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Defining omnichannel retail

by Bill Bishop

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Bill Davis is the first person we’ve run into who’s taken a thoughtful approach to defining the term omnichannel. He just completed his initial report on The Omnichannel Retailing State of the Union, and I talked with him recently about the distinction between multi- and omni- channel retail, his research about where omnichannel is happening today, and what he thinks it will take for retailers to achieve a true 360-degree view of the shopper.

Before founding MB&G Consulting in 2007, Bill spent many years helping businesses develop the infrastructures required to execute successful multi-channel retail by integrating demand management, supply chains, business intelligence, and information technology.  He has worked with Fortune 500 enterprises as well as emerging companies, among them CUC International, Endura Software, i2 Technologies, IDEXX Laboratories, Microsoft, NetMarket, and Washington Mutual. 

Brick Meets Click: How do you define omnichannel retail? Do you think it’s a useful term or is there a better one?

Bill Davis: To me, omnichannel is the logical evolution of multi-channel retailing. In multi-channel retailing, companies sell through several sales channels but each channel – brick & mortar, catalog, ecommerce, contact center, mobile – is independent of the others. In omnichannel retailing, a customer can use more than one sales channel to shop from a retailer for any given transaction. They can buy online and pick up in-store for example, or use mobile in-store to research or make a purchase, or they can buy in-store and initiate a return online.

I think it’s a useful distinction: In omnichannel, a retailer is working toward a 360-degree view of its customers’ purchases across all channels, in multi-channel they’re just offering customers a selection of channels to choose between.

You published your first report on the state of omnichannel retail in 2012. Why did you decide to research this topic?

Omnichannel was a huge buzzword at retail conferences, and I was frustrated by the research I saw. Most of it reflected the perspective of various corporate departments like marketing, IT, etc., and it talked about what they thought omnichannel could or should be. Very little research looked at actual capabilities.    

I wanted to find out where omnichannel existed today, to see if it was real or not. I thought if I analyzed the actual capabilities on a retailers’ websites, I could determine where things really were – if it was being practiced and how widely it was being practiced. I started with Stores.org’s list of top 100 retailers, but expanded that to included B2B oriented retailers along with the B2C because I hadn’t seen much where both segments were being evaluated and compared.   

The study approach focused on two omnichannel retail capabilities.  Can you tell us a little about each one and why you chose them?

I focused on

  • buying online and picking up in-store,
  • and on buying in-store and initiating a return online.

Since these two capabilities were readily available (or not) via retailers’ websites, I could measure them on a limited budget. The first is a capability I like to use because it saves me both time and money; I don’t have to wait for my order, and there are no shipping costs. Buying in-store and initiating a return online highlights which retailers are truly customer-oriented, as it saves customers a return trip to the store. The return capability also offers some insight into whether a retailer is working to achieve a 360-degree customer view – for it to work, they have to be able to combine data from in-store and online channels.

Would you talk through the topline conclusions for each of the capabilities you studied?

Omnichannel retailing exists, but it’s not widespread yet. More retailers offer the option of buying online and picking up in-store than offer the option to initiate a return online for in-store purchases. The numbers are somewhat surprising.

  • Less than 50% offered buy online and pick up in-store, and only 11 of the top 100 retailers supported this capability fully.
  • Less than 5% offer shoppers the capability to initiate a return online for store-bought purchases. 

The retailers that are widely recognized as best in class are the ones most involved in these capabilities. 

What do you think it will take for a retailer to achieve that sought-after "360-degree view of the shopper”?

Being able to deliver a customer a one-year history of purchases across all channels (store, web, mobile, contact center, etc.) would be a huge leap forward. It’s extremely challenging to do.  

I’ve had a personal experience with Lowes Home Improvement Centers that shows progress toward this goal. Lowes is able to produce a summary of all my purchases – in-store, online, etc. – in one document, as long as the purchases are made using the My Lowe’s loyalty program. This makes it possible for them to:

  • Show me I’m a valued customer by helping me track my purchases and offering some special services (like easier returns).
  • Study what I buy and how I buy it so they can design additional offers that fit my needs.

Lowes also presents the same marketing program across platforms so you get the same message from the printed brochure that you get on the website.  That’s a small point, but when the small points line up, they can have a powerful impact on the shopper.

Lowes is the exception, not the rule. While some retailers may be doing this in a data warehouse, I think it’s going to take several years to integrate sales channels. Many companies still have a long way to go here.     

When do you expect to release the your next Omnichannel State of the Union report?

The 2013 report should be completed this fall.  In the future, I expect to include additional capabilities and hope to generate regular updates at least twice a year if not more often to keep the information current.

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BlackBeltMike Spindler said:
Nice job of research here Bill. Funny how the hype always exceeds the reality. The value is always in understanding the reality and then determining how it might be improved upon. Looking forward to reading your next version.
Antonio Lyon said:
Very interesting article Bill. Omnichannel retail seems to be the way forward for retailers. There's still a lot to be done to activate consumer's desire to utilize the resources of online buying, in connection to in-store sales. It may not be a matter of preference, but one of access to information. Retailers need to be even more proactive and creative in their efforts to touch consumers in order to remain competitive in this highly-dynamic environment.

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