Home » Marketing » Despite the Hype, Retailers Wrestle with Omnichannel Marketing

Despite the Hype, Retailers Wrestle with Omnichannel Marketing

August 25, 2014

supplu-chain

DC Velocity reports, “Less than one-fourth of retail CEOs participating in a recent study believe the rise of omnichannel shopping will affect their organizations.” [“Most retail supply chains are not ready for omnichannel commerce,” 1 August 2014] As the article’s headline suggests, the staff at DC Velocity think that most CEOs are in denial when it comes to omnichannel shopping. The article continues:

“A new study suggests that many global retailers aren’t prepared for the challenges of the omnichannel world. Eighty-three percent of retail chief executive officers (CEOs) participating in a survey commissioned by JDA Software said their supply chains currently are ‘not optimal’ for meeting omnichannel’s demands. The consulting firm PwC contacted 409 CEOs at retail enterprises worldwide on behalf of the software company earlier this year. The survey’s findings are detailed in a report titled CEO Viewpoint: The Strategic Role of Supply Chain in an All-Channel World. Omnichannel commerce does not seem to be top of mind for many of the CEOs. Just over one-third (34 percent) consider the rise of omnichannel shopping to be a potential threat, and a mere 22 percent believe it will affect their organizations. They appear instead to be focusing on traditional growth areas.”

Perhaps CEOs should be listening more closely to what their supply chain executives are saying. For several years, supply chain executives have been stressing that omnichannel sales are a surefire path to growth. Back in 2012 the Retail Industry Leaders Association (RILA), in partnership with Auburn University and with sponsorship from Accenture, conducted a survey of nearly 200 retail supply chain executives. Those executives emphasized the importance of multi-channel retailing for growth and were concerned about meeting “the increased consumer demand for continual access to products from any channel.” [“Report: Supply chains trending toward growth,” Retail Customer Experience, 8 March 2012] Parag Jategaonkar, senior executive with Accenture’s Retail practice, told the staff at Retail Customer Experience, “This study will be essential reading for a wide cross-section of retail supply chain executives seeking insights into the key supply chain trends taking place in retail, including multi-channel operations. Accenture’s own experience with clients indicates an increasing focus amongst retailers on developing their supply chains to more effectively deliver a compelling customer experience, regardless of the channel.” The article continued:

“The most significant takeaway from the report, according to Casey Chroust, executive vice president of retail operations, centered on the importance of multi-channel operations, including fulfillment of .com, mobile and tablet orders. The report states that electronic e-commerce sales have grown by more than 15 percent, to $35.3 billion, versus an overall sales growth of 4.1 percent the previous year. With predictions that e-commerce sales will grow 10 percent annually, multi-channel has become a game changer for retailers. It has also added a new layer of fulfillment complexity that retail SCM executives must manage. According to the report, more than 85 percent of survey participants indicated that direct consumer fulfillment is a top priority for them, and that it is imperative to create a seamless customer experience regardless of the fulfillment channel, order size, origin or delivery requirement.”

Those statistics fly in the face of CEOs who don’t consider the rise of omnichannel shopping to be a potential threat. The year the report was released Steve McKee (@SteveMcKee) wrote, “Sales channels are fragmenting beyond the online vs. bricks-and-mortar divide to which we’ve become somewhat accustomed. Desktop and laptop purchases are giving way to shopping via smartphone — at a time when many companies don’t even have a mobile website, to say nothing of e-commerce capabilities.” [“Integrated Marketing: If You Knew It, You’d Do It,” Bloomberg BusinessWeek, 10 May 2012] Perhaps so many CEOs are denying the importance of omnichannel marketing because it’s difficult to do correctly. McKee explains:

“The good news is that there is a powerful way to overcome fragmentation: integration. But don’t be deceived — it’s more difficult than it appears. Integration is not simply slapping a common tagline onto all your ads, using a single color palette, or force-fitting a message that’s suited for one medium into another (great television commercials rarely translate well to outdoor billboards, which in turn are very different from online banners). Integration means communicating a consistent identity from message to message, and medium to medium, and (more importantly) delivering consistently on that identity. It requires not only the identification of a powerful, unifying strategy and compelling voice for your brand, but the discipline to roll it into every aspect of your organization — from advertising to sales, customer service to customer relationship management programs (and beyond). It’s not for the faint of heart.”

Another reason that so many CEOs may be in denial about omnichannel marketing is because consumers don’t use multiple paths to purchase consistently. The staff at MarketingCharts writes, “It’s become fairly well accepted that consumers are using a variety of online and offline sources to make purchases, but it’s worth remembering that the move to such ‘omni-channel’ shopping isn’t consistent across all shopping categories.” [“Omni-Channel Shopping Activity Differs Widely by Category,” 3 October 2013] The article explains:

“A new study from GfK serves as a good reminder, finding that a majority of US shoppers combine online and in-person sources when purchasing in areas such as consumer electronics (70%) and toys (66%), but far fewer do so when shopping for OTC medications and food and beverages (each at 15%). Overall, 37% of the US shoppers surveyed said they combine online and offline shopping sources across the 12 categories measured. Aside from consumer electronics and toys, many are leveraging these various sources when shopping for apparel (58%) and home appliances (57%), while the fewest are doing so for cleaning products (14%). The extent to which shoppers are using different channels also varies by country. The US, for example, which has the highest incidence of omni-channel behavior for consumer electronics (70%), is far above the global average (46%) in this regard. But for beauty and personal care, omni-channel shopping activity is far higher in China (57%) than in the US (31%).”

Despite these inconsistencies, retailer CEOs can’t afford to ignore the importance of omnichannel marketing. Supply chain analyst Lora Cecere (@lcecere) has been stressing this point for several years. Two years ago her company, Supply Chain Insights, completed a study on mobility and it became clear to Cecere that it was no passing fancy. She wrote, “Mobility is important to retailers, but it is not mobility for the sake of mobility. Instead, the focus is convergence of e-Commerce, mobility and social. And despite the doomsayers on the concepts of social commerce, the study results show that the greatest increase in the intended use of mobile is to fuel efforts in social commerce. … Social commerce is the use of social technologies to drive commerce through brand engagement and improvement of the path to purchase.” [“Convergence is Real. It is Now.Supply Chain Shaman, 23 June 2012] More than two years on, the fact that so many retailer CEOs still fail to see the importance (or threat) of omnichannel marketing is surprising. Phil Streatfield, a retail partner at LCP Consulting, believes that “Omni-Channel Is Retailers’ Future.” [Procurement Leaders, 21 January 2014] He writes, “Retailers need to invest in building omni-channel capabilities that can consistently deliver to consumers and be easily integrated with suppliers to provide strong financial results for their business.” He asserts that omnichannel strategies will embrace “a number of key factors including current operating models, channel economics, distribution and fulfillment networks, inventory and range deployment as well as returns.” In addition, he insists that omnichannel investment needs to address four critical areas: brand loyalty and trust; customer experience; complexity; and business models. Concerning the latter point, he writes, “A new, flexible, business operating model is a significant enabler for success. Done properly this will deliver increased sales, enhanced margins and improved availability of stock. Such fundamental change needs to come from a fully committed CEO who will typically need to lead a transformation program of 3 years or more.”

 

Given that so many CEOs aren’t concerned about omnichannel operations, finding a fully committed CEO could prove difficult. Streatfield concludes, “Omni-channel is becoming the ‘must have’ for the retail industry – as the channel matures, the winners will be those that master the costs as well. The bottom line is that retailers are at a tipping point. If they tackle this they will be well-positioned, not only for next Christmas, but for today’s constantly evolving customer expectations and retail marketplace.”

Related Posts: