What is omnichannel retailing?

Let’s dive into the core concepts of omnichannel retail – the cornerstone of high-quality customer service

what is omnichannel

What is omnichannel retailing?. Source: pexels.com

Sometimes, retailers understand omnichannel strategy as the presence of multiple purchase channels (brick-and-mortar, online, mobile, etc). However, omnichannel retailing is much more complex than that. Access to various selling points may be good, but not as good as their full integration. Consolidating all retail channels is what makes the shopping experience truly rewarding for both sides of the deal.

About the notion

The term ‘omnichannel retail’ or omnichannel commerce is quite new. It was coined only around 2010. It’s no wonder that people still confuse it with a similar notion – ‘multi-channel’. From the linguistic point of view, the difference is obvious. Whereas ‘omni’ means ‘all’, ‘multi’ is ‘many’. To simplify the words, we speak about all channels vs many channels. In the marketing industry, the two concepts go hand in hand, but they have very different implications.

To begin with, omnichannel would be impossible without a multi-channel commerce model. You can’t consolidate the sales outlets if you use only one channel for product distribution. With the development of e-commerce, most retailers understand its value and expanded their sales to online and mobile storefronts. Moreover, many striving salespeople have received the opportunity to start a low-cost retail business online. There’s not much initial capital required without additional warehouse and store-related expenses. Whether you begin with bricks-and-mortar or an online presence, one channel is simply not enough. Brands are adding more and more channels to their portfolios of online presences – social media channels, bots, apps, third-party marketplaces, and more. Yet, all those efforts are not very efficient unless the transition from one channel to another is smooth. That’s when omnichannel comes into play.

Omnichannel retailing presupposes a seamless customer journey through every touchpoint within the brand’s ecosystem. When all the channels are working in perfect harmony, businesses get higher levels of customer engagement and satisfaction, not to mention the boost in sales. In order to create such coherence, retailers need to factor in both different devices and various channels that consumers are using to interact with their business.

Implications

Back at the inception of omnichannel retailing, research showed the great potential of the given strategy. Namely, it was estimated that companies with omnichannel customer engagement strategies retained on average 89% of their customers, compared to 33% for companies with weak omnichannel customer engagement. Furthermore, customer satisfaction is 23 times higher in those companies that run omnichannel strategies. Today, omnichannel cohesion has become rather a golden standard for the industry. Therefore, 90% of customers expect consistent interactions across all channels.

These expectations have become increasingly important since the majority of buyers tend to use more than one channel while making a purchase. According to the 2019 BRP Consulting’s Real-time Retail consumer study, 82% of consumers have researched products using one or a few channels before buying in-store. The respondents have tried starting the product research in a catalog and finalizing the purchase via any channel (82%); checking on the product in-store and buying it online (56%); as well as the opposite way – researching online and buying in a store (45%).

Yet, not all marketers are ready to implement smooth omnichannel experiences into their core strategies. Unfortunately, about half of all the companies have no cross-channel strategy in place and currently are delivering poor customer experiences that end up in cart abandonment.

The top challenges retailers face while failing to develop a successful omnichannel marketing strategy are:

  • Lack of customer analytics across channels (67%)
  • Silo’d organization (48%)
  • Poor data quality (45%)
  • Inability to identity customers across shopping trips (45%)

Some of the main mistakes occurring at the stage of introducing the omnichannel business model include:

  • the wrong channels selected
  • weak customer support
  • not leveraging smart technologies like AI, AR, VR, etc
  • failure to evaluate the cross-channel performance
  • inability to meet customers’ expectations
  • impersonal content strategy
  • use of obsolete or irrelevant data
  • uncoordinated market campaigns
  • inconsistent inventory management
  • segregation of offline and online storefronts

In 2020, when a smart interconnectedness of digital and physical retail channels became critical for health safety, Periscope by McKinsey revealed the sad truth – the majority of shoppers in the US and Europe haven’t encountered even the most basic related in-store technologies, and more than 35% reported zero exposure to any omnichannel option.

As you can see, most retailers have a long way to go before they truly embrace the omnichannel customer experience. What looks good in theory is not as simple to implement in practice.

Use cases

Let’s discover what technologies and strategies are useful for omnichannel retailing. Those include everything that promotes greater integration of the offline and online environments. For example, contactless payment systems, digital screens that offer in-store shoppers certain features of online shopping, augmented reality (AR) systems for trying on clothing or testing products, in-app checkout, cross-channel personalized offers, unified loyalty programs, real-time inventory update across all channels, and many more.

There are many successful retailers implementing those business elements and reaping the fruits of omnichannel strategies. Their examples are inspiring.

Sam’s Club (operated by Walmart)

The membership-only retail warehouses introduced a proprietary Scan & Go App solution that allows members to check out via their smartphones. The app scans UPC codes on items in the cart, and the customers can make a payment directly on their phone from anywhere in the club. Scan & Go also illustrates member-exclusive savings and tracks spending throughout the buyer’s trip.

The retailer has also enabled mobile check-in for product pickup across the entire chain. Hence, when you come to the store to pick up your online order, you check-in before reaching the pickup counter and save precious time. Moreover, there’s a curbside and drive-thru pickup. When your order is ready, you may park in a Curbside Pickup spot and use the app or text to check-in. The employees will bring the goods to you and load them into your car trunk.

When partnering with Instacart to deliver groceries and essentials, the company has taken care of both preserving the membership perks (Sam’s Club Mastercard 1% cashback and lower, member-only pricing on items) and expanding their customer base by giving non-members access to Sam’s Club’s signature savings and bulk shopping options. With quick one-hour delivery and an ability to order 5 days ahead, the newly integrated channel has become a great addition to the whole chain ecosystem.

McDonald’s

A few years ago, McDonald’s invested in data-driven meal choices for its drive-through ordering panels. AI algorithms developed by Israeli start-up Dynamic Yield can automatically change menus depending on the weather, time of day, and traffic. Loyal customers can also appreciate the opportunity to be automatically offered their favorite or usual meals. It’s made possible by AI number-plate recognition. Furthermore,  the technology will enable menus to dynamically change as a customer places an order. Whether you order a burger or a healthy option such as a salad, the system will pair it with a related product like fries or a bottle of water and make appropriate suggestions. In addition, McDonald’s staff successfully handle the totality of in-house orders coming both from the self-service touch panels and those accepted in person.

Sephora

Sephora sends location-based notifications to its mobile-app users, encouraging customers to visit local stores. These notifications can be tailored to customers’ communication preferences or time since the last visit. Furthermore, the famous brand leverages AR for both in-store and in-app makeup trials. Sephora’s proprietary app has an AI extension called Virtual Artist. It uses facial recognition technology to allow the client to virtually try on makeup products. The app then provides online links for the chosen shades of products or gives instructions on where they can be found in a store. Meanwhile, its bricks-and-mortar locations feature 3D augmented reality mirrors, able to scan and save your samples directly into the app.

Home Depot

The retailer has a few cross-channel buying options like buy online/pickup in-store, buy online/ship to store, and buy online/ deliver from store. Its website and mobile app are using data and behavioral analysis of how customers are shopping as well as customer feedback to make it easier for customers to engage with the company. The app is packed with helpful features, including image-based product search and navigation that assist shoppers in locating specific items when visiting a store. The app also features a live chat — to help customers access expert advice at any time — detailed product information and click-and-collect features. It can be helpful even in-store if the human assistants are not available.

Throughout the years, Home Depot has been experimenting with everything from artificial intelligence to voice search and augmented reality. The AR feature is available in the retailer’s app. The product detail page has the option “See it in your home with 3D Augmented Reality”. You should pick a place in your room where the chosen product might fit and scan it with a smartphone. Home Depot is also present on Apple’s pop-up AR tools on iOS. Hence, Safari users may see a 3D representation of the retailer’s products in their home settings without downloading the app. Apple’s AR shopping tools also include shortcut links to shopping carts, store locators, Apple Pay buy button, as well as shortcut access to the customer support chat.

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