers and the company.

The implementation of these frameworks resulted in a successful digital transformation and omni-channel integration. The Balanced Scorecard revealed improvements across all perspectives, particularly in customer satisfaction and internal business processes. The Blue Ocean Strategy enabled the organization to discover and exploit new market spaces, significantly reducing competition and increasing customer engagement and sales through the omni-channel approach.

Learn more about Balanced Scorecard Value Proposition Customer Satisfaction

Eco-friendly Product Line Expansion

For the expansion of the eco-friendly product line, the organization utilized the Value Chain Analysis and the Triple Bottom Line frameworks. The Value Chain Analysis allowed the company to identify and optimize the value-adding activities in the development and delivery of the new eco-friendly products. This was critical in ensuring the products were not only sustainable but also competitively priced and appealing to customers. The Triple Bottom Line framework ensured that the expansion considered economic, social, and environmental sustainability, aligning with consumer demand for responsible business practices.

The frameworks were implemented as follows:

  • Conducted a Value Chain Analysis to pinpoint areas where sustainability could be integrated into the product line, from sourcing raw materials to manufacturing, distribution, and after-sales services.
  • Utilized the Triple Bottom Line framework to measure the economic, social, and environmental outcomes of the eco-friendly product line, setting benchmarks for success in each area.
  • Engaged with suppliers, employees, and customers to ensure that the sustainability efforts were communicated effectively and incorporated feedback into continuous improvement processes.

The application of the Value Chain Analysis and Triple Bottom Line frameworks led to the successful launch and adoption of the eco-friendly product line. The organization not only met its sustainability goals but also achieved positive economic outcomes, with increased sales and customer loyalty. The initiative further enhanced the company's brand reputation as a leader in sustainability within the furniture retail industry.

Learn more about Continuous Improvement Customer Loyalty Value Chain Analysis

Adoption of AR/VR Technologies

In implementing AR/VR technologies to enhance the online shopping experience, the organization leveraged the Diffusion of Innovations Theory and the Customer Journey Mapping framework. The Diffusion of Innovations Theory helped the company understand how the new AR/VR technologies would be adopted by consumers, identifying characteristics that would influence the rate of adoption. This was crucial for tailoring the technology deployment strategy to accelerate acceptance among target customers. Customer Journey Mapping provided insights into how AR/VR technologies could be integrated into the online shopping experience at key touchpoints to maximize customer engagement and satisfaction.

The frameworks were applied through the following steps:

  • Identified key adopter categories (innovators, early adopters, etc.) using the Diffusion of Innovations Theory and developed targeted communication and engagement strategies for each group.
  • Mapped the customer journey for online shoppers and identified touchpoints where AR/VR technologies could enhance the shopping experience, such as virtual try-ons or 3D product visualizations.
  • Collected and analyzed customer feedback on the AR/VR features to continuously improve and refine the technology offerings.

The strategic deployment of AR/VR technologies, guided by the Diffusion of Innovations Theory and Customer Journey Mapping, resulted in a marked increase in online engagement and sales. Customers reported higher satisfaction with their online shopping experience, and the rate of technology adoption exceeded initial projections. This initiative not only positioned the organization as an innovator in the furniture retail space but also created a competitive edge through enhanced customer experience.

Learn more about Customer Journey Customer Journey Mapping

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Key Findings and Results

Here is a summary of the key results of this case study:

  • Online sales increased by 25% year-over-year, attributed to the successful integration of digital and omni-channel strategies.
  • Customer Satisfaction Score (CSAT) improved by 15 points, reflecting the positive impact of AR/VR technologies on the shopping experience.
  • Eco-friendly product line sales grew to represent 20% of total sales, indicating strong market demand and successful brand differentiation.
  • Reduced competition in newly identified market spaces, thanks to the application of the Blue Ocean Strategy in omni-channel integration.
  • Achieved a 10% reduction in operational costs through optimized value-adding activities in the eco-friendly product line's value chain.

The strategic initiatives undertaken by the furniture retailer have yielded significant positive outcomes, notably in online sales growth, customer satisfaction, and the successful launch and adoption of the eco-friendly product line. The integration of digital and omni-channel strategies, underpinned by the Balanced Scorecard and Blue Ocean Strategy, has effectively addressed the initial challenge of declining in-store sales and underutilized online presence. The adoption of AR/VR technologies has notably enhanced the online shopping experience, as evidenced by the improved CSAT scores. However, the results were not without their shortcomings. The anticipated reduction in competition was not as extensive as projected in some market segments, possibly due to underestimation of the competitive dynamics and the pace of technological adoption among competitors. Additionally, while the eco-friendly product line has been successful, the initial cost implications and supply chain adjustments were more significant than anticipated, impacting short-term profitability.

Given the mixed results, it is recommended that the retailer continues to refine its omni-channel strategy with a focus on dynamic market analysis to better anticipate competitor moves. Further investment in customer analytics could enhance personalization and customer engagement, potentially opening new market segments. Additionally, exploring partnerships with technology firms could accelerate innovation and reduce the costs associated with AR/VR technologies. For the eco-friendly product line, a deeper analysis of supply chain sustainability and cost management should be conducted to improve profitability without compromising on quality or sustainability commitments.

Source: Omni-Channel Strategy for SMB Furniture Retailer in North America, Flevy Management Insights, 2024

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