The Omnichannel Challenge: Marketing Spin Vs. Operational Reality

2/19/2013
On January 8, Target announced its plans to offer year-round price match of online retailers. You find the item, pull out your smart phone, look up the price from any online retailer, and Target will match that price on the spot at any store. That may not be the whole story, but that was the marketing spin I took away from a "Good Morning America" news segment.

As a marketer, I can appreciate the beauty and simplicity of the offer. When something like this gets national news coverage as an "isn't this great?" story, you have made it to a place few companies (not named Apple) reach.
Today, retailers are under extreme pressure to find ways to compete with a new class of virtual stores — most notably Amazon — that operate without traditional storefronts and have invested heavily in technology to support the way they market and deliver goods.

Some retailers have stores, almost all have websites, and most have mobile and social capabilities. But behind the scenes, many have struggled to support these various channels with a single operational backbone — using one supply chain to fulfill demand from one pool of inventory.

Traditional brick-and-mortar retailers have responded to the challenge with mixed results. Many have taken advantage of having their stores located close to consumers. Their new marketing message is simple: shop and buy on your phone or tablet, then go down the street and get your merchandise in a few hours. Try it on, touch it, test it, and return it right on the spot for the ultimate semi-virtual buying experience. That sounds great, and it's a terrific marketing message, but it remains to be seen how many retailers are fully capable of managing this efficiently and effectively.

Personal case study: Three strikes and you will be out
I had an experience over the holidays with a large, well known retailer that captured this pressure to address its online competition. I ordered a scooter for my daughter's Christmas gift. After doing research, I found a great online deal at the aforementioned retailer. I was offered the option to buy online and pick up at the local store, which was appealing because we could avoid any shipping hassles. However, the clerk at the store would not honor the online price, which was lower than its floor price. After a bit of spirited debate with the manager, we got the scooter at the price we paid but not without a fair share of anxiety. Strike one.

After opening the gift, it turned out that the scooter motor wouldn't charge. After several hours on the phone (mostly on hold) I learned I needed to go to a different store – 25 miles away – to make the exchange because it was the only location in the region that had the inventory. Strike two.

At the store return counter, the clerks had no clue what to do. They first told me I'd need to pay an extra $50 for the exchange because that was the difference between the price I had paid and the price in their system. They corrected the situation, but still managed to charge me $0.22 (!!!) to cover the sales tax difference. I flipped them a quarter and told them to keep the change. Strike three.

Why was this so painful? Why aren't all stores fully in sync with their online shops? I found there was a gap between the marketing message and the experience. This retailer needs to do better if it hopes to compete with the Amazons of the world.

Competition is fierce and the status quo is not an option
The path to becoming a successful omnichannel retailer is not a beaten one. Many companies are already in the process of fusing their channels and adopting powerful, cloud-based technology to find new ways to offer phenomenal customer service and survive in the wake of the transition.

However, they're far from finished, and the tactics they undertake over the next few years will have a profound impact on the future of the shopping experience. Some of today's household names will emerge as the pioneers of omnichannel retail, while others — perhaps the one I recently encountered — will fall victim to slowing revenues and waning customer loyalty.

Two factors are largely contributing to heightened competition in the retail arena today. The first is that the upward trend in retail sales from the past several years has begun to level off. After dismal levels of consumer confidence and a lack of credit, which led to five-year lows back in 2009, retail spending had been steadily rising until the second quarter of 2012. This signals a possible plateau or even a reversal. At least in the short term, retailers may have to fight for their share of a stagnant pool of cash.

The second component is the way customers are spending their money. Retailers are racing to capture increasing online and mobile sales. Those that pull ahead during this transitional phase will have time to strengthen their brand and create a great customer experience as omnichannel becomes the norm.

Visibility is a key enabler
Choosing to adopt an omnichannel strategy requires visibility into every channel. First, employees and customers should have the ability to see clearly into all available inventory – both on-hand and in-transit. Second, the company should have an accurate picture of customer activity across channels. Visibility can help retailers gain a competitive advantage by allowing them to operate with less overhead and inventory, accelerate reaction time to meet demand fluctuations or disruptions, and manage risk more effectively.

This can only be achieved by assessing current capabilities and then upgrading them with the proper technology. Today, the most effective visibility tools are found in cloud-based platforms that allow trading partners to share data across their entire network.

One view, many channels
To survive in retail today, companies must embrace the omnichannel movement. Many are already doing so by integrating their distribution channels, embracing cloud-based supply chain technology for increased visibility, and focusing on new ways to provide value and service to their customers.

Ultimately, it is the consumers who will weed out the laggards from the leaders. Shoppers will choose their favorite retailers based on measurable action: how much money they saved, how many days to delivery, and how often what they wanted was available. The leaders that emerge will be the ones that, with the click of a button, will be able to peer out over their vast web of global trading partners and guide a single item to their customer's doorstep.

The marketing spin machine is moving into full gear. Retailers that can morph their operations to meet consumer expectation and deliver on the omnichannel promise will succeed, while those that fail will likely fade away.

Greg Kefer is vice president, corporate marketing for GT Nexus.
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