Transformation to Omnichannel: The New Reality in RetailBy Kelly Kroger | Thu, 01/13/2022 - 09:14
This Christmas, I received a pair of beautiful black pumps from my sister-in-law. The problem was that they didn't fit. I visited the store before New Year’s Eve to make sure they wouldn’t run out of my size; I really loved them! To my shock, the store had a “no exchange” policy because the product was bought online and shipped from a separate warehouse. Even though I was at the store of the same brand as the shoes, they couldn't complete the exchange in the store. I saw the beautiful shoes in my size at the store and was dying to wear them the next day to a NYE party but was told the return would have to be requested on their website and I would receive a shipping guide to send the shoes back and after a review, the reimbursement would be made to the credit card that made the payment (my sister-in-law’s). Can you imagine my frustration? How important did I feel the customer was to this company? The reality is that customer journeys are not cleanly divided between online and offline.
Internally, to a retailer shipping individual products back and forth to an online warehouse has a cost and the item spends more time being unavailable for resale and we won't even mention the environmental impact of all those delivery trucks. Multiply that for the ever-increasing volume of online sales and we can start to understand the business impact of maintaining a multichannel model versus transforming our business into a true omnichannel model.
According to Google, the definition of the term “omnichannel” is “a type of retail that integrates the different methods of shopping available to consumers,” but more importantly, from our customer's viewpoint, it is one that provides them a seamless experience across all platforms (online & offline).
Although the importance of omnichannel is obvious today, we must remember that e-commerce has now been around for almost 30 years, and most companies begin their digital journey offering products via a multichannel model even today. What has changed is the speed at which it is necessary to evolve into an omnichannel model to provide the experience and service our customers demand and deserve and can easily find online among the extensive number of competitors that exist in the digital space.
An omnichannel model allows the customer to define how and when he or she wants to interact with the brand. Capturing data based on real customer behavior allows us to communicate and offer products and services specific to their preferred way of shopping.
It benefits the business as it allows us to manage a single inventory, minimizing markdowns and shipping costs.
Transitioning from a multi-channel to an omnichannel model is much easier said than done. The following are what I believe are the key elements to achieve the transition successfully.
- Channel integrated fulfillment is the backboneof your strategy. You need flexibility to allow your clients to define how to purchase and receive their products. For this, you must redesign your inventory allocation strategy to make it demand-driven. Optimally, you will have systems that enable you to manage one “virtual” inventory so that product can be accessed by both online and offline channels for sale and sent to customers’ homes or for pick up at any one of your physical locations. This integration will also allow your company to utilize physical stores as warehouses and ship products from the nearest store to fulfill online orders, reducing delivery time and costs.
- Get the analytics right. As you invest in technology, it's imperative that you build capacity to use and leverage that technology within your organization. Data is only noise and space in your cloud services if no one is connecting the dots, analyzing it, coming to overarching conclusions and acting upon it. Data can both provide speed and quality in decision-making. Connecting CRM tools to both online and offline customer activity provides a competitive advantage, allowing for the creation of more specialized communication and experiences for our customers.
- Matching products and channels. As the number of channels continues to expand, it is important to define a product channel strategy that ensures customer segments can find your products on the channel of their preference but, at the same time, protects brand equity and product margins. Digital commerce is great for more niche products, an example would be offering packs of onesies for newborn babies or products in petite or plus sizes that may not be offered in physical stores. It is also a great tool for specialized products that can be used to build your brand value (such as our Cradle-to-Cradle sustainable T-shirts) or for product drops that do not have sufficient demand volume for placement in physical stores. Your product strategy should also clearly differentiate online product offerings between your own site and that placed on marketplaces. Since marketplaces tend to have higher costs, use them to place products that require a lower level of promotion and markdown. As mentioned before, a strong CRM and data analytics capability will allow you to obtain insights to define customer profiles and purchase habits across channels to ensure an optimized product allocation both for the customer and the bottom line.
- Ensure channels do not compete within the organization. To optimize sales and profitability, it is important to ensure that organizational structures and compensation are designed to incentivize doing what's right for the customer and not a KPI of a single channel. It is important to ensure store employees are properly compensated and incentivized to process ships from store orders and receive online returns. It is equally important to ensure online employees are compensated and incentivized to offer pick-up in stores and free up excess inventory needed in physical stores.
With the acceptance of digital commerce growing at an accelerated pace, retailers must understand how to evolve their business models, technological platforms and customer interactions to attend all possible customer journeys and provide a seamless experience across all platforms. There is no longer an online world and an offline world; they have already irrevocably merged into a single entity in the customer's mind and only those who adapt to the continually changing customer will succeed into the future.