How Omnichannel Is Changing the Merchant

Many of you must have heard the word "omnichannel." What does it really mean and how does it impact your role? Omnichannel retailing is the ability to serve customers in a consistent, structured and streamlined manner irrespective of the channel (store, web, mobile and emerging social channels). Historically, merchandise planning and management strategies have been designed with a single channel in mind.

However, a recent Cognizant Business Consulting survey of 2,500 shoppers in the United States and Canada seeking to understand shopper preferences and expectations reveals that the number one thing shoppers are looking for is consistent service, product availability and pricing across all channels.

In providing consistent service, companies are looking to consolidate the merchandising function in their organization. However, many retailers are struggling to integrate the internal organizations that handle these functions of merchandising including, planning, buying, assortments, pricing and promotions to provide a consistent customer experience. 

The planning and buying teams have a challenging job at hand, as they now need to look at the customer in a more holistic manner and consider how the shopping experience will impact these functions. As the financial plan is defined for each channel, the unique attributes of how consumers shop for these products are different, and yet the same. There will need to be financial and product plans that are unique for each channel. What makes the products move will also need to be analyzed.

When asked to rate their top in-store frustrations, shoppers report products being out of stock as their leading complaint. Additional comments are on prices not being clearly marked or not being able to match online pricing. The survey also shows that price matching is the answer to Amazon and showrooming. Time and again, respondents note the importance of price in their purchase decisions. Indeed, by a factor of 3 to 1, shoppers in the survey rank online pricing as their top reason for shopping in-store but purchasing online. Less clear, however, is what shoppers do when unsatisfied with store prices. The research shows that more than half the time, shoppers exit stores and look elsewhere, whether in another brick-and mortar store or online. Only 20 percent of shoppers say they request price matching. Electronics is the most requested category for price matching, and home furnishings the least requested.

The foundations of retail, upon which merchants have based their businesses for generations, have evaporated and been replaced by a non-linear shopper journey that begins and ends anytime, anywhere. The journey includes a wide variety of touchpoints outside of brick-and-mortar stores and most are beyond a retailer's control or ability to influence. Against this backdrop, retailers and merchants continue to search for ways to drive profitable growth.  But in times like these when foundational elements evaporate, a radical rethinking of business models becomes essential, and incremental adjustments will not be sufficient to ensure growth or even survival. The path to meet today's challenges will embrace the shopper's Web-fueled, digitally powered, non-linear lifestyle. Retailers and merchants will need to engage shoppers skillfully in every channel and at every touchpoint. Then retailers will need to be ready to quickly adopt emerging technologies as they arrive. 

So what should the merchandising and pricing teams do with this information? We recommend looking at each of the product categories to see how the customer will shop in these categories by channel and define a plan to address the patterns. The patterns will show for which products or categories customers are expecting prices to be same or different. Where this becomes even more complicated is when your company is providing ‘buy online, pickup in store' services. You will need to validate that the store pricing is the same as online pricing or provide the lesser of the two. As channels merge, managing consistent product pricing will become a focal point for the merchandising and pricing teams.

The financial plan will also need to be channel-specific and may require collaboration with different parts of the organization. This is a daunting task: Easy to say, but difficult to execute. Survival will depend on careful listening to and learning from customers to fund and implement go-to-market strategies and solutions that are aligned with the kind of shopper preferences highlighted in the study.

How big is the price-matching trend? How often do shoppers ask retailers to match prices and how many shoppers do so? Overall, the answer is one to three times during the last three months for roughly 20 percent of shoppers. For those who have done it one to three times in the last three months, the highest numbers are recorded for electronics (26 percent) and consumables (20 percent).  Electronics is the most active category for shoppers asking retailers to match prices, especially for males. The one product category where men and women request price matches in relatively equal numbers is for consumables — 22 percent for men and 18 percent for women who did it from one to three times in the last three months. Clearly, price matching is still an emerging trend among shoppers and retailers alike, but it shows up as being important in so many ways to so many shoppers that retailers would be smart to take notice now and begin planning a response.

Personalized preference will also impact the merchant's job. Retailers have been moving away from mass marketing for years. Is one-to-one marketing the answer or is it an idealized state forever out of reach? This is a question merchants and retailers are wrestling with, but shoppers are not. They want to get more personal but in highly selective ways.  Shoppers will exchange some personal information for individual recognition, but not too much and only in the right context. Balancing the limitations and opportunities of personalized marketing is the key to gaining greater influence in the shopper's non-linear path to purchase.

Clearly, retailing is changing, on many dimensions and at breakneck speeds. Customers' expectations are continually evolving as the shopping journey becomes more non-linear and more digitized. It is best to create a pricing competency that matches your business, not just rely on price matching, and provide focused personalized promotions. Customers are expecting all this and will be persuaded by the retailer that does so. The survey data shows that customers just go to others that will provide the best price or promotions. The key is to set the expectation for price and communicate at an overall value proposition that matches that price. The merchandising and pricing teams play a critical role in getting the price right. 

Focusing on these priorities will help position retailers to successfully navigate the changing shopper-driven landscape and make the shift from serving many to serving each individual customer.

Meena Surti Patel is assistant vice president for retail consulting at Cognizant.
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