Every multi channel retailer has uttered the words omni-channel in the last 12 months. If they haven’t, they probably won’t be around in 12 months. But that’s another topic. It’s more than a buzz word; it’s a crucial element in all future strategies that make the customer experience optimal, and not average.
A few months ago, Worldwide Business Research (WBR), in conjunction with Canada Post, Magento, and OSF Global Services, came out with a study called “Canadian Brands Take the Next Step Into Omni-Channel Retail.”
As the study notes, many retail brands are indeed thinking of omni channel, but very few are acting upon it: “The implementation of strategies and technologies that enable true omni channel shopping has been less consistent.”
In fact, only 28% of the respondents in the study noted that they have many or some omni channel capabilities already implemented.
What is Omni Channel?
Before we get too far, let’s define what omni-channel means from a customer or consumer point of view. Omni channel retail is about actually eliminating channels. So you can buy online, and pick-up in store; reserve online and pick up and pay in store; buy in store, and have the item(s) shipped to you, or walk out with some items, and have the rest shipped to you; buy online, return to store; buy with your mobile phone while in-store, and walk out with the merchandise you just purchased. The customer also wants a real-time view of inventory for all stores that can be viewed online, be able to buy and use cross channel gift cards, and have cross channel loyalty programs applied.
Now let’s define what omni channel means from a retailer’s perspective. It is about servicing all of the elements above for a total retail experience (in addition to having a unified customer account and order history to understand customer preferences), but doing so in an efficient and profitable way. So if a retailer’s distribution center is in Toronto, for example, and a customer in Vancouver orders luggage online from a multi-channel retailer, that retailer would set rules which would include looking at a few local stores to fulfill that order, based on location in order to save shipping costs, and also, reduce time for delivery. So the utopia for multi-channel retailers is to save costs by using stores as mini distribution centers, and to increase customer satisfaction by getting the customer their items more quickly. Or having the customer to all the legwork: reserve online and pick up in store, thus saving shipping costs, and also making the customer happy, as they leave with the merchandise in what could be the same day, or even the same hour.
Best Buy, Aldo, and WalMart are Great Examples of Omni Success
Some examples of retailers in Canada doing a terrific job at omni channel are Best Buy, Aldo, and WalMart. But it’s not for the faint of heart. It involves a huge shift in company mindset, and a huge investment for the current and future wants of a customer. Only 15% of the top 500 multi-channel retailers who launched omni channel are doing so profitably thus far. That is a cringe-worthy figure. But it must be stated that every company allocates omni channel sales and costs differently. Just ask former Saks CEO Stephen Savode, who once described omni channel reporting by saying:“There’s so much integration between (Saks’) store and online sales that we can’t report the numbers separately, they just don’t make sense because we are moving inventory from one to another all the time.”
But still, omni channel involves (sometimes huge) investments in technology, systems and processes, and infrastructure, especially for many retailers who are still using legacy systems.
It’s also worth mentioning that the primary drivers behind current omni channel strategies seem to be to meet customer expectations, which could involve a longer ROI than CEOs are used to.
The Long Omni Channel Road Ahead
The WBR study also pointed to the fact that 30%-40% of retailers are either currently implementing omni channel, or will be in the next 2 years. That is great news for customers, but also retailers. With every new launch, mistakes will be made and the next set of retailers can learn from them.
The biggest aspect for omni channel success is actually not in digital, marketing, finance, and the C-level executive suite. It is actually in inventory management and fulfillment. “Omni-fulfillment is a major challenge that requires enhanced inventory visibility and more streamlined inventory management,” the study noted. “These changes are profound and often transformative, because they push retail brands to not just invest in their inventory management systems, but to redefine their fulfillment networks as omni channel.”
50% of New Online Shopping is Rural-Based
Think about this: According to Canada Post, in 2014, half of all new online shopping households in Canada were located outside major urban centers. Considering most retailers have 1-2 distribution centers in Canada, that certainly increases shipping costs and delivery time.
Speaking of delivery timelines, Amazon and its distribution setup has helped spoil Canadian online shoppers, with many packages delivered within 2-3 days of order. That means that customers now expect all retailers to deliver similar shipping timeframes, which poses a huge challenge if retailers are not set up for this. But using their stores to ship can greatly impact shipping times.
Say Goodbye to Out of Stock (We Hope)
Another element and advantage of true omni fulfillment is to never miss a sale. How often are items out of stock online (using the distribution center stock) but there is tons of stock in several stores? Or how often are a retailer’s top stores are out of stock of some high-turning items, but online has tons of stock left? True omni means (almost) never missing a sale due to out of stock. And customers now expect this.
According to a 2014 Forrester research paper titled Customer Desires vs Retailer Capabilities: Minding the Omni Channel Commerce Gap, 71% of consumers expect to view in-store inventory online, while 50% expect to buy online and pick up in-store. Additionally, 39% of consumers are unlikely or very unlikely to visit a retailer’s store if the online site does not have physical store inventory information.
Other interesting survey results from the Forrest paper include:
- 51% of retailers surveyed cited inventory accuracy issues as a major barrier to the rollout of omni channel programs
- 54% of consumers said that the ability to ship their orders to a local store would be important to them
- 45% of consumers would say yes to an in-store associate offering to ship an out of stock item to their home for free
- 68% of consumers expect in-store sales associates to be experts on the products offered in store and/or online
- 40% of retailers reported having difficulty integrating back-office technology across channels
What is True Omni Channel Success?
And we haven’t even touched on the call center or social experience. But whether a customer calls in with an online order number, writes a complaint on Facebook, or emails to tell of a bad in-store experience, customer service teams must learn to handle these interactions with minimal hand off. Meaning all agents need to understand all channels a customer can and will come from. The customer no longer cares or wants to hear about online, in-store, social, mobile, or catalog. A customer is a customer, no matter what channel they come from. True omni channel success means never hearing about channels again.
What are the best cases of omni channel success out there? Please comment below.
Very timely and appropriate blog Johnny, I enjoyed it a lot.
A great deal going on in the retail business both here in Canada and throughout the world.
Exciting times, what with beacons, customer facing devices, near field communications and all that good stuff coming into the forefront. Lots of opportunity for for smart people to help retailers “Digital Up!” The next couple of years will be critical to be sure. Thanks!