Omnichannel: Not Just A Buzzword But a Data-driven Concept

3/7/2013
The goal, in its simplest form: enable the customer to execute a purchase, regardless of where the desired product is in your retail supply chain.

It started with brick-and-mortar vs. e-commerce, two distinct channels, just like inline stores and factory outlets. And these channels competed — sometimes with animosity — for every last consumer dollar.

Next came multichannel, which involved digitizing some aspects of the traditional retail experience: incorporating ship-to-store, maybe a web kiosk where customers can place orders. Multichannel operations demand a good amount of cooperation between the head of retail and the head of e-commerce. The NRF's "BIG Show" was flooded with digital merchandising products and e-commerce vendors. Traditional retail was going "digital."

Showrooming
Then showrooming happened: the process of walking into a physical store, examining the product, as you would in a showroom, and then proceeding to buy it online. This, of course, has always happened to a certain extent; it used to be called researching a purchase. What really changed the model, however, was Amazon's shopping app coupled with Amazon Prime. Amazon's Price Check app allows users to scan a UPC of any product and voila! it reveals the best (and usually lowest, due to the algorithm) price available. That, along with Amazon Prime's free two-day shipping, brought the barriers to purchasing down to almost zero.

Before Amazon's innovations, the effort expended in comparing prices and considering the implications of shipping costs only made sense for high-dollar purchases. Toothpaste was always going to be more expensive online because you had to ship it. And you kind of needed it soon (usually). And really, how much could you save on toothpaste? With a UPC scanner/smartphone in your hand and Amazon's patented 1-click checkout, it all became easy.

And it turns out, saving a few bucks on toothpaste, paper towels, deodorant and a pair of chuck taylors was worth waiting 48 hours.

Retailers panicked. For most of 2012, the term "showrooming" was everywhere. Articles, analyst calls, earning reports: showrooming was the biggest threat retail had ever seen. Target took a page from the mattress business and asked manufacturers to design unique product lines for the big-box chain so that customers couldn't compare prices. Scanning a tube of Crest from Target to see the comparable price from Amazon would no longer work because they were "different" products. Retailers talked of trying to block the Internet in their stores. "Confusion" and "restriction" were the strategies that would save retail.

And then smarter and cooler heads emerged (although the above tactics are far from dead) and started bringing true omnichannel to the forefront. Just last month both Macy's and Belk created the position of chief omnichannel officer, whose goal is to oversee the integration of store, mobile and e-commerce operations.

So what exactly is the difference between multichannel and omnichannel?

The biggest difference is data. A boring difference, without a doubt, but in the end that is what defines the omnichannel experience. You can have a fast, well designed mobile site or app but if that data stands on its own, you're still operating just in multichannel mode.

Omnichannel is:
  • One view of your customer — the traffic, the conversion , the analytics.
  • One view of your product — your inventory, your pricing, your merchandising.
Consumer
As an e-commerce executive with a product and technology background (not a traditional retail background), one of the most interesting things to me is showing Google Analytics to traditional retail execs for the first time. Google Analytics is the (free) tool offered by Google to track website performance. Sounds basic enough, big deal… But when a traditional retailer sees the intuitiveness, the detail, the amount of information we can glean about products, customers, geography, devices, shopping habits and how they trend and tie together, it makes a store's analytics seem downright archaic.

Google is not in the brick-and-mortar retail analytics business and probably never will be. But what Analytics does is highlight how far we retailers still have to go to achieve that omnichannel view of the customer. There are companies starting to delve into this business and there were a few of them at the NRF tradeshow this year. But brick-and-mortar analytics is still a business in its infancy.

Product
The product side of omnichannel is probably the most difficult part to execute. And it comes down to the simplest of reasons: inventory. I have worked with some of the world's largest retailers and no matter who you are, the problem always comes down to inventory accuracy. Ship-to-store, ship-to-home, in-store-pickup — it all depends on inventory. Inventory in distribution centers or warehouse management systems is relatively easy to get right; the stores are the wild card. Shrinkage, otherwise known as theft, is the big problem. That, coupled with misplaced product, annual physical inventories and high employee turnover, creates a fairly large question mark on inventory accuracy.

Get the inventory right and you can truly help your customer "hunt" your entire inventory and product catalog.

I have written in the past about the difference between hunters and gatherers, and how e-commerce and m-commerce specifically have turned traditional gatherers into hunters. A shopper who might identify as a clotheshorse used to browse or gather in store, but now she browses at home and "homes in" or hunts for one or a few styles once she gets to the store. Omnichannel matters most to these hunters. When someone wants a size 28 pair of Dragon Rinse Levi 511 jeans, she doesn't care where it is in your supply chain. She also doesn't care which P&L gets credit for the sale — she simply wants to buy it. And when she arrives in your store, phone in hand, or on your website, she's also more primed to buy than the most loyal of gatherers.

What about the gatherers? The moment a gatherer chooses an item that you don't have in her size/color, she has now become a hunter. She is just going to hunt elsewhere. As a retailer, if you truly don't have the product, well, it happens. Good stuff sells out, bad stuff lingers. But if you have that product in another store, online, reordered with a firm ETA from the manufacturer and you simply don't have the visibility, then shame on you, and you deserve to lose that customer.

Omnichannel is about knowing your customer and being able to give her what she wants to buy from your retail supply chain. To do this well, it all comes down to data. Not so boring a concept, wouldn't you say?

John Hazen is vice president of global e-commerce for Foxhead, the action sports and activewear apparel brand.

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