Building a Successful Retail Omnichannel Strategy

Overview:

The term 'omni' originates from Latin, meaning 'all' or 'every'. Consequently, 'omni-channel' signifies the concept of 'all channels'. With the shifting landscape of consumer behaviour, preferences, and expectations, it is crucial for businesses to connect with customers through every possible means, allowing them to improve service and ensuring a healthy profit margin. The push for an omni-channel system originates from the need of customers to utilize business offerings across all channels at once. Thus, an effective omni-channel strategy allows businesses to serve their customer needs anytime and anywhere. A true omnichannel retailer integrates both brick-and-mortar (B&M) stores and e-commerce platforms to deliver a seamless and consistent customer experience. In an effective omnichannel retail strategy, the ability to provide multiple delivery and fulfilment choices through interconnected channels is vital for delivering flexibility and convenience to customers.

The following are key motivational elements that could influence a retailer's decision to implement an omni-channel strategy.

1. Connect customers from anywhere, anytime.
2. Optimizing the physical channel.
3. Increase customer loyalty and retention.
4. Increase conversion rates.

Even though there is little doubt of the fact that omni-channel retailing comes with many opportunities for retailers, there are also several challenges that they are faced with as they move towards a higher level of integration among their channels.

• Technological Investments:

Implementing an omni-channel strategy makes retail operations and supply chains more complex. This complexity comes from needing to invest in advanced systems (e.g., WMS, OMS) and integrations, causing some retailers to hesitate. Challenges include constant inventory tracking and fulfilling customer demands quickly. New systems require financial investments and skilled teams to improve business processes and stay competitive.

• Conflict of Channels:

Issues often raised in multi-channel retailing include channel conflict and cannibalization, which concern retailers looking to better integrate their channels. Conflicts arise from scarce resources or incompatible goals. For instance, minimizing inventory may lead to disputes over which channel receives priority for limited stock. More established channels complicate inventory management further.

• Returns Management:

Returns are a vital part of supply chain management that retailers must handle. The shift to online retailing has increased return rates, as customers cannot see products before buying online. This leads to challenges when customers return online orders in-store, often resulting in items being shipped back to warehouses, which costs retailers. Additionally, physical stores are not set up for higher return volumes from e-commerce. Retailers need to design return policies to balance cost efficiency with high customer service levels.

• Consistency:

One issue with channel integration is the lack of consistency. Differences between channels make it hard to maintain uniformity in pricing, promotions, delivery, return policies, and product assortment. Different prices across channels disrupt the seamless customer experience, though special promotions can guide customers to specific channels.

• Handling Change Management:

Adopting an omni-channel retailing strategy can pose challenges if the organization fails to effectively communicate the advantages of this transition to all internal departments. It is essential to persuade various departments to shift their focus from individual performance metrics to the overall performance, which necessitates a robust change management process for implementation.

Components of an Omnichannel Retail:

Customer Journeys – Delivery / Pick-Up Options:

Curbside Pick-Up Customer Journey:

Endless Aisles Customer Journey:

BOPIS Customer Journey:

Smart Locker Customer Journey:

Customer Journey – Delivery Mechanisms:

Customer Delivery Promise Details:

Choosing the Right Strategic Delivery Option and Mechanism

The choice of delivery options and mechanism depends on factors like:

• Customer Expectations: Fast and flexible options are increasingly expected.
• Product Types: Bulky items might require scheduled or ship-to-home delivery, while smaller items suit lockers or curb-side pickup.
• Infrastructure: Invest in the right technology (e.g., order management systems, WMS system) to enable these options.
• Geography: Options like drone delivery or same-day service may depend on location.

Building a winning Omnichannel Strategy

Crafting a winning omnichannel retail strategy requires a customer-centric approach, seamless integration of channels, and the ability to measure success through clear KPIs. The following insights are drawn from my experience and observations from multiple retailers across the globe.

In a nutshell, referring to the above view, to facilitate smooth customer journeys, and to build a strong omnichannel retail, below are the key pillars:

1. Unified Customer Data: Implement a centralized Customer Relationship Management (CRM) system to track and sync customer interactions across all channels.? Enable personalized recommendations based on unified customer data across all channels with past transactions or browsing history for better conversion. Example: A customer who purchases shoes online receives an email with matching accessories available in-store.
2. Single Inventory: Ensure real-time inventory visibility across all channels, i.e., stores, warehouses and enable endless aisle solutions where customers can order out-of-stock items in-store.
3. Cross-Channel Promotions: Ensure promotions and loyalty points can be leveraged across online and in-store. Incentivize promotions for cross channel sales, e.g., while picking up the item at Store for an online order, customer is offered exclusive in-store-only promotions, prompting an additional purchase at Store or provide a special promotion based on customer preferences, which is valid in both online and in-store or online only customer can receive an upcoming mega in-store discounts.
4. Consistent Messaging: Create a consistent branding, communication, pricing, promotions, customer support across all channels. Example, BOPIS (Buy Online, Pick Up In-Store) with exclusive in-store promotions or allow in-store returns for online purchases (and vice versa).
5. Mobile-first Experience with mobile apps to reserve items, or scan QR codes for in-store offers or personalized recommendations or blend online & offline experience, e.g., app users get product suggestions when they walk in.
6. Technology Integration: By implementing a state-of-the-art distributed order management system (OMS) alongside an advanced Warehouse Management System (WMS) based on a modular microservices architecture for critical functions like Product, Inventory, and Pricing, retailers can lay the groundwork for understanding customer needs. Furthermore, the addition of a modern CRM system that provides an unified customer view, enhanced by AI chatbots, will promote better engagement across various channels, allowing retailers to create a seamless commerce anywhere journey.

Building a successful omnichannel retail strategy requires a customer-first mindset, innovative use of technology, and seamless channel integration. Retailers who embrace these strategies and continuously innovate will maintain a competitive edge in today’s dynamic market.