Omnichannel Operations are the New Retail Standard

Stephen DeAngelis

January 30, 2019

The past holiday season solidified the importance of omnichannel operations in the retail sector. Paul A. Myerson (@Paul_A_Myerson), a supply chain instructor at Monmouth University, notes, “An omnichannel retail strategy provides a consistent shopping experience across different channels and devices, requiring your supply chain to offer a smooth, positive experience for customers — no matter where and how they interact with your brand.”[1] Adam Robinson, a marketing strategist at Cerasis, bluntly states, “An omnichannel retail strategy is the new norm in today’s supply chains.”[2]

Omnichannel is the new retail business model

Omnichannel operations have become a business imperative because consumers are increasingly using the digital path to purchase. Robinson notes, “78% of U.S. individuals over the age of 15 at some point use e-commerce platforms to make purchases, asserts Business Insider. Although this represents a stark change in shopping habits, the essence of it lies in its convenience, reports TechCrunch, and convenience is key to the conversion of 18% of visitors to actual purchases. Therefore, an omnichannel retail strategy must become the new standard business model for companies wanting to remain competitive.” Retailers are quickly learning that omnichannel operations are not business as usual. Meyerson asserts retailers need to focus on six challenges on their quest to master omnichannel operations. They are:

Supply chain visibility. Knowing where your inventory is and how best to get products to customers are essential to successful omnichannel operations. Meyerson explains, “Consumer expectations are increasing, and supply chains are extending. You need timely and accurate inventory information for all parts of the supply chain, whether physically integrated or separate.”

Network design. Network design is where the modifier “omni” needs to be stressed. What are all the possible ways a consumer might want to buy from you? Meyerson explains, “Design the network appropriately for rapid delivery, free or low-cost shipping, and free returns, and determine optimal inventory placement. Consider segmenting the supply chain to achieve optimal stocking and delivery performance, while maintaining low operation cost, by grouping products with shared stocking, delivery, and fulfillment needs.”

Order fulfillment. Order fulfillment is where the rubber meets the road. Meyerson writes, “Omnichannel retail creates a range of customer touch points — stores, outlets, e-commerce sites, catalogs, and seasonal pop-up locations. … There is the increased demand — and added complexity — for ship-to-store and ship-from-store delivery, turning retail locations into mini-fulfillment centers requiring picking, packing, and possibly delivery capabilities.”

Pricing. Pricing is always tricky. Today, many retailers leverage cognitive technologies to help them determine optimal pricing strategies. Meyerson writes, “Determine if pricing will be channel specific, a single omnichannel price, or some combination as many consumers use smartphones in the store to compare prices — and use online coupons — before purchasing. The price can help determine if consumers want items delivered to their homes or if they want to pick them up at the nearest store.”

Customer service. On the digital path to purchase, the consumer is king. That means customer service is more important than ever. Meyerson explains, “Omnichannel retail expands the customer experience beyond the store. Many stores contact customers through social media, live chat, or text messaging, so employees need to be trained correctly when they are contacted through any channel.”

Reverse logistics. One unfortunate reality of e-commerce is that northwards of 30 percent of merchandise purchased online is returned. A reverse logistics strategy is essential for successful omnichannel operations. Meyerson asserts, “Make returns convenient through in-store, prepaid mail, and drop point channels.”

Even though omnichannel operations are now the retail standard, Robinson indicates some retailers have yet to master them. “As explained by James Pepper of ITProPortal,” Robinson writes, “retailers that have not yet deployed connected technologies, tracking systems, and integrated e-commerce platforms, are simply unable to make the transition into an omnichannel retail strategy.”

Omnichannel 2.0

Even as many retailers are trying to find their feet in the omnichannel world, Jason Rosing (@JasonRosing), a founding partner of Veridian, asserts omnichannel operations are evolving. He writes, “While omnichannel refers to the integration and seamless experience across channels for supply chain partners, omnichannel 2.0 takes it a bit further. Supply chain leaders need to understand omnichannel 2.0 and what it means for transforming the customer experience.”[3] Rosing believes many retailers tried to master omnichannel operations using technologies developed for a completely different business model. He explains, “The current technology within omnichannel has led to inconsistencies and growing complexity, and instead of the iconic overarching and adoptive platform, many retailers have continued to use legacy systems through custom interfaces that lead to inefficiencies and integration problems.”

According to Rosing, omnichannel 2.0 leverages new technologies purposefully designed to enhance customer relations. He explains, “Omnichannel 2.0 means retailers and supply chain leaders must increase proficiency across all channels, engaging with consumers and personalizing the shopping experience. This allows retailers and the supply chain to eliminate the barriers to new technology implementation, offer better customer service, and prepare for the next innovation. Ultimately, omnichannel 2.0 is about bringing the entire enterprise together, not just enabling support within legacy systems for an omnichannel approach.” Rosing’s assertion is in line with other subject matter experts who insist Industrial Age models are ineffective in the Digital Age. They insist organizations need to transform into digital enterprises; or, as Rosing states, they need to bring the entire enterprise together in order to master omnichannel 2.0. Rosing asserts retailers that master omnichannel 2.0 operations will achieve the following benefits:

  • Greater control over key performance indicators.
  • Flexible fulfillment options across multiple channels.
  • End-to-end visibility.
  • Better risk management strategies.
  • Improved inventory management, reducing instances of overstocking and under stocking.
  • Improved IT processes and true integration between systems.

Consumers really don’t care about the technology that makes their path to purchase convenient and fast. They simply know when a shopping experience feels right and they reward those experiences with return business.

Concluding thoughts

Robinson notes, “More companies are actively investing in an omnichannel retail strategy by realigning business goals and processes with the need to provide a seamless customer experience.” A good omnichannel strategy ensures customers are satisfied at every touchpoint along their path to purchase. New technologies can help achieve that goal. Rosing explains, “Omnichannel 2.0 is not just the next evolution; it is the ultimate standard for customer experiences in modern supply chain management. Customers want their products now, from any ordering portal, the ability to pick up online orders from in-store locations, have another piece shipped to their home, and still have the option of getting notifications on their phones when they enter a store about items on sale. This will require an entirely new generation of integrated systems and the ability to rapidly scale productivity with limited resources.” Cognitive computing capabilities will play a significant role in integrating systems and reducing omnichannel complexity.

Footnotes
[1] Paul A. Myerson, “Are You Ready for Omnichannel Retail?Inbound Logistics, 16 July 2018.
[2] Adam Robinson, “Omnichannel Retail Strategy: Not just a Buzzword, But a Business Model,” Cerasis, 5 October 2018.
[3] Jason Rosing, “What Exactly Is Omnichannel 2.0 and How Is It Different?” Cerasis, 21 December 2018.