Omnichannel is the Future of Retail

Stephen DeAngelis

September 15, 2020

British novelist Wilbur Addison Smith once wrote, “History is a river that never ends.” The metaphor of history as a river is misleading. It implies a fairly steady flow of events from the past into the future. Forecasters would love that to be true. Unfortunately, the coronavirus pandemic once again demonstrates how history is more like tectonic plates floating on the Earth’s core than it is a river. Every now and then history undergoes a tremor that disrupts the flow of events and changes the landscape forever. Analysts from Shadowfax write, “The global pandemic has the entire world in lockdown with a significant impact on both human lives and livelihood. Talking about businesses, both offline and online business models have taken a beating, with substantial disruptions across the supply chain and changes in demand and revenue patterns.”[1] One business model demonstrating resilience has been e-commerce.

Acceleration of e-commerce trends

Petr Svoboda (@petrsvob), CEO of Shopsys, has been urging retailers to focus more sharply on online sales for nearly twenty years. He now predicts, “The coronavirus pandemic will accelerate the digitalization of the world at all levels, from trade and education to government and work habits.”[2] He adds, “I firmly believe that the effects of this pandemic will fundamentally alter customers’ buying habits, and even after this has passed customers will prefer online shopping significantly more than they did before.” He believes this change in consumer behavior will be the result of convenience rather than fear. He explains, “Throughout history, humans have been looking for tools to simplify their lives and save time. Nowadays, online stores are have become one of those tools. Online sales experiences will likely be highly valued as the economy tries to recover from a new recession, even though it will predictably come at the expense of traditional retail stores.”

Although brick-and-mortar stores are experiencing tough times, the pandemic doesn’t mean the end is near for physical retail. It does mean that retailers need to master omnichannel operations if they want to survive and thrive in the years ahead. Retail industry expert Shelley E. Kohan (@retailshelley) writes, “Self-quarantines and emerging consumer worry about public places will provide opportunities for the e-commerce business to thrive over the next few months. As consumers turn to digital options as a means to circumvent physical shopping environments, the change in behavior may impact longer-term comportment. Consumer behavior is influenced by technological advancements, but also by environmental, economic and sociological factors, all three of which are evident with the current COVID-19.”[3]

The rise of omnichannel operations

Few analysts question the fact that consumers are increasingly taking the digital path to purchase — which increases the importance of omnichannel operations. Omnichannel operations require a seamless blending of online and in-store shopping experiences. Shadowfax analysts explain, “[Retailers need to invest in the] digitization of supply chains to make them omnichannel instead of multichannel, effectively breaking down the organizational silos and bridging the gap between offline and online to meet the new demand patterns of the post-COVID-19 era.” Dani Cushion (@dmcushion), Chief Marketing Officer at Cardlytics, agrees that channel silos are anathema to omnichannel operations. She writes, “Even with the best of intentions for an integrated approach, marketing efforts can remain siloed with different strategies and performance metrics that don’t necessarily correspond to how customers actually shop.”[4] Cushion goes on to note that “omni shoppers” are better customers. She explains, “The industry buzz around omni isn’t just hype. By evaluating where sales are happening based on actual purchase data, we see that omni customers — those who shop with a brand both online and in-store — spend significantly more. In the retail vertical alone, omni customers spend 82% more than customers who shop only in-store or only online. Converting customers from shopping in a single channel to omni can be a leading driver of loyalty and make a material difference to the bottom line.”

Another thing the pandemic has demonstrated is that customers like “buy online pick-up in store” options. Casey Gannon, global vice president of marketing at Shopgate, explains, “Now more than ever, it’s important for retailers to deliver products to the hands of customers where and when they want them. Shoppers want choice and flexibility in how their orders are fulfilled, and they want to be able to complete their purchases or make returns quickly and efficiently. … To combat this challenge, the savviest of retailers are adopting the buy online, pick up in-store (BOPIS) model and the buy online, return in-store (BORIS) model to compete against the likes of Amazon.com.”[5] She adds, “This isn’t a fast fleeing fad either; it’s a full-on expectation. In our recent omnichannel survey, 61 percent of retailers said that BOPIS and BORIS are at the top of their omnichannel plans and investments.”

The pandemic forced retailers to offer a new option during the pandemic curbside pickup. Emma Cosgrove (@emmacos) explains, however, that curbside pickup isn’t a preferred option for retailers. “Curbside has not always been attractive to retailers,” she writes, “many of which were reticent to offer consumers more opportunities to avoid coming into the store.”[6] On the other hand, she notes, “Curbside pickup is, after all, literally just a few steps away from buy online pickup in-store. The picking process is the same, but store staff need an efficient way of determining when and where the customer will be in the parking lot to drop the goods. Still, few retailers outside of the grocery space offered it pre-pandemic.” Whether curbside pickup remains a ubiquitous option after the pandemic remains to be seen.

Concluding thoughts

If you harbor any doubts about the future of e-commerce and omnichannel operations, consider the fact that Amazon is in discussions to rent mall space as distribution centers. Esther Fung (@estherfung) and Sebastian Herrera (@SebasAHerrera) report, “The largest mall owner in the U.S. [Simon Property Group Inc.] … has been exploring with Amazon the possibility of turning some of the property owner’s anchor department stores into Amazon distribution hubs, according to people familiar with the matter. Amazon typically uses these warehouses to store everything from books and sweaters to kitchenware and electronics until delivery to local customers.”[7] Cosgrove concludes, “With peak season in view and the virus still a factor, the importance of robust omnichannel infrastructure will only grow and the bar may rise as well. As U.S. consumers grow more accustomed to pandemic conditions, the expectation of speed for curbside pickup — the time between click and collect — may rise.” As I noted at the beginning of this article, extrapolating the past into the future can be both risky and foolish; nevertheless, I believe omnichannel operations will be around for a long time.

Footnotes
[1] Shadowfax, “Omnichannel — Why it is the future of supply chain post COVID-19,” Medium, 5 May 2020.
[2] Petr Svoboda, “Crisis as an Opportunity: The Omnichannel World After Covid-19,” Shopsys, 24 March 2020.
[3] Shelley E. Kohan, “Coronavirus Fears May Drive U.S. E-Commerce Sales Beyond 2020 Projections—And Change How People Shop In The Future,” Forbes, 6 March 2020.
[4] Dani Cushion, “Rethinking Omni: Breaking Down Sales Channel Silos,” Advertising Week 360, August 2020.
[5] Casey Gannon, “Retailers and Shoppers Are All About BOPIS and BORIS,” Total Retail, 21 October 2019.
[6] Emma Cosgrove, “With stores closed, retailers supercharged omnichannel adoption,” Supply Chain Dive, 30 June 2020.
[7] Esther Fung and Sebastian Herrera, “Amazon and Mall Operator Look at Turning Sears, J.C. Penney Stores Into Fulfillment Centers,” The Wall Street Journal, 9 August 2020.