Redefining Omnichannel Marketing

Why Omnichannel Strategy Failed and How to Make It Work? (Part Two)

However, few people ever realized that this seemingly perfect concept of omnichannel marketing is indeed very tricky and misleading at least in the following three ways:

First, omnichannel misleads retailers to chase after something important but NOT the most important to their customers.

Although omnichannel definitions may vary, they all have one thing in common, that is the so-called “seamless customer experience” which is one of the signature goals of omnichannel. According to some omnichannel literature, the seamless experience consists of the following key elements:

1.The congruent and frictionless interactions. Customers have a congruent shopping experience across devices. Customers can begin their shopping journey in one channel, i.e. the desktop and switch to others, i.e., the iPad, without having to start all over or repeat previous steps. It also means that when speaking with different customer service representatives, the customer does not need to repeat or repeat his/her info.

2.Consistent marketing messages. Companies send out consistent messages to their customers. Customers see consistent info about branding, design, product inventory, and pricing, etc. across multiple channels. For instance, if a customer clicks a coupon code on the Facebook page, it automatically applies the discount upon checking out.

3.Visible real-time cross-channel inventory. Physical store inventory is shared across all channels and is able to be seen online. By giving online shoppers access to the inventory and service resources of local retail stores, products that were used to be hard for online sales can be added to the mix.

4.The integrated cross channel distribution. Omnichannel retailers use the cross-channel fulfillment programs such as buy online, pickup in-store (BOPIS) or curbside pickup, etc. to help shoppers avoid shipping fees, and are more convenient to manage returns and seek expertise in stores.

Now, if you carefully exam these elements for a second, you will soon find out that in a nutshell, they all aim to do one thing – providing convenience to customers. Convenience is undoubtedly one of the essential elements that will help create an excellent customer experience, but convenience per ser does not equal to the whole customer experience which is generated by a slew of much broader transactional drivers(i.e. price, location, products, services and so on) and emotional drivers (i.e. respect, responsiveness, rewards, integrity, trust, honesty, belonging, familiarity, compassion, security, surprise, delight, gratitude and so on.). The truth is that even though retailers like Macy’s can deliver the so-called “seamless experience” across all channels, at best, they merely offer customers convenience during shopping, which does not necessarily guarantee an overall good customer experience. Therefore, logically, many omnichannel definitions use a part of a whole (convenience) to represent the whole (customer experience).

Even some people might consider convenience as customer experience; the problem is that customer experience alone has never been the most crucial factor that drives a purchase decision(s). Customers make a purchase(s) because of one of or a combination of the transactional and rational drivers such as location, competitive prices, high perceived value, superior product quality, monopoly, hassle to switch, variety of selections, better customer service, rewards program, brand name, and so on. According to The International Council of Shopping Centers’ (ICSC) survey, “driving loyalty to specific retailers in 2017 are price and value with nine out of ten (92%) loyal customers ranking this the top reason, followed by product/quality (79%) and variety/selection (71%)”; And “millennials are less affected by negative customer experiences” compared to customers of other generations.[1]  Highlighted in the survey, the top four loyalty drivers are price, value, product/quality, and variety/selections. Customer experience even didn’t make it to the list, let alone becoming a panacea for the demise of retail as many ailing retailers had hoped for.

Customer experience is like the icing on the cake that becomes a differentiator unless and until the “cake” – a combination of products, price, value, place, customer service, and so on – can satisfy the fundamental needs of customers first. For multichannel retailers especially those that compete in the low-to-middle class market segment, products, prices, and value are probably more important than customer experience. Therefore, organizations that spend the majority of their limited marketing dollars to chase after the so-called “seamless experience across channels” but failed to address the fundamental needs of their customers will be doomed.

Second, the omnichannel concept misleads retailers to invest heavily in a modern supply chain system that is hard to achieve and will get very little value back

To provide a seamless experience across channels, retailers realized that the inventory-tracking and product distribution processes must catch up to the marketing aspirations. Today, the forefront of omnichannel retail is the modern supply chain, which consists of three major initiatives: cross-channel inventory visibility, store pickup, and store-based fulfillment. This new model requires the visibility of supplier inventory and better collaboration between the retailer, its suppliers, and its logistics providers.

The benefits of implementing such a model, in theory, are evident: it opens up the inventory across channels to customers regardless of where or how they are shopping. For instance, online customers can access to their closest store with the item in stock. Customers can also select their preferred delivery options, such as buy online and pick up in the nominated store or home delivery. If the customer orders something currently unavailable in a store but available from a nearby store or even a nearby supplier, the item is dispatched directly from that store/supplier to the customer as this reduces the turnaround time. The system theoretically benefits retailers too. It can help retailers to reduce operational costs and bring customers back to physical stores for additional purchase opportunities.

The problem is that in reality, implementing such a modern supply chain system is not only costly but also difficult. It will encounter many challenges, such as the follows:

Organizational challenges – integrated inventory requires to break down silos between online and physical stores.

Technology challenges –  managing product responsibilities as one collective marketplace involves the implementation of new technologies such as integrating the legacy system into the new inventory management systems to ensure products available when, where, and how the customer needs and wants them, and to allow for new functionality such as buy online, pick up in-store, and so on.

Logistics challenges – creating new ways of delivering products that extend delivery across websites, social media, mobile apps, suppliers, and the physical stores require a lot of integration and coordination between stores, vendors, and logistics providers.

Store operations challenges – the store associates play a critical role in the success of any omnichannel strategy. For instance, if an associate doesn’t get a commission on an order that he/she places for a customer in-store because it was fulfilled elsewhere, that associate is unlikely to actively participate in the program. To make new initiatives such as Buy Online and Pick Up in Store (BOPIS) work, stores often have to assign a dedicated pickup location and designated parking spots, establish signage within a store, and pre-sort items, and make them ready for pickup. It is not uncommon that many poorly managed in-store pickup programs take too long for the merchandise to arrive. Instead of reducing the turnaround time for customers, the omnichannel supply system results in frustrated and impatient customers. Another issue is that stores lack sufficient space for staging, packing, and shipping orders because they were not designed to handle these functions in the first place. Therefore, ensuring store associates are both adequately trained and incentivized to participate in omnichannel is essential to the overall success of the initiative.

Fraud challenges– BOPIS (buy online pick in-store) attracts fraudsters. Unlike most online orders, BOPIS orders come with no delivery address, which helps determine whether a customer is legitimate. Emilie Grunzweig, Riskified’s senior fraud analyst noted that “we’re seeing effective rates of fraud in BOPIS for some of our merchants that are 250% higher than they were in the last year.”[2]

Overcoming these challenges is time-consuming and very costly as well. And due to lack of money, tools, labor, and data, many retailers believe that such a modern supply chain system is simply not achievable. Even though a handful of retailers such as Macy’s were able to secure sufficient funds and win support from top management and have successfully implemented such a system, an even bigger problem is that these substantial investments in updating the supply chain system will reap very little value to retailers.

Take BOPIS (buy online pick in-store), for example. The BOPIS supposedly adds incremental value in three ways: 1. Sales revenue from customers who make extra purchases while in the physical stores; 2. Sales from the additional visit(s) due to convenience. For instance, before BOPIS, a customer made four visits a year; after BOPIS, the customer makes six visits.  3. Sales from customers who otherwise will defect if the retail didn’t offer the BOPIS option. A quick and dirty way to gauge the incremental value of BOPIS is to estimate how many customers have used BOPIS. Marketing firm Signifyd surveyed 250 retail professionals at enterprises with at least $100 million in annual sales, and they found that averagely, BOPIS made around 20% of the online sales.

Let’s do quick math. For a typical multichannel retailer, the online sales revenue accounts for about 10-25% of its total sales revenue. So, BOPIS basically can affect only around 2% (10% x20%=2%) to 5% (20% x 25% =5%) of the total sales revenue. The incremental sales revenue generated by these 2-5% BOPIS users will be much smaller. Therefore, at this point, for most multichannel retailers, the costly BOPIS system does not seem to be a good investment.

You may wonder why BOPIS can only benefit such a small percentage of your customers? There is a secret that most omnichannel service providers don’t want you to know. Although most customers utilize more than one platform and navigate between many physical and digital touchpoints for a single purchase, at least right now, the majority of them will not take advantage of the modern supply chain. Omnichannel customers are not created equal. In general, there are two types of omnichannel customers -the broadly defined omnichannel customers and the narrowly defined omnichannel customers.

The broadly defined omnichannel customers are digitally influenced by customers. They begin the research with the mobile phone, read reviews, compare prices, and then purchase in a store. Or start the research online, then visit stores to see the products, compare prices, and finally buy online. In other words, they may use multiple channels to research the product)s) but will use one channel to make the purchase(s) and return the merchandise to the same channel. Today, the majority of customers will fall into this category.

The narrowly defined omnichannel customers are ones who have made purchases both online and in brick-and-mortar stores. These customers are more likely to use services such as BOPIS and buy online return in-store. As online business continues to grow, the trend is that more single-channel customers will become multichannel customers, and more broadly defined omnichannel customers will evolve into narrowly defined omnichannel customers who will demand more inventory visibility and cross channel distributions. However, the whole course of evolution might take quite some years. Today, typically, these narrowly defined omnichannel customers account for only 5-25% of the total customers in the database of an average multichannel retailer. Therefore, we haven’t seen any retailers, including Macy’s, have published any convincing data to prove that the incremental profit generated by the omnichannel supply chain can justify the massive investments in updating their legacy supply chain.

To add insult to injury, recently, Amazon announced that it would make one-day shipping the standard for all Prime members. That move will put pressure on retailers to respond. To stay competitive, most multichannel retailers will have to follow suit to make sure they can meet shoppers’ delivery expectations, which makes BOPIS less attractive to customers. Therefore, when determining whether or not to upgrade the legacy inventory system and offer BOPIS to customers, marketers must gauge how many customers will use the system and how much incremental value these customers will bring to the table.

Third, the omnichannel concept might mislead some retailers to invest in all channels, which is not necessary and financially infeasible.

“Omnis” is Latin for every/all. Some omnichannel literature emphasizes that retailers must prepare to satisfy today’s customers who decide whenever and wherever to interact with you. Therefore, marketers must be ready on every channel. A good example is the popularity of the buzzword channel-agnostic. “Being channel-agnostic means we don’t have a preference where our customers gather their research, which channel they buy on, or how or when they want to interact with us. It means servicing every channel without priority and limitations – web self-service, email, chat, SMS/text, IVR voice self-service, Facebook, Twitter, and other social platforms, and, of course, actual live agent voice.” [3]

Being channel-agnostic is like adopting a segment-agnostic approach to serve every customer equally, a strategy that only a very few companies are capable of doing because there are more than one hundred different marketing channels. Channel agnostic dilutes companies’ limited marketing dollars and distracts retailers’ attention away from focusing on the most relevant channels to better serve their best customers. Therefore, it is neither necessary nor sustainable.

From Omnichannel to Practical Omnichannel Marketing

So, should we get rid of omnichannel completely, as some marketers have suggested? Probably not for two reasons. First, after more than 15 years of numerous presentations, webinars, articles, and panel discussions to promote omnichannel, many people were under the impression that omnichannel will be the de facto standard of marketing communications for retailers. It is simply not easy to eliminate the word “omnichannel” from marketers’ language. Second, there are still many good points in the omnichannel theory worth pursuing. For instance, omnichannel marketing helps break down silos and requires all departments to work together. Also, omnichannel marketing integrates the different communication channels to communicate consistent messages with customers. Therefore, a more practical and realistic way is to redefine the concept and gain consensus on the definition of the new term among marketers.

[1] Low Prices Raise Customer Loyalty, Business Wire, August 15, 2017, https://www.businesswire.com/news/home/20170815005733/en/Prices-Raise-Customer-Loyalty

[2] BOPIS fraud is up 250% in 1 year. Can retailers protect their profits without losing customers? Jacqueline Renfrow, Jul 2, 2018, https://www.fierceretail.com/bopis-fraud-up-250

[3] channel agnostic | WordReference Forums. https://forum.wordreference.com/threads/channel-agnostic.3288088/

by admin

Redefining Omnichannel Marketing

Why Omnichannel Strategy Failed and How to Make It Work? (Part Two)

However, few people ever realized that this seemingly perfect concept of omnichannel marketing is indeed very tricky and misleading at least in the following three ways:

First, omnichannel misleads retailers to chase after something important but NOT the most important to their customers.

Although omnichannel definitions may vary, they all have one thing in common, that is the so-called “seamless customer experience” which is one of the signature goals of omnichannel. According to some omnichannel literature, the seamless experience consists of the following key elements:

1.The congruent and frictionless interactions. Customers have a congruent shopping experience across devices. Customers can begin their shopping journey in one channel, i.e. the desktop and switch to others, i.e., the iPad, without having to start all over or repeat previous steps. It also means that when speaking with different customer service representatives, the customer does not need to repeat or repeat his/her info.

2.Consistent marketing messages. Companies send out consistent messages to their customers. Customers see consistent info about branding, design, product inventory, and pricing, etc. across multiple channels. For instance, if a customer clicks a coupon code on the Facebook page, it automatically applies the discount upon checking out.

3.Visible real-time cross-channel inventory. Physical store inventory is shared across all channels and is able to be seen online. By giving online shoppers access to the inventory and service resources of local retail stores, products that were used to be hard for online sales can be added to the mix.

4.The integrated cross channel distribution. Omnichannel retailers use the cross-channel fulfillment programs such as buy online, pickup in-store (BOPIS) or curbside pickup, etc. to help shoppers avoid shipping fees, and are more convenient to manage returns and seek expertise in stores.

Now, if you carefully exam these elements for a second, you will soon find out that in a nutshell, they all aim to do one thing – providing convenience to customers. Convenience is undoubtedly one of the essential elements that will help create an excellent customer experience, but convenience per ser does not equal to the whole customer experience which is generated by a slew of much broader transactional drivers(i.e. price, location, products, services and so on) and emotional drivers (i.e. respect, responsiveness, rewards, integrity, trust, honesty, belonging, familiarity, compassion, security, surprise, delight, gratitude and so on.). The truth is that even though retailers like Macy’s can deliver the so-called “seamless experience” across all channels, at best, they merely offer customers convenience during shopping, which does not necessarily guarantee an overall good customer experience. Therefore, logically, many omnichannel definitions use a part of a whole (convenience) to represent the whole (customer experience).

Even some people might consider convenience as customer experience; the problem is that customer experience alone has never been the most crucial factor that drives a purchase decision(s). Customers make a purchase(s) because of one of or a combination of the transactional and rational drivers such as location, competitive prices, high perceived value, superior product quality, monopoly, hassle to switch, variety of selections, better customer service, rewards program, brand name, and so on. According to The International Council of Shopping Centers’ (ICSC) survey, “driving loyalty to specific retailers in 2017 are price and value with nine out of ten (92%) loyal customers ranking this the top reason, followed by product/quality (79%) and variety/selection (71%)”; And “millennials are less affected by negative customer experiences” compared to customers of other generations.[1]  Highlighted in the survey, the top four loyalty drivers are price, value, product/quality, and variety/selections. Customer experience even didn’t make it to the list, let alone becoming a panacea for the demise of retail as many ailing retailers had hoped for.

Customer experience is like the icing on the cake that becomes a differentiator unless and until the “cake” – a combination of products, price, value, place, customer service, and so on – can satisfy the fundamental needs of customers first. For multichannel retailers especially those that compete in the low-to-middle class market segment, products, prices, and value are probably more important than customer experience. Therefore, organizations that spend the majority of their limited marketing dollars to chase after the so-called “seamless experience across channels” but failed to address the fundamental needs of their customers will be doomed.

Second, the omnichannel concept misleads retailers to invest heavily in a modern supply chain system that is hard to achieve and will get very little value back

To provide a seamless experience across channels, retailers realized that the inventory-tracking and product distribution processes must catch up to the marketing aspirations. Today, the forefront of omnichannel retail is the modern supply chain, which consists of three major initiatives: cross-channel inventory visibility, store pickup, and store-based fulfillment. This new model requires the visibility of supplier inventory and better collaboration between the retailer, its suppliers, and its logistics providers.

The benefits of implementing such a model, in theory, are evident: it opens up the inventory across channels to customers regardless of where or how they are shopping. For instance, online customers can access to their closest store with the item in stock. Customers can also select their preferred delivery options, such as buy online and pick up in the nominated store or home delivery. If the customer orders something currently unavailable in a store but available from a nearby store or even a nearby supplier, the item is dispatched directly from that store/supplier to the customer as this reduces the turnaround time. The system theoretically benefits retailers too. It can help retailers to reduce operational costs and bring customers back to physical stores for additional purchase opportunities.

The problem is that in reality, implementing such a modern supply chain system is not only costly but also difficult. It will encounter many challenges, such as the follows:

Organizational challenges – integrated inventory requires to break down silos between online and physical stores.

Technology challenges –  managing product responsibilities as one collective marketplace involves the implementation of new technologies such as integrating the legacy system into the new inventory management systems to ensure products available when, where, and how the customer needs and wants them, and to allow for new functionality such as buy online, pick up in-store, and so on.

Logistics challenges – creating new ways of delivering products that extend delivery across websites, social media, mobile apps, suppliers, and the physical stores require a lot of integration and coordination between stores, vendors, and logistics providers.

Store operations challenges – the store associates play a critical role in the success of any omnichannel strategy. For instance, if an associate doesn’t get a commission on an order that he/she places for a customer in-store because it was fulfilled elsewhere, that associate is unlikely to actively participate in the program. To make new initiatives such as Buy Online and Pick Up in Store (BOPIS) work, stores often have to assign a dedicated pickup location and designated parking spots, establish signage within a store, and pre-sort items, and make them ready for pickup. It is not uncommon that many poorly managed in-store pickup programs take too long for the merchandise to arrive. Instead of reducing the turnaround time for customers, the omnichannel supply system results in frustrated and impatient customers. Another issue is that stores lack sufficient space for staging, packing, and shipping orders because they were not designed to handle these functions in the first place. Therefore, ensuring store associates are both adequately trained and incentivized to participate in omnichannel is essential to the overall success of the initiative.

Fraud challenges– BOPIS (buy online pick in-store) attracts fraudsters. Unlike most online orders, BOPIS orders come with no delivery address, which helps determine whether a customer is legitimate. Emilie Grunzweig, Riskified’s senior fraud analyst noted that “we’re seeing effective rates of fraud in BOPIS for some of our merchants that are 250% higher than they were in the last year.”[2]

Overcoming these challenges is time-consuming and very costly as well. And due to lack of money, tools, labor, and data, many retailers believe that such a modern supply chain system is simply not achievable. Even though a handful of retailers such as Macy’s were able to secure sufficient funds and win support from top management and have successfully implemented such a system, an even bigger problem is that these substantial investments in updating the supply chain system will reap very little value to retailers.

Take BOPIS (buy online pick in-store), for example. The BOPIS supposedly adds incremental value in three ways: 1. Sales revenue from customers who make extra purchases while in the physical stores; 2. Sales from the additional visit(s) due to convenience. For instance, before BOPIS, a customer made four visits a year; after BOPIS, the customer makes six visits.  3. Sales from customers who otherwise will defect if the retail didn’t offer the BOPIS option. A quick and dirty way to gauge the incremental value of BOPIS is to estimate how many customers have used BOPIS. Marketing firm Signifyd surveyed 250 retail professionals at enterprises with at least $100 million in annual sales, and they found that averagely, BOPIS made around 20% of the online sales.

Let’s do quick math. For a typical multichannel retailer, the online sales revenue accounts for about 10-25% of its total sales revenue. So, BOPIS basically can affect only around 2% (10% x20%=2%) to 5% (20% x 25% =5%) of the total sales revenue. The incremental sales revenue generated by these 2-5% BOPIS users will be much smaller. Therefore, at this point, for most multichannel retailers, the costly BOPIS system does not seem to be a good investment.

You may wonder why BOPIS can only benefit such a small percentage of your customers? There is a secret that most omnichannel service providers don’t want you to know. Although most customers utilize more than one platform and navigate between many physical and digital touchpoints for a single purchase, at least right now, the majority of them will not take advantage of the modern supply chain. Omnichannel customers are not created equal. In general, there are two types of omnichannel customers -the broadly defined omnichannel customers and the narrowly defined omnichannel customers.

The broadly defined omnichannel customers are digitally influenced by customers. They begin the research with the mobile phone, read reviews, compare prices, and then purchase in a store. Or start the research online, then visit stores to see the products, compare prices, and finally buy online. In other words, they may use multiple channels to research the product)s) but will use one channel to make the purchase(s) and return the merchandise to the same channel. Today, the majority of customers will fall into this category.

The narrowly defined omnichannel customers are ones who have made purchases both online and in brick-and-mortar stores. These customers are more likely to use services such as BOPIS and buy online return in-store. As online business continues to grow, the trend is that more single-channel customers will become multichannel customers, and more broadly defined omnichannel customers will evolve into narrowly defined omnichannel customers who will demand more inventory visibility and cross channel distributions. However, the whole course of evolution might take quite some years. Today, typically, these narrowly defined omnichannel customers account for only 5-25% of the total customers in the database of an average multichannel retailer. Therefore, we haven’t seen any retailers, including Macy’s, have published any convincing data to prove that the incremental profit generated by the omnichannel supply chain can justify the massive investments in updating their legacy supply chain.

To add insult to injury, recently, Amazon announced that it would make one-day shipping the standard for all Prime members. That move will put pressure on retailers to respond. To stay competitive, most multichannel retailers will have to follow suit to make sure they can meet shoppers’ delivery expectations, which makes BOPIS less attractive to customers. Therefore, when determining whether or not to upgrade the legacy inventory system and offer BOPIS to customers, marketers must gauge how many customers will use the system and how much incremental value these customers will bring to the table.

Third, the omnichannel concept might mislead some retailers to invest in all channels, which is not necessary and financially infeasible.

“Omnis” is Latin for every/all. Some omnichannel literature emphasizes that retailers must prepare to satisfy today’s customers who decide whenever and wherever to interact with you. Therefore, marketers must be ready on every channel. A good example is the popularity of the buzzword channel-agnostic. “Being channel-agnostic means we don’t have a preference where our customers gather their research, which channel they buy on, or how or when they want to interact with us. It means servicing every channel without priority and limitations – web self-service, email, chat, SMS/text, IVR voice self-service, Facebook, Twitter, and other social platforms, and, of course, actual live agent voice.” [3]

Being channel-agnostic is like adopting a segment-agnostic approach to serve every customer equally, a strategy that only a very few companies are capable of doing because there are more than one hundred different marketing channels. Channel agnostic dilutes companies’ limited marketing dollars and distracts retailers’ attention away from focusing on the most relevant channels to better serve their best customers. Therefore, it is neither necessary nor sustainable.

From Omnichannel to Practical Omnichannel Marketing

So, should we get rid of omnichannel completely, as some marketers have suggested? Probably not for two reasons. First, after more than 15 years of numerous presentations, webinars, articles, and panel discussions to promote omnichannel, many people were under the impression that omnichannel will be the de facto standard of marketing communications for retailers. It is simply not easy to eliminate the word “omnichannel” from marketers’ language. Second, there are still many good points in the omnichannel theory worth pursuing. For instance, omnichannel marketing helps break down silos and requires all departments to work together. Also, omnichannel marketing integrates the different communication channels to communicate consistent messages with customers. Therefore, a more practical and realistic way is to redefine the concept and gain consensus on the definition of the new term among marketers.

[1] Low Prices Raise Customer Loyalty, Business Wire, August 15, 2017, https://www.businesswire.com/news/home/20170815005733/en/Prices-Raise-Customer-Loyalty

[2] BOPIS fraud is up 250% in 1 year. Can retailers protect their profits without losing customers? Jacqueline Renfrow, Jul 2, 2018, https://www.fierceretail.com/bopis-fraud-up-250

[3] channel agnostic | WordReference Forums. https://forum.wordreference.com/threads/channel-agnostic.3288088/

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