The Adoption and Economics of Omni-Channel Retailing
Andy Tudor, Head of Multichannel Solutions at Retail Assist, comments on retail’s move from ‘multichannel’ to ‘omni-channel’. What does this mean for the industry and what kind of take-up can we expect for this new distribution model? Andy makes some predictions and also discusses the economics of omni-channel.
May 2012: Over the coming year, retailers who are already looking at the different ways in which their customers transact with them will start to introduce new IT initiatives to turn their plans into reality.
Many are starting to espouse omni-channel, and see it as an all-encompassing ‘win-win’ interface that enhances customer convenience and satisfaction whilst increasing the retailer’s ability to secure sales.
Based upon the work being currently undertaken by the most forward-thinking of our clients, we forecast see the following developments:
Mobile Payments – expect to see significant trials of mobile payments, marking a move beyond today’s mobile-optimised websites and mobile apps to focus on linking different channels. The goal here is a scenario whereby customers start to research purchases on their mobile ‘phone, then go into a store to confirm their choice, possibly completing the purchase on their ‘phone as well.
With the adoption of NFC payment technology, firstly via debit or credit card and ultimately evolving to mobile ‘phones containing NFC chips, we will see organisations such as the London Underground use this payment technology to replace their Oyster cards. Once mobile payment technology is implemented widely within the public sector, we believe any resistance to using it within retail will lessen.
Reduced fixed till usage - we anticipate a move away from fixed tills. We’ve already come across a number of tablet trials and, as platforms such as Windows 8 start to come out, we may see a real challenge to Apple’s monopoly. Tablets can offer a desirable, added level of in-store customer interaction. Having that one-on-one experience with the customer is particularly important for retailers whose product price-points or overall basket values are high.
Social Networking – social networking has already proved its worth by enabling retailers to better understand their customers. In extreme examples, we’ve seen executive board members respond to Twitter feeds and Facebook comments. At an operational level, we also see retailers studying live Twitter streams to gauge consumer reaction to new product launches.
We predict that social networking practices will be widely introduced into the workplace and become an integral part of a retail organisation’s culture. In the case of ‘bricks and mortar’ retailers, social networking can usefully underpin internal communications between Head Office and the store estate, utilising a technology that is becoming commonplace in the lives of their employees.
International web sites – this is another exciting area and one where we foresee considerable expansion. We will soon see dedicated foreign language websites which will break down the barriers to international trade and permit customers logged on from anywhere in the world to shop in their native language and currency.
But what about the economics of these new omni-channel initiatives? In simple terms, can the retail industry afford them?
Whilst few deny the importance of omni-channel, we see differing levels of investment in this area, not surprisingly. Some retailers are making good progress and are integrating their channels seamlessly. Others are simply making sure that financial pressures are well managed and are not investing in omni-channel this year.
Those retailers that have decided to embark upon omni-channel developments are at different stages of the journey. At one extreme, we see some who have yet to embark on a mobile strategy, still trading via ‘bricks and mortar’ stores or on the web. At the other, we are working with businesses at the forefront of omni-channel, which have already merged their channels and have achieved the goal of enabling customers to start product research using one channel, and make their purchase using another.
Behind the scenes, those clients leading the omni-channel charge are joining up their fulfilment processes and making their stock and inventory work very hard. In cases where a web purchase cannot be fulfilled from the Distribution Centre because it is not holding product in stock, we see product coming from store to complete the process; a great example of omni-channel in practice.
Looking back three to five years, a retailer was considered to be at the cutting edge if it had a transactional website. In the past year or two, we’ve seen multichannel retailing become more commonplace, which has allowed customers to travel in different channels in their purchasing journey.
Today, the buzz is omni-channel, and is all about the customer shopping the brand as opposed to shopping the channel. A consistent brand and shopping experience can be provided regardless of the channel chosen. That’s real progress.
In conclusion, if a retailer gets omni-channel right, there are clear financial benefits to be gained. Take the example of one of our clients who has now enabled fulfilment from stores as well as via the DC for web purchases. It attributes a 20% sales uplift on a like-for-like basis in the 8 weeks leading up to Christmas 2011 to this new approach. No one can dispute that this is a very significant return on investment, and one which clearly justifies the initial capital outlay.