Håkan Jonsson, the head of Vaimo’s eCommerce Strategy Department, discusses what’s going to happen next if the globally growing trend of pure-play businesses drastically changing their strategies takes even more hold in the coming years. “Omni-channel is going to be an essential part of commerce, so it’s time that merchants start analysing whether their business operations are ready for implementing omni-channel features.”
Scott Galloway, a New York University professor, says he believes “pure play” retailers that focus solely on either digital or brick-and-mortar sales will not survive. He thinks eCommerce companies will be forced to open stores or “go out of business” and that retailers need to be excellent at digital or they will also “go out of business”.
This is not just a prediction, the changes are already happening. Brick-and-mortar retailers like Home Depot have had to adjust to face the threat of eCommerce competitors and to accommodate online shoppers with an interconnected retail strategy. Similarly, recent eCommerce pure players like Warby Parker are expanding into physical stores with great success and online fashion brand Bonobos has guide shops where customers can make appointments to try on products before purchasing them online. Amazon itself is building an offline strategy with opening their first 'pick-up and drop off' store on campus of Purdue University, in the U.S..
One of the main reasons for this trend is the change of customer behaviour thanks to the mobile upswing. Shoppers are now conditioned to expect choice, personalisation and convenience - the same services and promotions on all channels; click & collect; express delivery; easy in-store returns for products they ordered online; a wide assortment of products and excellent customer service - in other words, a great omni-channel experience.
Omni-channel benefits for merchants
We know that shoppers are always asking for more convenience for less money, but what are the real incentives for merchants to implement the omni-channel features? Omni-channel as a concept of offering the same customer experience on all channels is beneficial (according to Colliers & ISCS) because:
- Omni-channel customers tend to shop more frequently and spend 3.5 times more than single-channel shoppers.
- In-store conversion rates are four times higher than online-only conversion rates.
- For online sales with in-store pick-up and return, retailers can expect a net sale of more than 100 percent.
- Conversion rates at brick-and-mortar stores are higher than for online-only sites 20 percent vs. 4.8 percent.
Thus, one great incentive for implementing omni-channel features, is the ability to get more people into the store, where the chances that the customer will buy something extra quadruples.
Consider this: A customer buys a pair of pants from an online store, receives them but doesn't like the fit. The customer then wants to return them in the fastest, most convenient way and picks the nearest brick-and-mortar store to do so. The customer walks in the store and returns the pants but the situation provides a clear window for the store staff to try to save-the-sale and offer a different pair of pants available in-store. The sales person can also suggest a matching top and accessories to go with the new pair of pants. The customer decides to buy all three items and leaves the store happy, while the store staff has successfully turned the customer around and gained revenue thanks to the additional items purchased.
We certainly know, that the core features of omni-channel solutions, click & collect and in-store returns for online purchases, if implemented well, will provide more convenience to your customers while at the same time removing the delivery costs that the customers usually have to cover. However, here is where it gets tricky — for most merchants out there, understanding how to start with omni-channel implementation is still a puzzle.
Be ready to adapt for omni-channel
In order to provide a consistent omni-channel experience to your customers and reap the rewards, you have to first realise that successful implementation can only happen if: firstly, you know exactly where your business stands; and secondly you are ready to change and adapt. This is because omni-channel isn't just a solution that can be implemented by your eCommerce supplier. Rather, you really have to be ready to work together with your solution provider, understand and change your business structure and allocate your resources differently to meet the pre-requisites for a successful omni-channel project.
Making sure your business is ready from a financial, organisational, logistical and technical point of view, before starting the omni-channel project, will save you time and money and will help you define the scope of features to implement.
In general the overall cost of the project consists of: cost in organisational change which takes into account the costs you will inevitably bare because of the need for changing some procedures & processes, allocating resources differently and even investing in your back-end business systems; and implementation costs, which include integrating omni-channel features into your business systems as well as building custom features.
Calculating those numbers isn't going to be easy, so at Vaimo we do our best to help clients understand the strong connection between their business structure & processes and the omni-channel features that their particular situations make feasible to implement.
One way to find out how much a business has to adapt for desired features is to think through technical questions which affect implementation costs such as: “What state are my business systems in?” (e.g POS system or any other business system. Legacy systems might have to be replaced or need complicated integrations which are costly), and business questions which affect the cost in organisational change like: “Are our brand’s brick-and-mortar shops owned by us or not?”.
The latter is extremely important for merchants whose brand stores are either all franchises or consist of some franchise stores and some fully owned ones. It brings out an issue - how can merchants persuade store owners to promote their online store - e.g. long tail selling over a potential in-store sale.
From one side you can compensate loss in potential sales with the statistics discussed earlier - omni-channel features can help raise revenue of brick-and-mortar shops by bringing more shoppers to the stores. However, there are also features that can be implemented into the omni-channel system to give franchise stores incentives to help customers buy online when the customers are visiting the stores (e.g for easy home delivery or when there isn't a product in stock). As an example, Vaimo has implemented a system for one of our clients that allows store staff to log in to the online store and order the desired products for their customers. By doing so, the franchise store will receive a percentage of the total amount that the customer spent.
Advice for omni-channel implementation
Vaimo’s eCommerce Strategy department has been helping companies realise their omni-channel objectives for the past two years now and we have found that very often implementing just the core features of omni-channel (click & collect; online shopping with in-store returns) give merchants a huge advantage in front of their competitors. Take a look at the list of features we have put together below, to help you understand the three basic levels of omni-channel features. These are by no means the only omni-channel features we implement - there are so many custom omni-channel features in the world, so if you can imagine it’s a high likelihood we can deliver it.
The logic behind the progression of the list derives from the need to offer a streamlined and consistent omni-channel experience for your customers, which can only be achieved if there is enough time and practise to get the front-end of your business (online store, brick-and-mortar shops and staff) work perfectly with the back-end of your business (ERP and other business systems).
Firstly, we believe that there are two features that make up the core of the omni-channel experience: click & collect and in-store returns. These two features, when aligned perfectly together, will create convenience both for your customers and your business. In order to understand the different options and outcomes, take a look at the insights below.
Click & Collect
To make sure your customers win (speedy delivery, fast returns) and also your business wins (increasing footfall for the shops) from implementing click & collect, you need to think about whether the items your customers buy will be dispatched directly from your warehouse or would your staff dispatch the entire order from the nearest store’s assortment. One thing to keep in mind however, is that the latter scenario requires your online store to be integrated with your offline point of sales system/cashier for store-inventory lookup. Other sides of this feature mean deciding on - how will your stores handle order collection also known as pick-ups? How will the staff mark orders as “delivered”, which might require access to your online store. And figuring out if there is enough space to store all shipments (even when the sales spikes, like at Christmas)?
The obvious thing to think about is how will your stores handle the items that have been brought back by your customers. Where will those products go when they are returned - will they stay in store or be shipped back to the warehouse? What kind of system is there for processing these returns? What’s the process for returning the money to the customers?
The next step is to raise your level even higher with more advanced omni-channel features like 1-hour deliveries directly from the brick-and-mortar store and different assortment features. Amongst the most popular assortment features are In-store kiosks which allow for long tail selling - keeping only a selection of the full range of products in the stores and offering customers the ability to order the rest of the range conveniently from the kiosks either to the store or have them delivered to their homes. Another popular feature, which acts as a gate for other feature possibilities, is store-inventory lookup which allows your customers to check stock availability in stores directly from your online store, just as described earlier in the click & collect section.
Lastly, if your plan is to take your brand to the forefront of the omni-channel experience, we suggest you implement some of the custom omni-channel features like fitting room features - e.g allowing people to pick out what they want to try before getting to the store and finding all the items already in the fitting room. Or use interactive in-store screens to allow people to pick out clothes without having to try them on thanks to customisable virtual mannequins trying the items on for them. There are also custom delivery/ return features - e.g having the home delivery person wait until the client tries on their items in case they aren't happy and want to return them. Or as mentioned before … anything you can think of!
Omni-channel is becoming more popular and the desirable outcomes vary greatly in terms of features and cost. Thanks to the growing expectations of shoppers all over the world no business can afford to miss out on the extra revenue that providing a convenient and pleasant buying experience can present. Now, it’s up to merchants to take advantage of what omni-channel has to offer and approach solution providers like Vaimo to help them on their way. By helping merchants understand where their business stands and what they need to change in order implement the desired omni-channel features, it is possible to cut costs and time in half, even before the technical implementation stage begins.