Omni-Channel: Retailing's Grey Shade

I recently came across a podcast interview of the Wharton Press with Barbara Kahn, Professor of Marketing at The Wharton School on ‘Why some retailers succeed despite big disruptions’ that had some essential takeaways for me as an MBA student and an aspiring marketer.

The first thing that stuck with me from the article was the statement:

Physical retail is not going away; bad retail is going away

What this means is that brick and mortar is here to stay. Contrary to popular belief, the world is not moving online, it is moving to a ‘customer-centric omnichannel experience’. E-commerce is not a new concept. In 2019, e-commerce accounted for 11.4% of US retail sales, and even during the peak of lockdown conditions in the US in Q2 2020, online retail sales accounted for only 16.1% of the total US retail sales – a gain of less than 5%.

What’s striking is that while everybody is talking of the world switching to e-commerce, Amazon, the biggest US online retailer is busy opening brick and mortar stores of Amazon Fresh and Amazon Go. Why? Simply because the future is not online ‘OR’ offline – it is both. It is a seamless integration (the best of both worlds as Miley Cyrus may call it) between the two channels. This concept existed and was rightly identified by the likes of Jack Ma and Jeff Bezos but is only accelerated by the pandemic. Shoppers are becoming more comfortable with the idea of ‘BOPIS’ – Buy Online Pickup In Store, also called ‘Click and Collect’ wherein a customer goes through the search and discovery process online and the checkout process offline, or vice versa.

Drawing an analogy from my personal life, until a decade ago, I was dependent on a small nearby retail shop called ‘Foursight’ for purchasing spectacles. Enter Lenskart and things changed. At first, it introduced to me a convenient way to browse through new styles and shop from home (e-commerce). Next, it added an option to try-and-buy, both virtually and through physical sellers at my doorstep carrying limited options (enhancements to its e-commerce model). Finally, it allowed me to physically try the frames at its outlet and place an online order on its website from the retail outlet itself, eliminating the need for a return visit for order pickup. Lenskart equipped its employees with hand-held tablets to quickly take online orders in store once a customer was satisfied with the product (omni-channel). Such models are likely to be the most successful in an industry often affected by a tsunami of changes.

The second interesting concept coined by Jack Ma and introduced to me through this article was of ‘new retail’, which talks about the enhanced in-store customer experience in an omni-channel setup facilitated through the use of technology. An example of ‘new retail’ is ‘Hema’ - Alibaba’s high-tech supermarket designed around a smartphone. Shopping at Hema offers experiential retail involving shopping through an app using QR, digital price tags updated in real-time, seamless digital payments with facial recognition, automated service using robots, and much more! Hema also doubles as a distribution center for Alibaba where the back of the store serves as the warehouse that helps employees fulfil online orders in store and send them out for delivery. Watch the video below to know all about new retail.

The third insightful observation by Barbara was about why Gen-Z shoppers, i.e., people between 6 to 24 years of age, are the preferred target audience for omni-channel retailers. The obvious answer is that they are a tech-savvy, mobile-first generation that has also seen the comfort of offline shopping, but the real insight here is that what really drives their behaviour towards omni-channel is the notion of blurring of shopping channels, involving all kinds of media. Here, Barbara introduces another interesting concept of ‘shoppertainment’ (a fancy name for influencer marketing), wherein retailers use influencers and KOLs (key opinion leaders) to persuade shoppers into a sale. In essence, the shopping experience for Gen-Z shoppers has merged between online, offline, online within offline, and social media – making them the perfect omni-channel shoppers.

The fourth and the final key highlight of the article was the discussion of an omni-channel strategy with a twist. When asked about exceptionally innovative brands in the new era of retailing, Barbara opined that though the biggies like Amazon, Target, and Walmart managed to survive the pandemic, they already had their inimitable competitive edges laid out in the market. She rather lauds Lululemon, an athletic apparel retailer, as a star performer that pivoted its retail strategy quickly and successfully at the onset of the pandemic.

Two things led to its success – getting the 101 of marketing, i.e., its marketing mix right, and proactively adopting an omni-channel strategy but with a twist. The first one was created on the pillars of a great product being sold at the right place at the right time that built strong customer loyalty, that helped Lululemon stay afloat during the pandemic. The more interesting strategy though, is where they took to omni-channel to translate their in-store experience, and not purchases, from offline to online. Lululemon was not like any other fitness apparel store. It had a large format multi-purpose store with a yoga studio, gym, meditation area, restaurant, and a retail apparel outlet, that aimed to build a community of athletic people. When the pandemic hit, Lululemon was quick to acquire Mirror, a fitness startup conducting online classes, with a popular online fan following. This mini case study of how Lululemon embraced the notion of omni-channel to drive its in-store experience online, and not retail sales, stood out for me.

In essence, omni-channel has led to the complete blurring of boundaries between online and physical retail, and is neither the black nor white, but the grey of the retailing industry!