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Will ‘omnichannel’ start a retail revolution?

A new retail model has emerged in the digital age.

These are chaotic times for the retail industry.

Click-bait headlines predict a full-fledged “retail apocalypse” and mass disruption in the market. But could those wild predictions be accurate — and what is to blame?

One such story casts serious doubt on the future of traditional brick-and-mortar stores, saying that out of 200 U.S. retailers who operate both physical and online stores, two out of three will likely shut their physical stores within 10 years — opting to go completely virtual.

Small survey size, right? True.

But Jeff Booth, CEO of Vancouver-based BuildDirect, an online-only seller of thousands of renovation supplies (think Home Depot meets Amazon), made the exact same prediction in an interview last year. “There isn’t a right way to do it,” Booth explained, referring to in-store retail. “It’s dead. Within 10 years I think it will all be done online.”

What’s going on in retail?

Booth’s statement is a dire declaration for sure. Yet physical retail is certainly showing signs of trouble. Sears Canada just filed for creditor protection, announcing plans to shut 59 stores and cut 2,900 jobs. Specialty chains in the U.S., including Payless Shoes and kids’ clothing merchant Gymboree, have also filed for bankruptcy protection.

Over in online retail, the story couldn’t be more different. Many Web-based retailers are doing so well that they’re venturing into the realm of (wait for it …) physical stores.

E-tailing juggernaut Amazon plans to buy grocery store chain Whole Foods for $13.7 billion. Canadian company Indochino, which started out as an online-only retailer of custom-made menswear, plans to open four more physical stores in the U.S., bringing its total to 17 across North America.

What the heck is going on in retail? A lot — though it’s not as simple as ‘stores are dying’ and ‘e-commerce is king.’ There are actually several channels retailers can use to market their brands, sell their products and provide customer service, including physical stores, e-commerce, mobile and social.

Omnichannel: Different customers, different needs

Today’s shoppers demand and expect to be served in the channels of their choice, according to Retail Systems Research (RSR), which polled almost 100 retailers around the world for its new report. RSR says merchants need to adopt an entirely new set of skills, strategies and technology tools for this complex omnichannel environment.

“The way people shop has changed drastically in recent years. But unfortunately for retailers, incrementally chipping away at old processes and the systems that supported old ways of shopping just is not working out,” the report’s authors write.

Omnichannel retail involves more than just taking a physical store to market and sell its goods online. RSR researchers say a true omnichannel strategy includes the following:

  • Digital technology for sales transactions (i.e. mobile point-of-sales tools)
  • Creating brand awareness (SEO, social marketing)
  • Driving traffic to stores (email coupons)
  • Assisting shoppers in-store (in-store video tutorial kiosks)
  • Managing post-transaction customer service (shopper satisfaction surveys)

That’s not to say cross-channel selling is always a slam dunk. RSR points out “the shift to digital has had some serious unintended consequences for apparel retailers in particular: return rates three and four times the return rates of products sold in stores.”

As RSR explains, it’s now so easy to buy shoes and clothing online — and return them to a physical store for free — that those physical stores are being flooded by returned merchandise that was bought online. This phenomenon has retailers struggling to keep on top of how much inventory to order, and precisely where to stock it within their distribution chain.

Social selling has also hit a speed bump. In 2014 Facebook said it was testing a ‘buy’ button so its users could directly purchase goods from retailers without leaving the social media site. Then Facebook quietly dropped the idea.

Although other social networks have dabbled in ‘buy’ button features, research released late last year indicates consumers still see social media as a place to learn about products online rather than buy them. In that survey, 72 per cent of marketers reported no sales as a result of social media ‘buy’ buttons.

Why some retailers fail & how to succeed

Why do some retailers seem to fail at omnichannel? RSR’s research indicates faltering merchants use digital technology mainly to track their bottom line.

Successful retailers, however, “are always looking for new ways to engage with consumers and turn them into better customers,” the report concludes. That means they use omnichannel technology to know and service their customers better.

In digital customer service, Canadian retailers still lag behind their American counterparts. In its own 2017 omnichannel retail study, Deloitte calls out Canadian merchants for offering customers less than their U.S. competitors do in terms of mobile apps, mobile inventory data and mobile payment options.

Deloitte also cites the Canadian retail sector’s slow adoption of data insights, which are key to understanding and serving shoppers better. Deloitte urges Canadian firms to use more predictive analytics for “forming key customer insights, identifying growth opportunities and determining the smartest omnichannel investments for their company.”

Don’t forget the data

RSR recommends omnichannel data analytics, too.

“It is critical to measure the value of your customers’ cross-channel behaviours. Does activity equal sales and profits?” RSR asks in its report. With timely data insights, retailers could “forecast the point of demand more accurately (and) inventory would be far more easily leveraged,” RSR adds, perhaps in a nod to all those in-store returns.

Most importantly, omnichannel data can give retailers a consistent view of each customer across multiple channels, so every business unit can provide that shopper with a consistent experience, from marketing to purchasing to shipping.

“(Don’t) be unaware of your customer’s full buying patterns. Don’t offer her something she’s already bought from you in another selling channel. It’s simply unacceptable,” the RSR researchers warn.

What does an ideal omnichannel retail model look like?

Deloitte describes it as the “complete integration of web, mobile and physical stores — a seamless, cross-platform experience (including) … consistent inventory information and shopping basket availability across all channels … (and) significant post-purchase support with features such as product recommendations or allowing product returns with digital receipts.”

That’s a tall order. With the right digital technology and omnichannel strategy, retailers could stand a much better chance of filling it successfully.

Up Next: Find out how one Winnipeg entrepreneur is turning heads in the world of e-commerce.

How to make your e-commerce store stand out

Christine Wong

Christine Wong is a journalist based in Toronto who has covered a wide range of startups and technology issues. A former staff writer with ITBusiness.ca, she has also worked as a reporter for the Canadian Economic Press and in broadcast roles at SliceTV and the CBC.

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