We discussed the concept of omnichannels in the text in various chapters. This has become a very “hot” topic since the book was published in 2015. I thought it might be relevant to revisit the topic and consider any further research or comments that might have emerged in the literature since then.
Let us recap what this term means.
Essentially companies have to address the changing behaviour of customers (both B2B and B2C) in the market-place. Yet again technology and data have combined to materially influence the way in which customers in all sectors engage in the purchasing decision-making and buying process. This is particularly so in the case of the retail sector. Traditionally shoppers visited the physical, “bricks and mortar” store to make get advice, browse, compare different brands and make a purchase.
Online channels and developments in mobile technology (for instance mobile apps) and social media have revolutionised the way in which customers engage with retailers across all points in the buying process: problem recognition, search, evaluation of alternative options, and the decision on which item to buy, purchase and post-purchase considerations.
Put simply, shoppers “duck in and out of” different channels during this purchasing process. For instance social media platforms may stimulate me to consider buying a new TV set, I may visit some blogs and discussion forums to pick up some “pearls of wisdom” from people who have experienced some of the brands out there such as Samsung and LG. I may then visit an electrical retailer such as Curry’s. I may finally make that final purchase online. Post-purchase if I have any queries I may ring a call centre to get advice or guidance. In this case I have used a number of different channels.
Initially during the late noughties and the early part of this decade, some of the experts in the retail sector were predicting the eclipse of physical stores and that shoppers would sublimely migrate to the new channels. However evidence suggests that this is not happening to the extent highlighted in various reports. Physical, “bricks and mortar” stores play a significant role for many of us. Indeed retailers in general have responded by redefining what a physical store should deliver in terms of the shopping experience.
The challenge for the retailer is to ensure that I, as a customer, should enjoy an integrated and seamless experience across all of the channels every time I engage with the retailer.
In theory this sounds perfect in terms of managing customer’s expectations and improving the experience.
In practice however it is a challenge.
The following quotation is from a recent article published by McKinsey Consultants *
“Mapping its customers’ journeys confirmed the suspicions. Four out of five potential loan customers visited the bank’s website, but from there, their paths diverged as they sought different ways to have their questions answered. About 20 percent stayed online, another 20 percent phoned a call center, and 15 percent visited a branch, with the remainder leaving the process.
The channels’ differing performance pointed to specific problems. Ultimately, more than one-fifth of customers who visited a branch ended up getting loans. But in the online channel, less than 1 percent got a loan after almost 80 percent dropped out rather than fill in a registration form. Finally, in call centers, a mere one-tenth of 1 percent of customers received a loan—perhaps not surprising, since only 2 percent even requested an offer
To integrate digital and traditional channels more effectively, the bank had to become more agile, with the understanding that its one-size-fits-most processes would no longer work. Complex registration forms were simplified and tailored to different types of customers. Revised policies clarified which channel took the lead when customers moved between channels. And new links between the website and the call centers enabled agents to follow up when online customers left a form incomplete. Together, these types of changes helped increase sales of current-account and personal-loan products by more than 25 percent across all channels.” (Full reference at end of this blog)
This lengthy quotation (apologies) serves to highlight the practical problems that a retail bank faces in terms of implementing an omnichannel strategy. Existing processes and procedures have had to be adapted or changed in order to ensure that customers and the bank benefited from the concept.
Building digital capabilities is key to the ultimate success of the omnichannel experience. It is not simply a case of adding on extra digital channels, for instance a new and improved app. In order to understand customer preferences retailers have to invest the time and energy in mapping out the journeys that individual shoppers take when engaging with it during the buying process.
In the book I discussed some typical obstacles to implementing an omnichannel strategy. This included variation with respect to inventory across the different channels e.g. an item being available in some, but not all stores, while at the same time not being available at all on its online channel. This in turn damages the reputation and brand equity of the retailer. It also can result in disgruntled shoppers taking their business elsewhere.
Further obstacles identified in the McKinsey article include the following.
- A bias toward bigness. Part of the reason is a misplaced belief that omnichannel’s massive implications require equally massive actions, such as an entirely new IT platform or organization structure to bring all channels together. Too often that “silver bullet” mentality leads only to a massive misallocation of resources.
- Disregarding diversity. In our experience, most companies tend to build their digital and omnichannel experience believing that most customers have basically the same needs and follow basically the same journeys. In reality, customers are far more diverse, not only in their needs but also in how they want to meet those needs.
- Curbing cooperation. But the need for greater flexibility usually bumps into a hardened reality. Despite decades of discussion about conflicting channels, many companies still operate each channel as a separate organization, expecting it to optimize its own performance and service model while showing its own results. Incentives ostensibly designed to encourage performance unintentionally reinforce the channels’ isolation—such as revenue-generation targets that push each channel to increase its own sales volume regardless of any impact on sister channels.
Most of these obstacles actually tend to emerge because companies have pre-conceived notions of how shoppers behave. In order to address them senior management needs to adopt a change in mind-set and get back to basics.
In the next blog I consider some of the practical ways in which companies can employ to overcome these obstacles and help to ensure that a smoother path to omnipotent success is achieved.
Bianchi, Rafaella, Cermak, Michael and Duskek, Ondrej (2016) “Omnichannel not omnishambles”. McKinsey Quarterly, December.