Written by Kristina Carlsson
Five important factors to consider when implementing an omnichannel strategy
When it comes to strategies in how to implement omnichannel retailing, retailers must of course take matters like product, level of demand and target market into consideration. The following recommendations will thereby be general and should be optimized in their adaption to fit the specific company or brand that implements them.
1. Structured layout and information of e-commerce and physical store
No matter if the consumer is shopping online or in the physical store, an omnichannel retailer must provide an understandable layout and structure of its product presentation. According to both Brynjolfsson, Hu & Rahman (2013) and Liebmann (2013) many shoppers are finding physical retail stores hard to navigate and compare them with e-commerce alternatives where they can search for keywords, category or the specific product and find it instantly.
Having store personnel visible everywhere for consumers to ask about locations of products in larger retail stores is expensive. An idea is therefore to place tablets on selected strategic places in the store where customers themselves can search for products or categories and straight away get product or category location. These tablets can also include additional information about products, something that both Brynjolfsson, Hu & Rahman (2013) and Liebmann (2013) argue is important for the well-informed customer, which to some extent is lacking in offline stores today.
2. Gather and analyze data and analytics – solutions should be made accordingly
According to Brynjolfsson, Hu & Rahman (2013) retailers need to work more proactively with gathering and analyzing data. There are a lot of data that traditional retailers already have access to, but do not take advantage of. Using data and doing in-depth research about the shopper’s needs and behaviors can, according to Frazer & Stiehler (2014), determine the key contact points that retailers need to take advantage of and understand in order to improve the shopping experience. Liebmann (2013) argues that there is an unwillingness to look at the buying process through the customer’s eyes, which has to be changed in order to understand, find and improve the key points in the process. These key points should be improved in the omnichannel retailing and create a seamless experience. If the shopping experience is not seamless, the new customer in the Internet era will go elsewhere.
Innovation should thus be created in terms of customer value and not with technology in focus. Technology can be the tool for creating customer value and creating the seamless experience that omnichannel retailing is, but the technology should not be too complex, an instant and intuitive usage should be the goal according to Aubrey & Judge (2012).
An example from Rigby (2011) of successful customer research made by Tesco in South Korea can act as inspiration for how technology can be used. After rigorous research of how the time starved consumers of groceries in South Korea made their shopping Tesco found some interesting facts. They realized that when customers lack time in their schedule to go grocery shopping, Tesco would bring the grocery shopping to them. Tesco launched a trial run with digital grocery shops in the subway, letting the customers chose from hundreds of products, scanning them with their smartphones and then getting them delivered to their home. About 10,000 customers took advantage of the digital grocery store and Tesco’s online sales went up with 130%. According to Rigby (2011) this could never have been achieved if Tesco did not know what their customer’s key points were and could accordingly create a tailored solution for that specific target group.
Picture 1 - Omnichannel retailing in South Korean subway (quietlikehorses.com, 2011)
3. Seamless logistics, inventory management and educated personnel
Pratt (2012), Aubrey & Judge (2012) and Brynjolfsson, Hu & Rahman (2013) agree that the physical store and the online store should all be a part of the same omnichannel logistical system. This means that the possibility to make returns or exchanges should be applicable for every channel, if a product is ordered online it should be possible to return it in the physical store and the other way around.
When the seamless logistics concept is applied in physical stores, sales advisors should, according to Pratt (2012) be able to see the exact inventory status in all channels as well as in other physical stores in the nearby geographical area. This provides the sales advisor with the opportunity to order an out-of-stock product to the store or to the customer’s home, ensuring that the customer will buy it from the specific retailer but also saving the customer time. Another opportunity for the sales advisor is to show the entire range of products to the shopper, even though they are not in stock, saving inventory space – only ordering it if there is an interest from the customer.
Another argument for the omnichannel logistical system is according to Brynjolfsson, Hu & Rahman (2013) that retailers can learn how to sell niche products in physical stores instead of only in online stores, since niche products is something you would want to keep low in stock.
Finally, Pratt (2012) and Liebmann (2013) only believe this way of using technology is possible with well-educated store personnel. Kaplan (2011) describes a catastrophic situation with the American clothing chain GAP where management did not inform store personnel about an online coupon certain customers had gotten. When customers tried to use their coupon, they were laughed at by the personnel, “are you trying to use the magic coupon again!?”, the customers left the store disappointed and insulted. Of course this spread on the Internet, not increasing the positive brand image of GAP. This underlines yet again that sales advisors must be educated in the way to use the technology in order for it to be smooth and creating that seamless experience for the customer.
4. Creating switching costs leads to loyalty
The customer experience and buying process should be smooth enough so that customers would not want to change retailers. According to Brynjolfsson, Hu & Rahman (2013) the focus for retailers should be more on customer experience than on pricing. Retailers should still offer a competitive price but if the price difference is small, customers would rather go for the one offering the smoothest buying process. Furthermore, Brynjolfsson, Hu & Rahman (2013) believes that in order to ensure customer’s loyalty, barriers for them to change retailers should be established. It can be bonus programs; invitations to events or other offers that makes the customer believe it is worth staying loyal to the specific retailer. Customer Relationship Management should always stay in the back of retailer’s minds since it is one of the strongest ways to connect and ensure loyalty according to Frazer & Stiehler (2014) and Pratt (2012).
5. The physical store is an opportunity to differentiate and communicate brand image
Aubrey & Judge (2012) claims that the physical store should be a place where retailers differentiate themselves. This should be an inspirational place where customers are amazed and want to spend hours. The physical store should be a place where retailers can communicate brand image and thereby gain positive effects on the overall brand value. Rigby (2011) lists a couple of hands-on ideas on how the physical store can differentiate themselves with for example high-tech fitting rooms, seating areas with the possibility to scroll through the complete range of products on your smartphone and mobile check-out’s.
Aubrey & Judge (2012) further argues that retailers should be able to take active decisions about where different formats are suitable. The coffee brand Nespresso have for example chosen to open smaller stores with a reduced range of products just to be visible, and larger stores with the full range of products, so called flagship stores. The smaller sized stores can always order from the complete range of products, either to the store or to the customer’s home. In this way, they save inventory space and reduces risk of not getting products sold – while at the same time being visible on many locations, offering customers everywhere to pop in for a cup of coffee.
Conclusion
This paper has offered insight on why and how businesses should approach omnichannel retailing. The largest reasons to why businesses should adapt to omnichannel retailing is because of the growing ownership of mobile phones and tablets with Internet connection that customers bring and use when they go shopping. The growing trend of shopping through e-commerce, on mobile phones, tablets or on the computer should also be seen as an argument for the need of omnichannel retailers. Using an omnichannel retail concept, retailers can minimize the risk of being exposed to showrooming. Showrooming happens when customers use the physical store as a showroom for examining products and then ends up buying the product from an e-commerce business with lower price. With an omnichannel retailer, consumers should value the smooth and seamless experience higher, and thereby not consider exercising showrooming and ordering online from a pure online retailer being worth the hassle.
When considering an omnichannel approach, the five most important properties are presented as follows:
1. Structured layout and information of e-commerce and physical store
2. Gather and analyze data and analytics – solutions should be made accordingly
3. Seamless logistics, inventory management and educated personnel
4. Creating switching costs leads to loyalty
5. The physical store is an opportunity to differentiate and communicate brand image
Existing research on omnichannel strategies is to a large extent focused on why but not as much on how. Interesting further research will thereby have the possibility to cover questions like how omnichannel retailing can be applied in practice with hands-on advice and examples from practice. Omnichannel strategies are today used by some retailers but not anywhere near by all. Few, if any retailers of today can be considered to be fully integrated in the omnichannel concept and thereby it would also be interesting to, in the future, investigate how these have managed to integrate the omnichannel strategy and what we can learn from those examples.
References
Aubrey, Chris & Judge, David (2012) Re-imagine retail: Why store innovation is key to a brand’s growth in the ‘new normal’, digitally-connected and transparent world, Journal of Brand Strategy, vol.1, no. 1, pp. 31-39 April-June 2012.
Brynjolfsson, Erik, Hu, Jefferey Yu, Rahman, Mohammad S (2013) Competing in the age of omnichannel retailing, MIT Sloan Management Review, May 2013.
Findahl, Olle (2013) Svenskarna och Internet, Internetstatistik 2013. http://www.internetstatistik.se/artiklar/svenskarna-och-internet-2013-slappt/ Avaliable 2014-02-15
Frazer, Mariette & Stiehler, Beate Elizabeth (2014) Omnichannel retailing: The merging of the online and off-line environment, Global Conference on Business and Finance Proceedings, vol 9. No. 1, 2014.
Kaplan, Andreas M. (2011) If you love something, let it go mobile: Mobile marketing and mobile social media 4x4, Business Horizons no. 55, pp.129—139
Kelley, Blaine (2014) Rebuilding from the ground up, The Journal of Commerce, 2014 Annual Logistics Review and Outlook.
Liebmann, Wendy (2013) Chains must grasp omnichannel opportunity fast, or lose, Chain Drug Review, August issue.
Omnichannel retailing in South Korean subway: Photo from http://www.quietlikehorses.com/2011/12/tesco-subway-grocery-shopping.html Available 2014-02-15
Pratt, Mary. K (2012) Click & Mortar – CIO’s are merging online and offline retail to retain customers and reclaim the shopping experience, CIO November 2012.
Rigby, Darrell (2011) The future of shopping, Harvard Business Review, December 2011.
Stockport, Gary J., Kunnath, George, Sedick, Rashida (2001) Boo.com – The path to failure, Journal of Interactive Marketing, vol. 15, no. 4, pp. 56-70.
Stone, Merlin, Hobbs, Matt, Khaleeli, Mahnaz (2002) Multichannel customer management: The benefits and challenges, Journal of Database Marketing, vol. 10, no 1, pp. 39-52.