Why is omnichannel retail attracting so much interest - but so few businesses actually doing it?
OK, so you’ve got your multichannel strategy mapped, you've expanded to encompass etailing, social media, TV shopping, kiosks and apps, and you cater for customers across all of their touchpoints. Well, now it’s time to get to grips with the next phase: omnichannel.
As demonstrated by our community, there’s still some confusion surrounding the definition of omnichannel, and how it differs to multichannel and/or cross-channel. But in a nutshell, it's a joined-up approach to your multiple channels; the ability to seamlessly continue a single conversation or transaction even if the customer chooses to change channel.
Paul Heathcote, senior manager at Deloitte Digital, defines omnichannel as “an experience that's designed to work on the particular channel that you're engaging with, and which exists across different channels, and can often include those different channels interacting with each other.”
From a shopping experience, this may be the retailer’s apps I’ve got on my smartphone interacting with some kind of in-store displays, he says.
In a world of ever increasing channels, and increasingly channel-agnostic customers, omnichannel presents a huge opportunity for retailers looking to differentiate themselves via exceptional customer experience. The mighty John Lewis is one High Street giant that has already announced its commitment to omnichannel service, with MD Andy Street recently explaining to MyCustomer.com: “The strategy's quite simple. We know that about 60% of our customers buy both online and in shops so the approach is to make it absolutely seamless for them to move from one to the other."
But omnichannel service also presents retailers with the opportunity to capitalise on a valuable demographic.
Vivek Venugopalan, chief technologist, retail, CPG, transportation & goverment business unit at Wipro Technologies, believes that the omnichannel customer shows a propensity for higher value in several different aspects of value measurement.
- The value of interaction: “Customer value is measured by how frequently a customer interacts with a brand. The higher the number of interactions, the higher the value. Omnichannel customers by their very nature interact through multiple channels and thus have higher levels of interaction with the brand,” says Venugopalan.
- The value of loyalty: “The typical omnichannel customer, when presented with seamless experience across channels, tends to display a higher level of loyalty to the brand. The typical cost of attracting a new customer is much higher than retaining an existing ones, hence why customers with higher loyalty to the brand are considered very valuable.”
- The value of information: “As omnichannel customers interact more regularly with various brands, they provide more information about everything from their shopping habits to their food and lifestyle preferences. As a result, during the lifetime of the relationship, brands can expand their presence, tailor their offerings to customers and even create new products and services based on that customer information.”
There is also evidence to suggest that omnichannel shoppers spend more than other shoppers. Deloitte’s recent 2012 Annual Holiday Survey showed that customers that purchase via a combination of in-store, mobile and internet spent $1,585 each on gifts, compared to the average $1,428 spent by those who just used their smartphones to assist in holiday shopping.
Research by IDC Retail Insights supports this, suggesting that while the multichannel shopper will spend, on average, 15% to 30% more than someone using just one channel, omnichannel shoppers outspend multichannel shoppers by over 20%.
Heathcote believes that when debating the value of omnichannel customers, brands must approach it in exactly the same way as they would the value of improving the user experience. “It’s all about delivering great user experience. And so omnichannel is just another way of achieving all of the things that are true about delivering great UX in general – that it drives loyalty, that you're able to increase conversion rate, that you can extract more value from that relationship.”
But when it comes to impressing the omnichannel customer, they are no pushovers.
"They demonstrate an eclectic mix of independence, seeking answers though self-service and community as well as requiring one to one support at times, when only an immediate and personal response is good enough," suggests Dennis Fois, VP EMEA sales at eGain. "The balance can be a fine one: when happiness translates to purchase and loyalty, they may trumpet the brand in public. Let down, they drive a hard response and have no shame in airing their grievances."
So who is the omnichannel customer? The reality is that while there is some evidence that the majority are aged between 20 and 40 and are traditionally tech savvy, the boundaries are changing. In a sense, we are all becoming omnichannel customers - research from eMarketer on the methods shoppers use to buy products shows 12% still mostly use brick and mortar, 42% use mostly online, and 1% mostly mobile, but 45% say they use a combination of brick, online, and mobile. So nearly half of all shoppers are already exhibiting omnichannel behaviour patterns.
And the number is set to rise. Capgemini research suggests that 60% of shoppers expect a seamless integration across online, social media, mobile and physical stores to become the norm by 2014.
Rather than simply missing out on an exclusive yet lucrative demographic, retailers that fail to deliver on this expectation, may find themselves going the way of the dodo.
So if omnichannel is such a powerful service to provide, why isn't everybody doing it?
The proliferation of channels has seen retailers evolve from single to multichannel organisations. But historically, channels have operated as different business units, with their own inventories and pricing. Omnichannel demands that the channels are seamlessly connected, with experiences, promotions and prices all knitted together.
In a report titled “Predicts 2012: Retailers Turn to Personalized Offers Through Mobile and Social but Will Struggle With Multichannel Execution,” Gartner suggests that 80% of multichannel implementations will fail because of siloed approaches and channel-centric strategies that will turn off customers, impacting loyalty and sales. Indeed, it would appear that while omnichannel is coming to the fore now, the challenges undermining its adoption are issues that have been present for many a year.
“Today in most businesses, the organisational structure of channels and brands doesn’t easily lend itself to omnichannel behaviour,” says Venugopalan. “This is one of the biggest stumbling blocks as it requires a fundamental re-design of organisational structure and processes, which can be a significant undertaking. To give an example, in any traditional retail organisation, the brick and mortar is created as separate P&L unit, which tends to be disproportionately large compared to the catalogue / online business. Therefore, any omnichannel initiative will be heavily influenced by the brick and mortar owners and in some cases end up becoming another project for sales uplift of the stores. This can be a real risk that faces disproportionately sized businesses within a brand.”
In an omnichannel world, retailers will have to build unified supply chain capabilities that can handle store demand, ecommerce demand and any other channel simultaneously, allowing customers to order, receive and return products irrespective of the channel they use.
Venugopalan believes those businesses that are concerned with omnichannel should be focusing on the following issues:
- Ensuring a synchronised view of channels and a single cross-channel view of inventory.
- Automating order routing and transmission, order status tracking, shipping, invoicing, reporting, and order lifecycle visibility.
- Building a mobile presence.
- Embedding social into the shopping experience.
- Building apps and experiences especially for tablet-based shopping (use finger swipes, taps and pinching).
- Delivering information to the customer via videos, reviews, ratings, recommendations and price comparisons.
- Addressing organisational and cultural roadblocks.
James Dion, retail speaker and consultant, adds that retailers must be more technologically savvy - both inside and outside the organisation. Have a mobile-ready site, a more sophisticated link between the store and its suppliers and embrace new technologies such as digital wallets and self-checkout, of which Apple is only just moving past the experimental stage. “This is not stuff that you can do on your own,” he says. “In the old days, retailers were able to build their own IT department, write their own code and have their own inventory management systems, their own POS'. Those days are pretty much gone.”
Meanwhile, co-founder of United Future Scott Holmes, focuses on the strategy: “It's absolutely necessary to achieve a holistic strategic understanding of the behaviour path to transaction: the new customer journey. And to tactically implement the best solution now requires an unprecedented level of coordination among marketing, sales, operations and IT to produce the optimum omnichannel/omni-tech brand experience.”
Omnichannel may be a buzzword - and in some quarters an unpopular one at that - but in essence its philosophy is nothing new. It is about putting the customer at the centre of the business. However, to achieve this also means confronting a very familiar set of challenges. Retailers must remove the silos that their channels operate in, and unify the disparate systems and processes.
The modern customer has changed. It's time for businesses to do the same.
Over the coming month, MyCustomer.com will be focusing on how to build an omnichannel strategy, exploring what IT architecture is required to support omnichannel, and examining some case study examples.