Omni-channel retail is the new found retail marketing strategy where brands can draw major insights from customer behaviour and drive effective campaigns, measurements which leads to business growth consequently.
Since a long time, technology has been transforming consumer behaviour and reshaping the relationship between humans and organisations. And the Covid-19 pandemic has only accelerated things and made consumers go the digital way faster than ever.
Since 2020, consumers have reduced their physical presence in stores drastically. Many of them started to have concerns about their safety (especially in fashion and beauty, where there is the need to try-on products). Also the imposed lockdowns by the governments rendered business closures for longer periods that led to physical inactivity and loss of revenues.
Even though there has been an overall contraction in sales since the last year, especially in fashion and beauty, consumers spent their time in entertainment, home wellness and shopping from home.
As social distancing will likely continue into 2021, the shift to online shopping shows no sign of slowdown and the oversaturated online marketplace is only going to be more and more competitive for retailers.
This means that simply being online no longer cuts the mustard, from the point of meeting customer expectations to exploiting opportunities. Thus retailers and brands must think on their feet and react to changes as quickly as they can.
In order to have a better understanding of the current situation, we need to look back to find the roots of retail technological revolution, which can be majorly divided into three waves.
Three waves of retail
In the first wave (which is dated around mid-1990s) retailers launched the very first online channels, that were characterised by being technology-driven, managed in silos, and not integrated with traditional channels.
During the second wave (dated around 2005-2014) the need for multi-channel integration emerged. Retailers started to focus their strategies on consumer needs fulfilling their demand to shop from channel of their choice.
Finally, the third wave (dated around 2015 till today) saw the rise of omni-channel retailing as a response to change in people's shopping behaviour.
In particular, single-channel was the traditional retail model that offered a very limited customer base since it focused on one sole channel, based on the single-distribution system - the retailer's own brick-and-mortar stores (offline) or e-commerce (online). In current times, this structure cannot compete anymore.
Multi-channel instead means the separate management of multiple channels. Often, multi-channel has been considered as an added service to customers or for expansion of customer base who do not stay near the stores of retailers or for the digital-savvy young generations.
Multi-channel arose as a new retailing approach that could take advantage of the digital media to satisfy customers on whatever channels they chose. This business model quickly dominated the retail industry and continuously developed during the last few years.
With the third wave or the final digital revolution, there has been a rise in D2C (digital to consumer) and e-commerce business as single channel management started to show off limitations of both separated models and multi-channel. Thus some D2C retail brands started to open up their first pop ups and showrooms to drive brand awareness and impart greater consumer convenience.
Emergence of omni-channel retail
Unfortuately, the multi-channel approach has many flaws. The measurement analysis- when collecting multiple data from separate channels-leads to an inefficient strategy, as there is no real time flow between online communication and store visit. In fact, when it comes to the emerging omni-channel business model, some people still tend to confuse the role of supply chain technology upgradation and convergence with corporate commercial functions (e-commerce and brick and mortar retail stores), instead of thinking about it in a wider perspective, which includes the above mentioned functions, plus the integrated consumer journey, experience, marketing and expectations in both online and offline. Being data-rich without a real connection of fundamental insights shows a lack of structure. In brief, omni-channel has become a good strategy to survive in the long term, as the outcome of the insights can drive effective campaigns, measurements and consequently lead to business growth.
At a higher level, being an omni-channel organisation means making the customer the core of the company interaction process through channel integration, consistency, and seamless customer experience. A few smart retailers and brands, with a long term vision, started to invest in this model years ago. This particular structure connects digital media and technology with planning, marketing, store management, selling processes and customer experience. That's why often omni-channel is linked to customer-centricity and co-creation.
A McKinsey report stated that in 2021 more than one-third of Americans have used omni-channel features such as buying online for in-store pickup (aka BOPIS) as part of their regular shopping routine, and nearly two-thirds of those individuals plan to continue.
Different shopping behaviours
We have to consider the different generations of shoppers as separated islands with different shopping behaviours for evaluating the propensity towards usage of digital channels to make purchases. While gen z consumers have never considered that the physical and online dimensions could have barriers, now even the so-called boomer generation (born in 1946-1964) have been forced to start using the e-commerce channel. Also, the expectations are mobile-first, meaning that smartphones are the first touchpoint for the discovery and consequently of the customer journey.
We can say that there has been an overall societal change in consumer behaviour, preferences (as many categories like athleisure experienced an impressive growth) while others such as shoes and accessories have been hardly impacted. Also there has been a change in values and expectations from a brand or retailer.
From food to vaccines to all the other categories, a quick service delivery and an efficient customer service has become crucial, together with an integration between the supply chain operation. Considering that covering the last mile and having a speed delivery means to be able to cope with an efficient order fullfillment and supply, the pandemic expressed all the limitations of many business models.
In fact, many traditional retailers failed to meet the demand and have shown their inner vulnerabilities, losing a significant part of their profits, because they failed to adapt to an unexpected situation. Retailers should now concentrate on omni-channel structures balancing their margins with investment in technologies and customer-centric processes.
Some luxury brands have found solutions by partnering with delivery service companies to fasten their delivery timing. They have shifted from one week delivery, to one day, to one hours in some cases.
The question is - what happened to the consumer behaviour suddenly?
Before the pandemic, only the most digital-savvy consumers used to make online offering comparisons. But nowadays this practice has become the norm, making the market more competitive. This means all customers are open to online and offline offers and services, as they effectively use apps and websites to scout products and collections. They expect a tailored service, a prompt response on every channel, a digital friendly user experience, convenient pricing and multiple return options, good quality and a personalised experience.
As customers became more demanding, fulfilling their expectations went beyond retailers' infrastructural development. The offers comparison websites and apps lower barriers to product choices by offering many alternatives and features in just one central place, with links that could easily navigate to said alternatives.
Apart from a fully connected supply chain management between all the channels, now every single touch point of the customer journey must be considered in the lifetime value of the customer to measure profitability of the business. Digital technologies to recollect KPIs and customer data have become the main asset of many companies to take business decisions on future strategy.
Data coming from multiple touch points land to a corporate data lake. While performing an appropriate analysis, it is possible to understand the real channel attribution to come out with a real-time marketing strategy.
Why it is important to tailor different strategies according to different targets?
For instance, a research revealed that consumers in the high frequency group, are more positively influenced by website characteristics along with the affection path during their online shopping journey. While consumers in the low frequency group are significantly influenced by website characteristics along with attitude path. Compared to the low frequency group, a more significant influence is found among consumers in high frequency group between consumer affection and consumer behaviour path. These differences in consumer behaviour patterns between different groups with different online shopping experiences, could be used as references for online shopping business owners in their formulation strategies.
Given that the market is more competitive than ever and the cost of customer acquisition is rising, investment on customer retention and on a strong loyalty programme is fundamental to keep consumers engaged and incentivised to re-purchase. Thus, retail of the future is about a circular integrated marketing eco-system.
Customer data analysis is the basis of the emerging 360oCRM approach which includes a personalised offer based on preferences and forecasted matching needs or cross selling/upselling, with relevant content that can keep the consumer interest at high levels. Martech, social media can support in building up a community of loyal and engaged consumers that can co-create the future brand strategy of any company. In this context, the systems of social listening are useful brand allies to generate an efficient customer-centric approach.
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