Omnichannel Retailing – the Survivors’ Choice

22 minute read

Where to begin? How to implement changes?

If the old shops want to survive, they have to turn their biggest cost driver – the physical store – into a source of revenue.

According to studies, stores and online-channels boost each other. If change of mentality starts with smoothly merging the online and physical shopping environments, then it is just as important to turn the store into something that would lure people out of their homes. Something that is as pleasant as going to the movies or a restaurant.

One simple way is turning your shop window into an interactive screen. Even if you cannot afford one, or don’t have the option of putting up an eye-catching screen on the window, you can stick a QR-code on the glass – a passerby can visit the store’s website even if the shop is closed, and do their shopping online.

It is also very useful to pick apart your entire business, as Russell L. Ackoff writes in his book Idealized Design: How to Dissolve Tomorrow’s Crisis… Today. The author recalls a similar breaking point in Bell Labs in 1951. When the board asked employees to point out the company’s greatest innovations, they only managed to come up with the coaxial cable and dial phones. Unfortunately, both of these were invented before the year 1900. Then the board asked employees to use their fantasy. They were supposed to try and imagine that the current phone system had crashed, and a new one has to be built from scratch. What would their dream phone be like?

The concepts such as a phone with buttons, call forwarding, voicemail, putting calls on hold, conference call, and even cellular phone, actually originate from the ideas they came up with.

Why not think the same way at the grocery shop? Great Britain’s chain store Tesco came up with a rather unconventional solution in South Korea like this. Apparently hard-working Koreans didn’t go to the stores because they simply couldn’t find the time. But they had some idle time while waiting for their train at a metro station. So Tesco put up huge posters at the metro stations of shelves with appetizing food on them – fruit and vegetables, sausages, meat, etc. One simply had to scan a code to fill up shopping basket, and the groceries were home delivered at a suitable time.

If you’re planning to reorganize your business, you should check out the British company Vodat’s 2018 survey results. According to 1,000 respondents’ answers, seven out of ten shoppers are disappointed in retailers lacking omnichannel mentality, especially when it comes to something as basic as merging the online and physical stores’ loyalty programs. Earning and spending shopping points should be done easily and without a hitch in both channels. The basting stitches should not show.

Lack of personalization is also an issue. 65% of shoppers find that their specific demands and shopping history are not taken into consideration enough. They would also like to get the discounts information on their mobile phone when entering the store.

How to make the changes happen?

Retailers introducing the omnichannel logic have to be prepared for setbacks. Omnichannel mentality requires the visionaries with exuberant ideas and the current personnel integrate, cooperate and compromise. Therefore, those two sides need to be merged somehow.

Top consultant Darrell K. Rigby says that, “Managing changes in a store is like sending a satellite into space. If you send it too far, it won’t reach orbit and floats aimlessly in outer space. Then again, failing to give it a sufficient boost, the gravity will bring it back down on the ground again, where it will burn up.”

One option would be to implement changes gradually, like Apple did. Apple opened their online shop during the dot-com bubble in 1997. When the company opened retail chain in 2001, they had two completely separate distribution channels. Both aimed to yield the maximum profit, and neither had to worry about any possible conflicts of interest.

Over time the collaboration between the two distribution channels deepened. It began with standardizing the product range, as well as collectively launching new products onto the market and pricing them. But customers wanted more. So they updated the return policy – items bought online could now be returned to a physical store, and vice versa – and added the option of putting products on hold in a physical store through the e-shop.

When the company revamped the chain in 2011, product information on the iPads was basically the same as on the website, and online shoppers could ask for help and advice from the physical store employees. Currently, the two separate channels form a solid unit.

In short, the goal is for digital channels to support the old channels that businesses excel at, not create barriers between them. This means that before implementing omnichannel, you need to take down the barriers within the company, and establish a very thorough understanding of how customers use these channels, and move between them. Also, how the physical store could support the online shop and vice versa.

McKinsey experts Raffaella Bianchi, Michal Cermak and Ondrej Dusek point out three important obstacles that usually hinder omnichannel mentality.

Being afraid of the magnitude of resources needed for implementing omnichannel. The fear that omnichannel strategy requires a huge investment and energy, creating an entirely new IT-platform and a new division within the company. That is not true. Even if the company has loads of money and resources to reorganize current operation in the store tomorrow, it won’t become the “silver bullet”. The most successful companies are those consistently focusing on practices when implementing omnichannel strategy, thus creating collaboration possibilities between different channels and eliminating obstacles.

Hindering collaboration. Many organizations have set their sales goals in a way that creates rivalry between their distribution channels, as if they were completely different organizations. Internal competition is even harsher than external, and there is no hope for cooperation in this case.

Ignoring versatility among customers. A common notion is that all customers have the same needs and behave the same way. That is not true. Even seemingly similar customers behave very differently in different situations. For example, a survey amongst the customers of North American mobile operators indicated that even if people mostly used digital channels for administrative issues (like changing the billing address), they preferred speaking face-to-face to a specialist, or at least over the phone, when it came to technical problems. In order to send as many customers successfully over the finish line as possible, so to speak, this versatility has to be admitted and considered.

The next step is creating interconnected teams to put the necessary changes into practice.