Retail: How to survive the evolving market
By Aad Smits -
Over the last few decades, the retail world has changed more than ever.
New technologies have entered the market and have transformed traditional retail stores into high-tech shops where, for instance, you can do everything through self-checkout, or as extreme as having stores with no employees at all.
Nowadays consumers expect more flexibility, better service and quicker delivery. The increasing power of the customer means that retailers should adapt in order to keep their customers satisfied, leading to more competition and reducing margins. With big players such as Amazon entering the market, it is important to stay ahead of the competition in order to maintain or even gain market share.
The rise of the omnichannel retailer is arguably one of the most profound changes in the retail space. We know that products can be sold to customers in multiple ways, using different channels. As long as these channels are managed separately, we talk about multichannel or crosschannel. However, as soon as the approach to the customer is aligned and the channels used to sell products to customers are fully integrated, then the term omnichannel applies. This means for instance that the same prices, advertisements and promotions are used across all channels.
An example is when someone receives an advertisement on social media for a t-shirt. They could buy this t-shirt either via the online store or visit a store. When they choose to order the t-shirt online, they can choose whether they want it to be delivered to their home, or alternatively they could pick it up in-store. In the case that they decide to return the t-shirt, this too could be done by sending it directly through mail or bring it back to the store. This illustrates how the integration of channels provides the customer with a consistent yet flexible experience.
Research has shown that omnichannel retailing strategies leads to higher average customer satisfaction. This is because personalised, relevant and consistent brand and product experiences foster greater faith in the company. Customers now have a range of channels through which they can engage with a business and are satisfied knowing that they can choose their preferred channel and still receive a consistent product and brand experience. This again leads to higher conversion rates and an increase of sales.
Some companies apply the ‘anywhere everywhere’ strategy. This strategy avails all units of every product to customers regardless of their location. For instance, if the last unit of a product is available in a store in Sydney, someone could purchase it in a Melbourne store and it will then either be sent to the store in Melbourne or to the customer’s preferred delivery address. This is just one of many strategies that can be achieved through omnichannel retailing.
The omnichannel strategy has great potential; however, it is not easy to implement. Since the strategies of multiple channels needs to be aligned, the processes and the information systems should also align. This means that there should be one single point of entry, this is the main source of data (ERP). In addition to an ERP system, best-of-breed systems can be integrated into the ERP to ensure that each process is optimised.
Another vital point that should be kept in mind is that the focus should be on the customer instead of on the channels. The alignment of channels in a business should work to serve customers and their needs. It could take some effort to have the right process in place, but the main driver should be to understand what the customer really wants and to adjust the processes to the needs of the customer.
Having placed the customer at the centre of your business, it is important to ensure that your backend supports this. What service level is expected and what lead time is accepted? Should the full assortment be stocked in every store, or should only the core assortment be available in the store, so the outer range can be ordered online?
An omnichannel strategy enables businesses to increase sales by marketing online ordering with delivery to store or directly to the customer in the case that they demand an out-of-stock product, or the product is not part of the core in-store assortment. However, the caveat is that this can only be done when the lead time is acceptable. Here, the service level and assortment strategy will determine if and how often the channels must work to complement each other. This means that now more than ever, the right stock should be at the right place, at the right time. Only then with guaranteed availability and a clear strategy in place can your company survive and thrive in the highly competitive retail industry.