Connecting the dots of omni-channel retail

by These Days - May 11, 2016

It's been over two decades since the lines between online and offline started to blur in retail. Across the first e-commerce initiatives that grew year after year since the advent of the Internet, several retail categories systematically came back: books, music, you name it.

Today that list has grown exponentially and new e-commerce players with often disruptive models keep popping up. Nevertheless, some of the first movers and the biggest name in online retail since those early days still stand firm and even changed the game in retail overall. Yes, indeed, I’m thinking about Amazon.

The changing face of retail and the reality of omni-channel retail isn’t just about e-commerce. It’s about many factors with the changing consumer being the key factor.

Analysing retail consumer behaviour

During and after the 2008 economic crisis several large retailers had to close shop but beyond the reality of the crisis a deeper evolution changed the retail landscape. As consumer behaviour changed, so did the reality of shopping amid a series of accelerating digital transformation drivers.

Contrary to popular belief and despite the continuous growth of e-commerce, it isn't online shopping as such that is the biggest game-changer. After all, the large majority of retail sales still comes from physical shops.

The major evolution is the rise of the totally channel-agnostic shopper who still loves to buy in stores (reports on the death of the high street as such are indeed exaggerated – a lot) but has a far more diverse, demanding, connected and multi-channel behaviour than before.

• The connected part refers to the ways consumers form networks of shopping reviews, buying decisions, social shopping experiences and even collaborative retail models. It also stands for the connectedness of a seamless journey whereby borders have disappeared.

• The multi-channel behaviour, which from the consumer's perspective doesn't exist, is about how retailers are confronted with a more complex buying journey whereby consumers hop from channel to channel, depending on the individual 'task' and context at any point in time. Furthermore, think about the multi-tasking aspect so to speak. Today's consumer is sending pictures of, for instance, a dress or suit, to friends or family members to ask their opinion.

• The demanding part obviously stands for how consumer expectations in retail have changed. Just think about how in many retail categories, physical shopping experiences are expected to be so much more than the traditional store model. Consumers want WiFi, they want immersive experiences, they even want fun, digital innovations and the ability to compare prices online for the products they try, touch or discover while in your shop. 

• The most important and probably most difficult element, however, is the diversity. Consumers are spoiled and they have an abundance of choice. Sometimes they even have too much choice which refrains them from taking actions. Yet, as choice regarding channels and retail models (look at how consumers buy items from warehouse-style discounters while very consciously buying other items at luxury stores within one category such as food) grows, this diversified behaviour makes it more complex for retailers to understand the individual consumer, let alone to build loyalty.

Add to that the highly individual and contextual ways in which various touchpoints, channels, devices and sources (including peers) are ‘used’ for specific intentions across the buyer's journey (inform, compare, decide,...) and the complex picture of omni-channel retail becomes even clearer.

Adding to the omni-channel retail complexity: challenges beyond marketing

Distinguishing between offline and online has become an archaic way of looking at retail. As we moved from multichannel and cross-channel to omni-channel, the consumer didn't really care about channels, let alone about digital or physical. They simply prepare their retail journey

and shop, regardless of where, when and how. They expect seamless shopping experiences and journeys.

Omni-channel is simply a given and retailers have been and are massively investing in enabling those seamless experiences, while testing out new in-store approaches. Retailers face numerous challenges. While they start getting omni-channel from a marketing perspective, it's really hard to remain profitable in the omni-channel reality. The reason: omni-channel sales means costs that further squeeze margins in an industry that's already facing revenue and profitability challenges.

Omni-channel indeed isn't just about marketing, it's at least as much about sales and when you want to sell and deliver when and where king consumer wants it today, you inevitable face handling and shipping cost to fulfil orders.

A holistic view on the retail consumer and the retail supply chain

As if it isn't enough, consumers are less loyal to retailers and some leading e-commerce players have fully altered the landscape.

It's not a coincidence I mentioned Amazon in the beginning. The online retailer (and it's more than a retailer) is one of those champions that raised the bar of customer experience expectations across the industry and even all other industries. And the many changes that hit the retail industry as a consequence of the actions of Amazon and the likes have further impacted the very business of retail. Consumers expect free shipping, they are used to ultrafast delivery and expect the same comparison and shopping features they see on the websites of the best in class retailers.

As Amazon is starting with 'offline' stores and clearly is preparing to raise the bar even higher with its unmatched logistics and retail supply chain capabilities, all retailers try to optimise and digitally transform their back office operations. Excellent omni-channel experiences in the digital front end and the store aren't enough anymore. Aligning promotions and marketing actions with excellence in the overall supply chain is the name of the profit game.

Fortunately there are more ways to increase profit. In some categories and regions, logistics are still a reason for digital and mobile first consumers to pay a premium. But for how long? Just as in the operational aspect the heat is on to have a more connected and optimised supply chain, in the customer-facing context a holistic approach towards consumer engagement, brand and shopping experiences, in-store technologies and the overall consumer journey is and will be paramount.

At the centre of it all: a mix of data maturity, real-time retail operations, the end-to-end customer experience and, last but not least, a shift from limited moments of truth such as the actual transaction to relationships based on deep consumer insight per category, segment, interaction and even individual consumer. And that also means deep insights into channel usage, even if for consumers channels don't exist. The trick is to hide to remove complexity for the consumer, even if omni-channel retail is complex across all operations and activities. And if that complexity behind the screens can be removed by connecting information and data flows with marketing, sales, promotional activities and the supply chain, retailers can focus on what really makes the difference from the consumer perspective.

Getting started: ways to win in the changing retail reality

Let’s face it: there isn’t a single best approach to win in retail or deal with the omni-channel challenges. Buying exclusive fashion is not the same as buying groceries, for starters.

Yet in general, to win in this complex reality it's essential for retailers to:

• Have their supply chains and back office processes right to optimise costs and support the inevitable omni-channel shopping journey.

• Prioritise omni-channel capacity and marketing investments in order to optimise their offering and strategy in correlation with revenue and profit, taking into account the cross-fertilisation effects of several channels.

• Use the saved costs from the optimisation and digitisation efforts they undertake to invest in innovative and immersive, and at the very least omni-channel, shopping experiences in (selected) physical stores.

• Design the full retail experience with the consumer in mind, diving deeper into consumer psychology, user experience, design thinking and frictionless experiences, as the increasingly mobile first lifestyle demands it.

•Transform loyalty approaches, moving away from the traditional rebate-only model towards more comprehensive and encompassing loyalty programs within a broader ecosystem of partners.

•Get the data. And most of all get the right data to tailor the individual consumer's journey and experience in the most hyper-personalised, timely, location-aware and context-aware sense way achievable.

•And last but not least, connect the systems, data sources and processes to align operations, promotions and strategies with predictive models to optimise revenues and marketing approaches in real-time.

The more diverse, omni-everything, interconnected and empowered consumers are, the more critical it is to have a unified approach towards data, creative, interaction and engagement.