Winning the omnichannel retail race
Written by Akhilesh Ayer, Head of Research & Analytics, WNS Global Services
The digital era has turned the retail industry upside down. The customer purchase journey is more complex than ever before, the Internet of Things is becoming a reality faster than most can comprehend, and showrooming (the practice of visiting a shop to examine a product before buying it online at a lower price) is on the rise.
Each of these market shifts is testament to the increasing preference consumers have today for digital and online buying, and in a bid to capitalise on that, traditional bricks and mortar retailers are being forced to embrace omnichannel strategies for selling products. This is essential to appeal to a 21st century shopper who cares less about how, where or when they shop, and more about having a personalised, seamless and on-demand customer experience whether buying in-store or online.
A quick Google search will show you numerous articles listing the benefits available to retailers who can create an inspiring omnichannel experience. This side of the story remains well documented but what isn’t as clear however, are the steps that a retailer must take behind the scenes to transition from a bricks and mortar set up into an omnichannel leader. The following guidelines, taken from a recent WNS DecisionPoint report, have been designed to act as a roadmap, helping typically traditional retailers looking to create maximum value from their omnichannel set up:
1. Rethinking transportation
ASOS and Amazon have completely transformed the transportation game. Thanks to ASOS, anything over a 24-hour wait for delivery now feels like a lifetime, and the ongoing technological disruption at Amazon has opened our eyes to the possibility that drones could soon be responsible for making deliveries. It has since become imperative for retail and CPG companies to look for new ways to drive down supply chain and logistical costs while at the same time improve service levels.
The good news is that in the age of free shipping, bricks and mortar retailers have the existing infrastructure and economies of scale to leverage omnichannel capabilities and operate at higher profitability in relation to e-commerce companies. This means that retailers can take advantage of a range of fulfilment options that the 21st century shopper now demands, for example, purchasing a product online but collecting it in-store. Omnichannel retailers can also get ahead by using advanced analytics-based supply chain systems to improve the route planning of fleet while reducing delivery miles and transportation costs.
2. Revamping finance processes
It is safe to say that digital innovation is completely disrupting the entire financial ecosystem for retailers. The growth of mobile payments (via Paypal or Apple Pay), MPoS devices (like Square, EzeTap and mSwipe), electronic cash lending (such as HDFC and PayZapp) and even Bitcoin are all testament to the growing number of ways in which consumers can purchase a product. Accounts receivable teams must ensure they are up to date with the latest technologies to maintain relevance.
If that wasn’t enough of a challenge, accounts payable teams must also ensure the correct infrastructure is in place to create incentive and drive demand. This is where loyalty schemes and retailer apps come into play. Macy’s is one example of a retailer who has championed this space, as for some now time now it has given credit (for incentive calculation) to the channel that originated a “search and send transaction” rather than to the store that supplied the inventory.
3. Forging more meaningful customer relationships
A key requirement to understanding omnichannel shopping behaviour and imparting the right information to the right customers via the best channel is to have an integrated CRM for all customer interactions including purchases across channels. Omnichannel retailers need to be able to transition customers seamlessly from social network to web chat to voice to website, to match the customer’s preference or the most effective resolution mechanism. Those who champion this will be able to forge more meaningful customer relationships, by making personalised services and offerings using data analytics from past interactions.
4. Embracing digital in-store
With showrooming having quickly emerged as one of the biggest threats to traditional retailers, it can be of no surprise to learn that stores are being increasingly equipped with technology to generate data and personalise the customer experience. This is an important step that helps to encourage the shopper to complete a transaction in-store, rather than leaving to make it elsewhere online.
In-store touch screens provide customers with a full range of available products (a concept known as endless aisles), magic mirrors offer virtual fittings, and staff with mobile point of sale systems eliminate customer frustrations by allowing them to check out anywhere, avoiding a long line. Examples of retailers championing digital in-store include the House of Fraser mannequins which use electronic codes to transmit information about items of clothing on display, and Clinique’s innovative Great Skin lab which synchronises in-store recommendations with shoppers’ online profiles.
5. Reinventing the inventory system
A growing challenge for retailers in today’s digital era is getting an inventory on the shelves so people can see it, but also then figuring out how to then get into their hands. This requires having a clear view of all inventory items across different distribution centres, with one integrated inventory for both online and offline models. Most retailers today use radio frequency identification (RFID) technology to track and integrate products at various locations, in addition to product tagging that is consistent across all channels. With integrated inventory, online orders can be shipped quicker from store to customer and are comparatively cheaper (compared to online companies), even after considering the handling costs and trucking costs from vendor to DC and DC to store respectively. By pooling its online and offline inventories in China, Burberry was able to reduce average time for online orders in China from about 10 days to less than three days.
Following the closure of several popular and well respected retailers over the last year, including tailoring brand Austin Reed and BHS, you could be forgiven for thinking that we are staring at the beginning of the end of store-based buying. However, if approached correctly, the online retail boom could act as a blessing in disguise for wounded bricks and mortar retailers. While it remains impossible to accurately predict the impact of technology disruptions before they occur, retailers can find success and stay competitive if they win the omnichannel retail race.