The retail industry has been undergoing rapid changes for some two decades. Around 20 years ago, there was only one channel – the local branch – which made administration easy and straightforward. But widespread Internet access has resulted in an increasing number of purchases being made in online shops. The retail industry has responded by providing opportunities for online shopping in parallel with their traditional in-store experience. That was the beginning of the multi-channel strategy. However, even though many channels were available, there was no interconnectivity. Later, retailers began to link the individual channels to provide customers with a more appealing shopping experience – that’s how the cross-channel strategy came about. For example, the customer may select a product on the Internet and then pick it up in the store. But even if there has been a certain amount of networking, most retailers still manage the individual channels largely separately from one another. However, this is starting to change with the growing popularity of omni-channel strategies.
Omni-channel – customer-focused retailing
Omni-channel goes one step further than the methods presented so far. Here, the boundaries between the individual channels are blurred as much as possible. That means the customer can always access the option that is most convenient for him at that particular moment, and he is always the focus. The various sales channels serve to present the products and brands to him as fully as is possible. The buzzword is “Customer Centricity”. All the different channels are fully interconnected and the customer can switch between them at any time. For each alternative option, he can access the same products, the same information and the same prices. Even discounts and other promotions are simultaneously available across all channels. The ideal form of omni-channel trading is referred to as “no-line commerce”. Where this is properly set up, the user will barely notice any dividing lines between the individual forms of retail access.
Merging of marketing, organisation and logistics across all channels
The introduction of cross-channel trading and functionality presents retailers with some challenges. Moreover, such issues not only affect the new digital channels, but also existing forms. For example, consistent use of customer data across all sales channels is very important, because it allows transactions to be processed both online and in the store. Not only should the master data be available, but also information about orders, complaints or open invoices. The product data must also be consistently accessible across all sales channels. Only in the area of pricing is it possible to make channel-specific adjustments. However, cross-channel retailers generally still have clear dividing lines between online and offline marketing in other areas such as marketing, organisation and logistics. Therefore, very often, different departments are responsible for similar functions without really coordinating their activities. However, the introduction of omni-channel is beginning to create changes. It’s essential for these areas to network together, and marketing activities should be relevant to all channels. Also in terms of logistics, it should be possible for a shop retailer to deal with an online order, or arrange for goods to be sent between different branches.
Major changes in process organisation and IT architecture are essential
An omni-channel system promotes a holistic view of the customer. Traders will then better understand consumer actions and preferences, which should lead to better-targeted marketing initiatives. In addition, the customer’s shopping experience is improved. This leads to greater customer satisfaction and thus contributes to increased sales. However, these measures are associated with significant restructuring, which will affect the organisation of the whole company. If, for example, the customer wishes to exchange a product, he should be able to choose whichever channel is most convenient for him – even if he purchased the product via a different channel. It is therefore essential to completely revise existing structures in this area. The same applies to logistics – until now, a central warehouse has often supplied all the different sales channels. From now on, it will be important to manage all stock together and make everything accessible to all channels. And to do this, retail companies must comprehensively revise their underlying IT architecture.
Conclusion: Careful examination of the chosen strategy is a wise move
An omni-channel strategy brings many benefits. It improves the shopping experience for the customer, and permits a broader view of consumer behaviour. Consequently, distributors can offer the customer products that precisely meet their specific needs. Omni-channel has the potential to increase sales significantly. However, its implementation does require a substantial investment, because businesses will need to revise their internal processes and develop a new IT architecture. This increases the complexity of the task and generates higher costs. Therefore, switching to omni-channel may not always prove worthwhile. So it is very important to plan this step carefully – for example, via a careful comparison of costs versus profit expectations.
This article was originally published on LinkedIn.