June 17, 2016

What is OmniChannel Retail and What are the Benefits?

Omnichannel Best Practictes, Fashion Commerce Software, Fashion Technology, Retail Technology

By many accounts, ecommerce is slated to become the channel of choice. Year over year, online and mobile sales continue to grow and traditionally brick & mortar brands are doubling down on their ecommerce strategies. The numbers are telling: total ecommerce sales are expected to grow in the U.S. by 9.32%, and continue to do so for the next 5 years.

Yet, in-store numbers are surprisingly resilient. Even in historically weak brick & mortar verticals such as print, retailers like Indigo have actually seen an increase in sales. The truth, as is often said, is not so simple. It is likely that, instead of a blowout, ecommerce and Brick & Mortar sales will stabilize. Despite the popularity of ecommerce, Brick & mortar stores continue to offer a retail experience that is still very much appealing to shoppers.

Consumers, it seems, are channel agnostic. Taste is not universal and given the choice between shopping in-store and out, some amount will always prefer the former, while some the latter.

What is certain, however, is that consumers expect the same basic brand experience across all channels. For businesses, this not only means letting consumers buy from any channel, but it also means allowing each channel to ship orders from another. Offering this, in essence, is part of what the omnichannel experience entails.

Yet, this involves more than just a simple fix. Offering an omnichannel experience requires connecting and leveraging the data produced by traditionally isolated business processes to allow for interoperability between all channels. Businesses that do not implement this experience risk being outpaced by leaner companies who can offer quicker shipping, lower stock outs, and improve demand sensing.

But, offering omnichannel success is far from impossible. This article will first detail the definition of omnichannel, how B2B and B2C companies alike can benefit from it and the future of omnichannel.

If you’ve ever found a shoe you liked, only to find the store is missing your size, you might recognize going through a process such as this:

  • The sales associate will double check the back room, then contact a nearby store, probably by phone, to verify its availability elsewhere.
  • You’ll likely wait as the situation is explained to the sales associate at the other store.
  • Then one of two things can happen:
    • The other store will carry your size and you’ll have to drive there to complete your purchase or,
    • The store will offer to order another shoe, but you’ll have to travel to the store again at an unspecified date to complete the purchase.

It goes without saying, the process is needlessly tedious and can, at worst case, dissuade the consumer from purchasing at all.
Omnichannel promises to streamline this entire process.

While its implementations are constantly evolving, omnichannel refers to a business model that is foundationally based on unifying all of the data and all of the processes found within a given company. An omni-channel business is, therefore, one wherein each of its processes has total visibility to each of its other processes. In other words, it relies on an end-to-end solution. So what does this actually look like? Real-world implementations of omni-channel include, but are not limited to:

  • Creating communication systems between each consumer touchpoint
  • Allowing for inventory visibility between channel-specific warehouses
  • Creating processes to unify data between all internal departments

Simply put, omnichannel businesses centralize their data from concept to consumer. As a result, the customer of an omnichannel business can buy from anywhere and similarly, their order can be shipped from anywhere. In practise, a retail location in an omnichannel business would be capable of fulfilling online store orders. Another business would be able to use its omnichannel capabilities to leverage consumer and POS data to implement better demand sensing, thereby reducing spoilage and warehouse costs.
A seamless experience is tantamount
The omnichannel experience is therefore the end user’s experience of dealing with a business that unifies and centralizes all of its data. But it’s important to note that the customer does not see in channels. They simply assume that once they place an order, their order and account details are visible and accessible across the entire company.

Let’s return to the example of the missing shoe. If the business in question was omnichannel enabled, the process for fulfilling a missing shoe size would be completely different. It is likely that the shoe store would digitally poll nearby stores or warehouses for your desired shoe, then have it same-day shipped from an in-stock location to your home.

While both omnichannel and multi-channel businesses permit the consumer to purchase from separate channels, multi-channel businesses manage each channel with disparate systems. As a result, channels in a multi-channel business cannot communicate with each other. Conversely, omnichannel businesses enable free communication between channels, allowing each channel, for instance, to view the inventory levels of another.

While it’s easy to see the benefits of omnichannel for a B2C company, it is a common misconception that wholesalers cannot benefit from delivering an omnichannel experience to their customers. In fact, it can be argued that wholesalers stand to benefit the most from proper omnichannel implementation. Omnichannel enabled inventory transparency, flexible fulfillment options and enhanced demand sensing can allow a wholesaler to dramatically save on costs and increase sales.

Since omnichannel businesses centralize the data of previously disconnected systems, branches, and channels, omnichannel wholesalers can “see” the inventory of a certain item across each of its stocking locations. Wholesalers that can manage and achieve this level of inventory transparency can achieve two benefits.

First, it can be used to decrease shipping costs. If, at the point of sale, a company can see the stock levels of a given item within each warehouse, it can calculate freight, taxes and duties to determine which location will be cheapest to ship from. In cases where the default shipping location is not optimal, the wholesaler will save on shipping costs. This can work internationally as well. An omnichannel enabled wholesaler, for instance, would be able to cross reference against duties and import tariffs to determine the most optimal ship-from location on an international basis.

Second, a business that can see all inventory can, in some cases, fulfill more orders. For example, if a customer places an order for an out-of-stock item, an omnichannel wholesaler would be able to query each other warehouse to see if it could be shipped from an alternate location, saving a sale that would previously be lost.

A recent study reveals that overstocks cost businesses around the world approximately $1.1 trillion each year. The leading cause according to the study, suggests that these overstocks are due to improper planning and buying issues, which can ultimately be blamed on poor data collection and forecasting. These issues are exacerbated by companies who do not share data between channels and miss out on important performance and sales data. As such, proper demand sensing requires omnichannel inventory level visibility. A wholesaler needs to be able to see sales and performance data from all channels. Doing so will lead to the generation of more accurate sales forecasts.

Indeed, it’s hard to understate the benefits of proper forecasting and demand sensing. For instance, if a company forecasts and produces fewer units than the demand, then the company loses on sales. If it forecasts too many, then the company loses on warehouse costs and spoiled inventory. As such, proper demand sensing is imperative for improving the performance of a company.

Of course, the entire process of achieving these omnichannel benefits as a wholesaler is not altogether simple. Omnichannel businesses require extensive data sharing and robust workflows put in place for the myriad of use-cases that the omnichannel customer can generate. Embarking on this process without proper help can incur huge costs. It’s often recommended to use an already established end-to-end solutions provider to increase the speed at which omnichannel features are enabled.

Wholesalers that are setup end-to-end for omnichannel are able to use their data centralization as a foundation for easy growth into new channels. As ecommerce is one of the fastest growing channels, it is a logical step “next-step” for many wholesalers. As might be imagined, for the omni-wholesaler, setting up an ecommerce store is frictionless. With the right omni-channel software, you can leverage your centralized data to set up and integrate your inventory and operational processes with an ecommerce platform, right out of the box. Processes like fulfillment and inventory updates for your ecommerce platform simply hook-up to your existing ones in your omnichannel software. Yet, wholesalers offering the omnichannel experience to consumers without an end-to-end solution must tackle a greater set of challenges.

Omni-channel businesses depend on proper planning. Companies who operate a greater number of channels and customer or consumer touch points, in turn, encounter a larger number of omnichannel use cases. This increases the required complexity of the system handling the business’s omni-channel operations. Since consumers have growing expectations for companies that offer their product on multiple channels, managing these channels properly requires careful and diligent planning. Omnichannel businesses need to be able to handle all possible use-cases caused by the different possible interactions between each channel. To illustrate the challenging amount of planning required for omnichannel success, we’ll go through the processes and variables associated with a single omni-channel use-case.

Take the following case: a consumer buys an article of clothing at an apparel business’s online store; yet, upon delivery, the item does not fit. The consumer is then presented with two options. First, they could contact the online store and ship the item back. Or, they could visit a retail location of the company and ask for an instant return or an exchange. The omni-channel business in question must have many proper procedures to account for all of the variables possible, even for this basic task. The company must:

  • Ensure that stock levels are accurate across its online channel and its brick and mortar store, requiring a connection between each.
  • Determine from which channel to reimburse the consumer. If not from the online channel, the company must transfer funds and manage bookkeeping across channels and countries.
  • Account for the possibility that the item could have been shipped from a warehouse in a different country than the retail location where it is being returned to.
  • Account for an in-store exchange and its implications for all of the above.

These are just a few of the complications that a business may encounter when dealing with a single use case when trying to offer an omnichannel experience. As a result, robust end-to-end system must be put in place to handle the large number of use-cases created when allowing for each of the possible consumer interactions with a business’s various channels. It goes without saying that by choosing the right end-to-end omni-channel software provider a company can likely forgo most of the challenges issued when implementing omnichannel.

Despite the difficulties and challenges associated with enabling omnichannel for a business, the benefits of using it are diverse. And, in all cases, they serve to either increase the sales of a company or decrease its operational costs.

By breaking down the walls between the channels in a business, the consumer is empowered to interact with a company in a way that feels natural to them. It goes without saying, being able to successfully respond to consumer demand in any way that they wish increases the rate customer satisfaction.

Advertising and digital marketing has become almost entirely data-driven. Since it is heavily data driven, having system in place which centralizes all business data can help lower spend on ad dollars, by offering historical data on order details.

As seen previously, the centralization of data within a company can produce accurate sales forecasts and demand sensing. This reduces wasted inventory and the costs associated with overproduction, including the costs associated with warehousing items that do not sell.

The omnichannel enabled business can increase its sales in several ways. For instance, it can use data centralization to easily sell its product on new channels. Furthermore it can use its inventory transparency between channels to fulfill orders that would normally be out of stock.

As companies gain intellectual control over their physical properties via Iot, data collection sources will continue to increase exponentially. Harnessing this, in-and-of-itself, presents many of its own challenges. However, when it comes time for IoT integration, omnichannel retailers will have the advantage.

Businesses will have access to an unprecedented amount of data, allow them to optimize processes, supply chains and assembly lines on a more granular level. Systems, and even supply chains, will be smart enough to organize themselves and self-diagnose potential issues before they occur. The future omnichannel business will allow factories to communicate with one another and function as a single entity. The improvements over the current iteration of omnichannel will further allow business to decrease costs and increase their speed to market.
IoT-enabled assembly lines
But, without an end-to-end system already in place, the benefits of increased data would be useless. As such, current investment for omnichannel can be seen as a future investment for IoT.
That being said, it is evident that today’s omnichannel consumer expectations will only grow. Companies who delay their implementation of omnichannel risk being outpaced by other omnichannel companies, or not being able to meet customer demand.


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