It's 2017: Is Any Retailer Completely Omnichannel Ready?

10/27/2014
Before we can answer that question, let's confirm that we are all working from the same understanding not only of what omnichannel is, but what is meant by "completely" omnichannel.  Naturally, some of the specifics of what it means to be omnichannel will vary depending upon what type of retailer you happen to be.  For example, showrooming for a big box retailer sensitive to price competition for similar products isn't as important to a specialty retailer that manufactures and sells its own product.

In late 2011 we were discussing clienteling (being able to access a customer's purchase history) and mobile checkout as the up-and-coming retail technologies. That quickly changed to cross-channel and almost before we could get that phrase out of our mouths, we now have omnichannel.  I believe that some vendors and consultants are already talking integrated commerce. 

Whatever name you choose, it can be widely debated that this definition, borrowed from a recent white paper by Motorola Solutions, is reasonable:
"Connected customers can shop for and purchase the same items across many different channels, in a retail store, on their home or laptop computers and perhaps most importantly on their connected mobile devices which allow them to shop online for virtually anything, virtually everywhere…"

The question is: have you truly enabled omnichannel or have you just connected your channels?  The poster child for omnichannel has been buy online, pick up in store.  It is entirely conceivable to connect your online channel with the store channel to send a message that says a customer will be in to pick up that striped shirt.  However, when the customer arrives at the store, were the inventory accuracy, timeliness and in-store procedures solid enough to deliver customer satisfaction or was he disappointed by the experience?

There are so many pieces to the omnichannel puzzle and the shape of each of those puzzle pieces seems to change on a daily basis. That makes it extremely difficult to complete the puzzle.  There are new ideas and concepts every day and we seem to suffer from "omnichannel ADHD," making it very difficult to focus on a solid strategy and stay the course for completion.  Mobile checkout, predictive analytics, in-the-moment product recommendations, distributed order management, tablets in stores, EMV, mobile apps…hey, there's a butterfly! 

Regardless of the ever-changing landscape for omnichannel I believe that there are some fundamental building blocks that cannot be ignored if anyone is to be successful delivering a complete omnichannel solution.  Everything that is visible to the customer depends on, in my opinion, three foundational elements.  We'll call it the I3 Foundation for omnichannel:
  • Integrated Channel Data:  Are you faking it, or do you truly have a repository for your customer data that includes all channels in an accessible location?
  • Inventory Accuracy:  Are you confident in your inventory and how much does your inventory accuracy degrade between physical inventories?
  • In-Store Network Vitality:  Does your network have the horsepower to handle tablets, mobile checkout, digital signage, RFID, etc. now and for the future?


Figure 1

The I3 Foundation (Figure 1) essentially supports a complete omnichannel solution.  If any of the supporting elements is missing or incomplete, so is your omnichannel solution as you run the risk of customer disappointment. 

Even if you have a  completely implemented distributed order management system that can build and maintain orders from multiple inventory locations (distribution center, store inventory, reserve inventory, etc.) the fulfillment of that order still hinges on the accuracy of the inventory at each of those fulfillment sources.  If your store inventory averages 65 percent to 75 percent accuracy you run the risk of disappointing your customer 25 percent to 35 percent of the time! Is that acceptable in today's environment?

Supplying the staffing or the external costs in the stores to take the appropriate numbers of cycle counts and physical inventories is not a long-term option.  RFID has been shown to deliver inventory accuracy levels above 95 percent.  While that kind of accuracy will support omnichannel functionality, the lead time to implement the RFID capability is dependent upon time-intensive tasks.  For example:
  • Tagging merchandise with RFID antennas at the manufacturing source
  • In-store equipment installation
  • Integration with current inventory systems
  • Integration with existing POS capability
Based on your company's lead time for purchase orders, the number of manufacturers/suppliers that must initiate the tagging capability, prepping distribution center and store merchandise to ensure 100 percent RFID-tagged inventory and training for store associates to effectively implement the technology, it is conceivable that acceptable levels of inventory accuracy can be achieved 12 to 18 months from going live.

A store associate is using a tablet to retrieve a customer's purchase history for use in a store transaction, another associate is checking out a customer on a mobile device and a third is accessing the web for the brand to locate an item that is not currently available in that store.  The contention on the network that is bandwidth challenged is uncomfortable for the associate and annoying to the customer.

Depending on the number of stores in your network and where you are in any kind of implementation of 3G/4G and WiFi, contract negotiations with a carrier, expect that implementation planning, equipment rollout and training of store and help desk personnel can take more than a year to complete an upgrade to the network to provide sufficient bandwidth to handle the type of transactions that omnichannel brings to a retail setting.

Traditionally, we all had Point of Sale customer data. Because the call center automation was in a different system, that data was stored separately.  Then came the web channel, probably another software platform again and volumes of data stored in yet another database location.  A complete omnichannel customer information set that includes a purchase history must contain all purchases regardless of the location of the  data.  The speed with which the omnichannel experience must play out regardless of the channel basically precludes you from searching and retrieving from three separate databases to provide information at the point of engagement. 

Planning, architecting and implementing an omnichannel database analytics solution for an organization is no small task and can certainly take years to develop and finetune.

Given these fundamental building blocks of any omnichannel solution, it is very important for retailers to assess their state of omnichannel readiness.  Referring to Figure 1, by identifying what percent complete you are for each of the foundational areas of complete omnichannel readiness, defining what steps must be taken to bring each area to maturity and defining a strategy for implementing the necessary changes will require substantial time and resources.  Given the constrained corporate and IT budgets in retail, accomplishing one, not to mention all three at the same time, is essentially a budget impossibility.

The three foundational elements that we have discussed are in essence the enablers for omnichannel.  Layer on top of that, the presentation layer that the customers and retail associates will need to utilize omnichannel information in the moment of the transaction.  Given our constant implementation constraints of time, money and people resources, I'll ask the question again. 

It's 2017, is any retailer completely omnichannel ready?


Ken Silay is director of technology research & innovation for Chico's FAS, Inc.
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