Maximizing the benefits of the omnichannel business model

Consumers are increasingly moving their shopping online, forcing businesses and retailers to meet service and efficiency challenges across multiple channels. That calls for a new approach to the supply chain. Omnichannel is one of the top strategies currently adopted to respond to this consumer demand. If five years ago it was a pretty unfamiliar concept, today, it is considered as a powerful marketing tool, defining how customers and businesses can interact with each other in the most seamless manner. Being a cross-channel model, it is embraced by multiple businesses aiming at enhancing customer service and business performance simultaneously.

Omnichannel gained traction in 2013

Omnichannel became popular at the same time smartphones started to become trendy for shopping, that is, in 2013. Mobile devices were being used by customers for price comparison and purchasing options. Rapidly, omnichannel became a buzz for both marketers and customers. Retailers were forced to start finding means and ways to adapt their marketing strategies to provide multiple channels to stay competitive.

Brands can no longer bypass omnichannel platforms

The omnichannel platform is an integral feature of e-commerce. A report by MIT revealed that purchases made by smartphones exceed US$ 12 billion while sales exceeding US$ 1.1. Customers are more and more demanding and businesses need to respond very quickly to provide the most seamless shopping experience as possible.

The need to integrate omnichannel

Experience has proven that businesses that failed to adopt the omnichannel model only ended up with a disjointed communication, attracting the frustration of clients and employees likewise. Brands and retailers know that they have to offer the same experience on various channels be it on the Internet, on social media, through direct mail, emails, phone calls, in-store experiences, ratings, review sites just to name a few. They should ensure that multiple touchpoints are made available to customers not only at the time of sale but throughout the customer lifecycle.

Channels making up the omnichannel model

Offering a seamless experience does not necessarily means focusing on absolutely all possible channels. A retailer may choose to incorporate only a few channels into his marketing strategy to offer a seamless experience. Nonetheless, the case scenario varies from business to business. The bottom line is to make sure that all messages are consistent and cut across all of the channels adopted, and that the operational processes in place allow customers to view, order and receive goods and services by opting any one of the channels that he deems most convenient.

Customer satisfaction is a key denominator

No business can survive today without offering excellent customer experience. The omnichannel model is a great means to offer customers continuous experience across brands, formats, and devices. A survey on best practices conducted by CEB highlighted that 58% of callers visit the website of a business before calling while 34% talk to a representative while verifying the website at the same time.

It is vital to synchronize multiple channels

Customers demand personalized experiences. Their journey is a cross-channel one and brands and retailers need to synchronize the various channels with a single interaction. The right synchronization will automatically urge the customer to engage himself and help build and consolidate customer relationships.

Omnichannel retailing is the fastest growing sector where customers can choose and buy an item online and then pick it up later on in a physical store or have it delivered at home. Studies have proven that yearly, this sector is growing between 40% to 70%. Customers are also inclined to buy more when shopping online and while collecting their items they often make additional purchases.

Failing to offer the perfect synchronization can entail dramatic results. For instance, a customer who goes online to buy a product saves the item he liked on his account. However, when he goes into the shop in person, he cannot see the items he chose. Such a fragmented online and offline shopping experience can only push away customers.

Competition in the market makes things harder

The consumer-retail sector has always been a fertile ground for intense competition. Today, competition is no longer in a horizontal plane but is coming from every direction: retailers can face competition from those companies that used to be their suppliers now offering online direct-sales, for example. On the other hand, supplier companies can face competition from retailers who are increasingly developing private labels. To stay afloat, companies are forced to create new offerings. That, unfortunately, can cost a lot without producing adequate additional value, hence decreasing profit margins.

Most businesses in the consumer sector agree that the core of the problem, as well as the solution, lie in the supply chain itself that is having a number of evolving requirements. Even if they recognize the importance of the omnichannel model and strive to adapt their business model to it, few have succeeded. Many claims to have efforts underway but few believe that they are on the right track in reality as building the perfect supply chain seems herculean. Attempting to serve more channels in a seamless way applies a lot of pressure on the supply chain, especially when combined with growing customer expectations of speed, convenience, and service.

Five distinguishing features that can help businesses succeed

There are five cross-functional efforts that businesses need to make in order to create a sustainable omnichannel model. For this, they need to invest in a custom-designed supply-chain network and build new supply-chain capabilities too. During this transition phase, the organization should be ready to test, learn and adjust rapidly.

Cross-functional collaboration

A company needs to make business decisions that will drive value not only for individual pieces within the organization but for the whole company itself. As a result, the approach should be an integrated one, including all important stakeholders in the journey. Teams should be set up to work on a cross-functional level right from the very start until the implementation. Resources and authority should be distributed wisely to allow them to make quick decisions and thus, drive progress.

The typical teams to be included are the marketing team, the customer service department, the supply-chain finance, the brick-and-mortar store operations, the strategic planning team, the e-commerce team, and the IT team. In this light, the omnichannel supply chain might be more appropriately termed as omnifunctional supply chain.

While devising an omnichannel model, companies should refrain from trying to run a collection of independent plans to avoid the risk of taking unwise decisions without understanding the broader picture of implications.

Omnichannel strategy

Defining the omnichannel strategy itself is the next critical phase. Businesses need to define what channels it wishes to integrate and what services it wants to offer online and offline. The omnichannel strategy demands cautious segmentation and precise definition for each channel, customer group, product category, and location. It is also vital to define what the company does not want to offer.

To create a strong strategy, businesses need to have a deep understanding of customer preferences, motivations, and habits. Detailed and holistic insights into customers’ behavior as well as underlying drivers need to be gathered. To be absolutely customer-centric, they need to define how they can help their customers. At the same time, they need to take cognizance of various factors that encourage purchase.

Without such a strategy in place, companies have a high risk of jeopardizing their omnichannel efforts. Common mistakes include offering customers products or services that they do not necessarily want. For instance, not every customer needs same-day or next-day delivery. While many care about convenience, others look for lowest shipping charges. Not to lose money by trying to keep customers happy, businesses should recognize the differences and understand what their targeted clients demand. Making resource-allocation decisions based on gut feelings can only lead to scattering resources that could have been fruitful as part of a segmented strategy.

Supply-chain network

An omnichannel strategy can be successful only if there is an optimized supply-chain network. To achieve this, businesses should decide where to position inventory and how products should flow from factory to customer. Next, it is equally important to decide which parts of the supply chain should be run in-house and which ones should be given out to partners.  The supply-chain network should be tailored for each individual segment of the market and service strategy. It is worth remembering that one size does not fit all for the supply chain in an omnichannel market. A bad network will entail poor service levels, extra distribution costs and will erode profits as well.

Businesses opting for the omnichannel model should recognize that the same thinking as with traditional business models cannot be applied to the omnichannel one. Focusing excessively on minimizing costs and boosting efficiency may trigger a failure to meet customer-service expectations. Companies having massively centralized distribution centers designed to handle large orders may reconsider their strategy by positioning inventory closer to market or by offering new direct-to-consumer flows. There is also no standard solution that suits every single business in the marketplace. For instance, many businesses start by integrating shipping-from-store option but then learned that this affects their walk-in customers and end up being more costly on large scale. As such, successful solutions for other companies should not be adopted blindly.

Supply-chain capabilities

The fourth must-have for omnichannel success is the integration of the next generation of the supply chain capabilities. The capabilities required to run a segmented omnichannel supply chain are considerably different from those that have served many companies well in the past. Older models did not have analytics in planning or distributed order management. Players need to know which capabilities they genuinely need. Today, many businesses still do not know whether they need forecasting, supply and inventory planning or appropriate order management.

Many businesses have minimal experiences in taking advantage of insights from emerging data sources such as e-commerce website or social media, or consumer-flow analysis to understand consumer preferences. Even if they do manage to gather such insights, they often struggle to translate them into improved supply-chain performance, for example, dynamic pricing, demand shaping or demand sensing.

Similarly, physical supply-chain processes such as warehousing and transportation are often not fast or flexible enough to cope with the large numbers of smaller orders required by the omnichannel platform.

Transition plan

Last but not least, companies need to get the transition right. In such a fast-evolving environment, businesses need to be both rapid and flexible during the implementation of the new segmented supply chains. Approaches and mindsets need to be adapted as the transition phase generally requires an iterative approach with frequent rapid changes and adjustments.

Companies should start by implementing smaller pieces while having a broader plan for the whole transformation. In today’s fast-changing environment, businesses have to implement smaller pieces rapidly without waiting until everything is ready.  

The transition phase is also a time for testing and learning. Pilot plans and experiments such as new service offerings to consumers should form part of this period to refine strategies and concepts on a smaller scale before rolling them out across the entire organization. Such testing will allow teams to learn quickly and master how to operate the new capabilities and also check whether the new concepts are truly enabling aspired business value.

Likewise, established companies should be flexible enough to have a new organizational mindset. Big companies might have to think of themselves as startups with new ideas. They will have to learn to implement concepts in small contexts to see the result. At the same time, businesses should welcome new ideas and allow for mistakes. They should also be prepared for certain failures to be able to find the right balance to be able to generate a bigger impact later in an omnichannel environment.

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