Omnichannel retailing is the use of a variety of channels in a customer's shopping experience including research before a purchase. Omni-Channel retailing is the use of all physical channels (offline) and digital channels (online) which offer a seamless, innovative, and unified customer experience.
Omni comes from the Latin 'Omnis' which means "every/all" and channel refers to the method in which consumers interact with the company. Transacting includes browsing, buying, returning as well as pre-sale and aftersale service. The pioneers of multichannel retail built their businesses from a customer-centric perspective and served the customer via many channels long before the term 'multichannel' was used.
According to Google data, mobile shopping clicks exceeds those on the desktop as shoppers made their purchase decisions on the go. The way we think about and approach retail marketing is changing. Today, success means reaching consumers wherever they are, on whatever device they may be using. This means smartphones. People are no longer discriminating between mobile and desktop when it comes to shopping—whether that's in a store or on an e-commerce site.
This is creating new realities for retailers. Chief among them is the fact that digital doesn't just drive e-commerce; it also gets people in our stores. This influence doesn't end at the entrance to the store: 71% of shoppers who use smartphones for research in-store say that it has become an important part of the experience. Smartphones are the new personal shopping assistant for people once they're inside.
As digital continues to touch every step of the customer journey, as we operate both e-commerce and in-store channels we have to take note. We have to change the way we think about omnichannel shoppers and what their shopping behavior means for our overall business. We have to ensure that our marketing strategies are geared toward enabling customers to convert on any channel. Why? Because we realize that a shopper who buys from us in-store ánd online is our most valuable kind of customer.
According to a 2015 study by IDC, omni-channel shoppers have a 30% higher lifetime value than those who shop using only one channel.
We can reap the revenue benefits of omnichannel shopping, but only if we know how to attract and keep connecting with these highly desirable consumers. Doing so requires a deep knowledge of how these shoppers behave. It also requires structuring the company to be able to act on these insights. But let's be honest: this is much easier said than done.
Information technology is a key enabler but adopting an omnichannel organisational culture is a key condition to be a (more) successful omnichannel market player.
So, the omni-channel experience is much more than providing the same price and products across channels. Many people confuse Omni-Channel with supporting multiple channels at best inventory and price points. With the customer being at the center of an Omni-Channel experience, companies needs to determine what kind of activities she/he might do through the entire engagement process. Accordingly, they would need to enable these features in individual channels.
The Omni-Channel Paradox
Retailers provide brick and mortar stores and e-commerce as channels to their customers. They also offer mobile applications. However, these channels work in silos and we mostly have channel-specific content applications and, order & inventory management. Product information is scattered and not coherent.
Fulfillment operations are also limited, restricting customer options in case there is an “out of stock” situation. Customer transactions often are limited to the specific channels they used to start the transaction. Even though some retailers provide real-time, personalized offers, these are largely pre-defined and not truly customized. Thus, we seem to have a multi-channel operation but we still do not provide an omnichannel experience to our customers …
The 10 Major Obstacles to Omni-Channel Retailing
Inaccurate customer information - deep 360° customer insights
Insufficient product information management & no central, single product catalog
Incomplete inventory visibility
Huge volumes of data
Manual and inefficient processes
Consumers are more knowledgeable than store associates
Insufficient operational excellence to service costumers as expected
Organisational culture & operating model not equipped to service omnichannel business
Obstacle #1: LEGACY SYSTEMS
Many brands are ‘guilty’ of using the same system for the past 15 years. Often existing infrastructure, architecture, and applications are dated and the technology simply cannot keep up with today’s consumer shopping habits nor your business’ growth plans such as geographic expansion or the creation of new brands.
Investing in an integrated solution (e.g. ERP) that is embedded in our retail business environment and applications. The accuracy provided by real-time technology and a centralized database is not just a benefit to operations but to associates and customers. Having an omnichannel architecture built upon a strong fundament allows us to easily manage multiple brands, products, pricing, and business rules.
Obstacle #2: SILOED SYSTEMS
Many of the existing systems that we are currently using were initially designed for a single channel. This means that data for every channel is either stored in a different database or even a different server. As consumers become more demanding, we cannot afford to have siloed information for each point of business.
Investing in a platform that connects all applications ('on top' of the backend): E-commerce, POS, Store Back Office, Mobile, and Order Management for consistent information across all channels.
Here are several examples of the types of activities that we can perform with an integrated platform:
A store associate can update a customer walking into a brick and mortar store with the status of their latest web order.
The same customer may have visibility to her complete profile including transactions and loyalty points while shopping online.
The head office may be alerted of inventory movement from the warehouse to a store or from the web inventory to a store.
Our call center will have access to review, edit, and cancel orders when a customer calls.
Remember that at any given point, there should only be a single view of the truth.
Obstacle #3: INACCURATE CUSTOMER INFORMATION
Customers expect us to know exactly when and where they’ve interacted with them. What often happens with siloed systems is that the information being viewed in one channel (ex: in-store POS) only represents a snapshot of the customer's profile since it does not take into consideration the other channels that may have been used (e-commerce, mobile app, etc.).
Investing in a solution that provides a 360° view of the customer in order to personalize the experience at every channel. Information such as the complete history of the customer’s purchases, contact information, lifestyle information, preferences, website browsing history, wish list, and customer service interactions should be accessible by sales associates on the store floor and at the head office in order to effectively engage with customers throughout the decision journey. Without establishing one-on-one relationships, retailers may underperform and may even lose customers by failing to optimize their business channels.
Obstacle #4: INSUFFICIENT PRODUCT INFORMATION MANAGEMENT & NO CENTRAL, SINGLE PRODUCT CATALOG
Consolidating All Product Information
The first step in establishing a sound infrastructure to manage product information is to consolidate all product information across our organization in a single location. From this location, team members can access, manage, and publish information to one or multiple locations.
In addition to consolidating all of this data in a central location, it is important to create consistency in determining how that information will be formatted. Benefits: fewer redundancies and errors in product information, improved traceability, and control over how products are managed, greater scalability via the ability to more easily add new sales channels.
Product Information Enrichment
Product information can be a tremendous sales asset and a competitive advantage for retailers who place an emphasis on enhancing the quality of that information. What appears to be obvious, necessary steps, such as writing unique high-quality descriptions, adding product videos, and using high-resolution images, are often overlooked as brick-and-mortar stores extend their offering to the e-commerce space. Effective product information management is not just about adhering to these standards, but utilizing processes and tools to make them more efficient. Benefits: improved customer engagement and loyalty; increased conversions and revenue; stronger differentiation.
Obstacle #5: INCOMPLETE INVENTORY VISIBILITY
We are using separate systems to manage the inventory found in different stores, for web orders, and in the warehouse. Similar to obstacle #3, this results in an incomplete view of total inventory across all business channels. As a result, we are losing sales, having stock-outs and over-stock issues, and generally lacking inventory control.
Investing in the right technology needed to view and efficiently manage omnichannel inventory. Achieve rapid ROI by freeing associates from back-office tasks and enabling them to spend more valuable time on the selling floor by equipping them to perform receiving transfers, and physical inventory from anywhere. Customers expect us to be able to perform inventory lookups directly in the store and offer different fulfillment options. As well, we should look for features that help improve inventory turn by transferring products between stores or back to a distribution center.
Obstacle #6: HUGE VOLUMES OF DATA
We understand the importance of collecting the transactional, product, customer profile, and social data; however, we are still manually compiling the business intelligence that is being collected across channels.
Investing in a solution with embedded analytics and business intelligence to access insights from within all business applications. A platform for both transactional and analytical reporting across the enterprise can help retailers make smarter strategic and operational business decisions. As well, customer information that is collected from every interaction and centralized in one location provides retailers with valuable insight to improve these interactions and the customer experience as a whole.
Obstacle #7: MANUAL AND INEFFICIENT PROCESSES
Although we live in a highly digital world, many manual methods are still being used in our stores, whether to manage customer orders or store receiving and transfers.
Integrating all of our omnichannel requirements with a centralized solution for customer orders and inventory management. This transition offers a great opportunity to review and standardize their internal processes across all channels. Minimize costs by automating processes, resulting in fewer errors, improved customer satisfaction, and significant time savings in the order fulfillment process.
Obstacle #8: CONSUMERS ARE MORE KNOWLEDGEABLE THAN OUR STORE ASSOCIATES
The modern consumer is armed with knowledge and technology. Consumers have access to information such as reviews and comparative prices when and where they want it, and as a result, it is not uncommon for a customer to actually have more information about a product than the in-store associates themselves.
More often than not, the sales associate needs to leave the customer’s side to get more information on the product or its availability. Not only does this lack of knowledge drive customers to use their mobile devices instead of engaging with your sales associates in the future, but you may also be losing them to your competitors the next time they decide to go shopping.
Empowering our sales associates with mobile technology and the right set of tools so that they can provide outstanding customer service and employ bestselling practices. Although there are many ways to digitize the store, arming sales associates with mobile devices allows them to remain by the customer’s side throughout their entire visit. Several valuable mobile capabilities to consider include inventory lookup, product browsing, accessible in-depth customer information (purchase history, preferences, wish lists), and mobile transactions. Store experience, customer service, and sales associate education are important in increasing store traffic, conversion, average transaction value, and gross margin.
Obstacle #9: INSUFFICIENT OPERATIONAL EXCELLENCE TO SERVICE COSTUMERS AS EXPECTED
Build Processes To Create Speed & Efficiency
It’s no secret that rolling out new products or making updates to existing products can be a lengthy, painstaking process. By implementing processes and/or utilizing technology to expedite those tasks, you can significantly decrease the amount of time spent managing product information –– in many instances by more than 50%. It’s important to note that because product management challenges are unique, there is not a “one size fits all” approach to building these processes. Furthermore, the processes themselves are the most important consideration, whereas any technologies to support those processes should come second. Benefits: increased revenue achieved by bringing new products to market faster; time saved updating existing product information; more accurate and up-to-date inventory and price information.
Obstacle #10: ORGANISATIONAL CULTURE & OPERATING MODEL NOT EQUIPPED TO SERVICE OMNICHANNEL BUSINESS
Proactive versus reactive operating mechanisms (real-time companies)
Dealing with ongoing change
Vertical towards horizontal organization and processes
Marketing, sales, and operations across the silos
An IT architecture to support the omni-channel business model
To support the changing business model it is imperative to plan and build enterprise platforms from a technology perspective. However, with shrinking IT budgets, we will have to find ways to reduce the cost of operations to fund these new transformations. Some cost-reduction avenues will come from these technology trends itself.
For instance, explore options for supporting ‘Bring-Your-Own-Device’ for store associate mobile devices. Another option would be to move some applications on the Cloud in a Software as a Service (SaaS) model, which brings in huge cost reduction opportunities.
While drawing up the Omni-Channel strategy, retailers should in parallel plan for a supporting technology platform, which will have to provide a base for integration with Cloud-based applications and an increased number of mobile device-based applications.
The recommended Omni-Channel IT landscape would include the following four key aspects:
Channel Integration Layer
Enterprise Business Service Layer
Common Business Applications
These are channels that the retailers will need to support and include a wide variety of options like web, kiosks, smartphones, handhelds, and POS registers. This is a growing list and varies based on the end-user. However, based on the channel strategy, the relevant functionality should be seamlessly enabled across these channels.
Channel Integration Layer
The Channel Integration Layer acts as a façade between the end channels and enterprise business services. This layer is important for 3 key reasons:
In the fast-evolving technology environment user channels such as AR/VR, smartwatches, in-game purchases and phablets are getting added. The idea is to keep enterprise services free of the complexities required to integrate these channels and let the channel integration layer manage this.
The users of business services will vary from customer mobile apps, store associate apps, third-party developers of price comparison sites to business partners. From a security point of view, it is not recommended to directly expose the enterprise services to all these external consumers. The Channel Integration Layer takes care of the security aspects and allows only the authorized consumers to hit the enterprise services.
Different end consumers might require different data and policies governing the interaction. This again can be handled at this layer.
Enterprise Business Services Layer
This layer can be a vital factor in the success or failure of an Omni-Channel strategy. The key here is to create business services that can be consumed by any channel. The channels individually do not need to worry about the backend business applications. They only need to invoke the right business service which, in turn, gets the response for the channel. Any new feature which the enterprise wants to bring in also gets added to this service layer and then the channels can adopt it at their pace. To support the new functional capabilities a variety of business functions would require to be exposed through the business service layer.
Common Business Applications
In most enterprises, the channels of interactions have evolved over time and most of them have different backend systems supporting them. This becomes a limiting factor for enterprises when they want to bring a common experience to the customer. The most important aspect of preparing for an Omni-Channel experience is to consolidate and harmonize the backend business processes and applications. This includes both the core business operations like Product Information Management, Inventory Management, Order Management, and customer value-added applications like Product Recommendations and Loyalty Management. Another important aspect of this layer is to have a common Online Transaction Processing (OLTP) so that customers can switch channels and continue their transactions from where they left off. This will allow all the channels to work as a single cohesive conduit from the customer’s point of view.
Conclusions and action points
It is important for retailers to identify, engage, and reward customers across channels.
A well-defined customer engagement strategy and identification of the role of each channel is an integral part of that.
Enterprises already have parts of the system landscape discussed above. However, it might not be enough to support new business models.
So they should invest in defining a reference technology architecture based on their planned Omni-Channel journey. The CTO organization should look at this technology reference architecture and identify the gaps.
The gaps would most likely be in the areas of integration, enterprise business services and the channel integration layer. Most retailers have enterprise service bus-based integration platforms, but these would need to be augmented with a platform to build and host enterprise business services. This is achieved by products around BPM, Business Rules and Complex Event processing.
Another area that needs attention is the channel integration layer.
This involves products around security gateway and Application Programming Interface (API) management. This is important to expose the enterprise business services to the end-users, third party consumers, and other applications (like Social apps) through multiple interaction channels.
Omni-Channel adoption is a large transformation that involves both Business and IT. So it should be approached with a clear roadmap for adopting it for both process and technology platforms.
A pragmatic approach will be to define an overall strategy and break the Omni-Channel journey into smaller initiatives.