How Retailers Can Meet the Need for Omnichannel
While consumers made their transition to omnichannel some time ago, retailers are only slowly following suit. They recognize the benefits of taking a channel-agnostic approach to deliver a seamless, cohesive customer experience from marketing to browsing and buying, but achieving success with omnichannel can seem to be a daunting task.
How can retailers get their organization, processes, systems and channels working together as a single harmonious orchestra, rather than a cacophony of instruments playing to their own tunes? More importantly, how can they get there without risking a drop in customer experience, brand value or revenues?
It's key to first understand that multichannel and omnichannel are not one and the same. Multichannel was the first stage of customer interaction, with retailers offering different customer touch points—first physical stores, then online, and then social. These different channels were not integrated, and as a result, customers could have different experiences in each. With omnichannel, the channels are integrated, so the retailer has comprehensive knowledge of who the shopper is and can personalize the experience for them based on behaviors across the different channels.
Pathway to Omnichannel
To be truly omnichannel, retailers need to understand each individual customer and the interactions he or she could be having across different channels simultaneously. To achieve this, retailers must go through several steps in their journey to being an omnichannel business:
- It has to have a clear documented understanding of its brand, merchandising, and pricing strategies across all channels.
- It needs the right organizational structure and incentives to support an omnichannel strategy.
- It requires the right kind of analytics to understand how customers behave across these channels at the individual customer level.
- Finally, with setting up the right answers in steps 1–3, the retailer can then personalize interactions, including across promotions, with less cannibalizing across channels, and secure more loyal trips from its target customers.
By knowing customer behaviors and desires, retailers can be proactive rather than reactive with communications and spend more efficiently to secure customer loyalty. Ultimately, the goal is to generate a cohesive branded experience across all channels, where customers feel comfortable and see what they expect. This does not mean the experiences have to be identical, but it does mean that differences redirect customers to interact in the way that balances their preferences (and share of wallet) against the cost-to-serve across channels.
Pitfalls to Avoid
There are operational, organizational and experiential issues to overcome to achieve a true omnichannel business.
In more traditional multichannel environments, the chief merchant officer controls the merchandising in the physical stores, while the CIO or "head of online" controls the offering in the online stores. They each have different agendas tied to different or misaligned incentive structures. This can cause the same retailer to cannibalize itself across channels, which inherently leads to less than optimal results for the customer. If retailers follow the steps above, it will help to ensure their path to omnichannel will be as smooth as possible.
It's important to keep in mind that online and in-store don't have to have the same pricing on items. This can have a negative financial impact on the organization. It could be that just the key value items need to be the same, for example.
Another obstacle to success is when a retailer tries to solve too much too quickly—compromising operationally or experientially in ways that can cause resistance and slow down the journey. It's better to build out a road map and strive for quick wins first that can have a positive impact on the customer experience. Even a journey of a thousand miles begins with a step. It's important to identify the right first step and goals for one, three, and five years down the road, as this will set the tempo of the omnichannel effort and keep the team focused on the priorities.
Finally, not having the right data, structured in a coherent manner, may mean retailers do not ask the right questions or determine the right answers. Therefore, it's key to begin with the end in mind. For example, a retailer should ask itself, what are we planning to achieve through online sales? For example, is it an extension of our current channel structure? A better way to reach our target customer base? A way to improve the brand through merchandising across all the channels our customers interact through/in?
Depending upon the intended goal, the retailer should structure its data to answer questions that best resolve its business challenge. By creating better data structures (it's not necessary to wait for perfect) to answer the business problem, it can more quickly decipher the right solutions to address the next generation of merchandising activities. This needs to be a seamless input to insight-driven action recommendations and workflow; otherwise, the sheer volume of identified opportunities and the faster, more dynamic pace of omnichannel will outstrip the capacity of the organization to take advantage of the opportunities.
The critical thing for retailers is that they need to accept the inevitability of omnichannel if they want to survive. Customers are already there; they need to be there as well. But it's a marathon, not a sprint. By following the guidance above and setting clear goals and milestones, retailers can take a strategic, measured approach to their omnichannel efforts that will help ensure the years they spent building their brand loyalty and reputation will not be compromised in the process.
Channie Mize is the general manager for the Retail Sector for Periscope, a McKinsey Solution. She has over 15 years of retail experience spanning diverse competencies, including omnichannel pricing and promotional strategy, clearance management, category management, analytics, and merchandise planning. Her career has included management consulting, software-as-a-service (SaaS), and retail industry experience as a vice president for a Fortune 250 retailer.