The physical and the digital world of retailing is converging into the world of omni-channel retailing and Dipayan Baishya explores what lies ahead.
God is omnipresent. In fact, all religions of the world agree that one can worship God from whichever place a devotee wants to – home, park, forest or inside the Temples of the God. And yet, eschewing the comfort and convenience of their homes, millions of devotees flock together in temple towns, churches, mosques and mausoleums. It is inside the Temples of the God and amidst the hustle and bustle of other fellow worshippers that devotees find themselves closest to God.
We all live in the age of consumerism. Technology and innovation drives the advent of new products that fascinate us, bring new benefits to us and makes them more and more accessible day by day. In fact, every society consumes more and more with the passage of time. In this age of consumerism, shops are the temples. It is within these shopping environments – whether located within neighborhoods, high streets or malls – consumers find what they need or aspire for. And like in temples wherein the sole attraction isn’t just the worship of the Gods, it is in the physical shopping environments people find the public space where they can meet, eat and celebrate along with their friends, family and fellow shoppers. There is more to physical retail than just choosing a product and paying for it. To imagine a world without physical shopping environments is probably similar to imagine a world without the belief in God – a near impossibility.
Ecommerce or the opportunity for consumers to shop from computers began almost two decades back in the United States. Darrell Rigby from Bain & Company writes in the Harvard Business Review that even in a developed market like United States where internet penetration is among the highest, pure online sales account for only 6% of total retail sales (and that’s excluding fuel and food services). AT Kearney in a report titled, ‘On Solid Ground’ puts forth a similar estimate and suggests, “Of the 30 possible multichannel journeys, the most common is one in which online is used solely for initial product discovery and the store is preferred for trial, purchase, pickup and returns.”
Surely, ecommerce commands a significantly higher mindshare compared to its actual marketshare.
Having said that, there is no denying of the fact that technology is going to play a larger and transformative role in way we shop and consume. It is in the nature of technology to bring about change and those who are agile enough to embrace it and combine it with their existing strengths are ones who become the winners and harbingers of change. As Rigby and the AT Kearney report points out that half of the ecommerce sales are captured by physical retailers or brick and mortar retailers who are leveraging technology to sell online. In fact, among the 100 largest online retailers as tracked by Deloitte, barely some are pure ecommerce players.
Beyond the perceived divide of online and offline sales, the world of retailing is witnessing the advent of omni-channel retailing. Omni channel retailing is about giving customers a seamless experience across both the physical and digital world. Retailers across the world are racing against each other to build technology-enabled platforms that allow customers to order from anywhere (homes, from within stores, while they are traveling), on any platform (shops, mobile, laptops) and get the merchandize anywhere (at the store, at their doorstep or at collection points).
For consumers and retailers, the days when convenience could be defined solely in terms of check-out times and in-store experience are long gone. In today’s reality, ‘convenience’ means letting customers decide when, where and how to shop.
If one closely looks at the journey of a brand or retail environment through the customers’ interaction with it, there are six distinct steps: Discovery, Trial, Selection, Payment, Pickup and Return. What the advent of technology has done to retailing is that it has broken each of these steps into distinct experiences. The customer today can choose to go through some of these steps online and some in the physical world.
Think of a consumer who goes to a store to learn about or try a product and then decides to purchase it through the retailers’ website. Now imagine another who learns about the same product on online portals and product reviews and goes to the store to check dimensions and purchase it. There are multiple permutations and combinations possible – discovery online, trial and selection in-store, payment on a mobile app within or outside the store, pick up at home or at store and return through a drop box located that is neither within the store nor to a delivery man at home, but at a drop box located at a convenient place. That’s the journey a customer today wants to go through with a brand or a retailer.
For a brand or a retailer, building a seamless experience on the digital and physical world therefore becomes imperative. Apart from the design, sourcing and merchandizing, in all other functions, the retailer has to become adept to deliver on every channel. This demands quite a few transformations for the retailer – both in terms of physical infrastructure and the mindset or culture of the organization.
From the ability to develop rich content on every product that the brand or retailer offers to being equally adept at communicating over multiple platforms – conventional media, apps, social media, online media, television and technology enabled outdoor media, is just the beginning.
The biggest transformation is in technology and logistics. Omni channel retailing not only demands near 100% fill rates, but a seamless information and inventory flow across multiple channels. Click-and-Collect retail or the ability to ensure fulfillment of a customer order made online and picked up at the store, even as other shoppers are picking up products within the store requires many specific supply chain capabilities, information accuracy, global inventory management, and in-store processes that are efficient, rigorous, and self-correcting. It also involves re-imagining stores as distribution centers, a completely contrarian development from the trend of consolidating supply chain and warehousing into fewer locations.
The good news is that all of this is actually feasible and retailers across the world are learning, adapting and growing their omni-channel presence.
Macy’s, H&M, Nordstorm, Walgreens, Wal-Mart and even Best Buy are leading this transformation into omni-channel retailing in the United States. From being perceived as a doomed business waiting to be killed by Amazon, electronics retailer BestBuy reported that it had doubled its third quarter profit this year, compared to the previous year. The story is similar across multiple retailers who have been able to leverage omni-channel platforms.
A number of technology platforms is vying for attention from retailers to develop omni channel capabilities that will provide seamless flow of information across channels, common inventory pool for all channels and give retailers capabilities like building digital endless aisles (in-store order for long tail merchandize not available in store), order anywhere (store, mobile, web), deliver anywhere (store pick-up, collection center and home delivery) and seamless customer experiences for physical and digital world.
While retailers like WalMart, JC Penny, Walgreens, Kohl’s, Neimen Marcus has chosen Oracle’s ATG platform, Staples, QVC, Sears and Target operate on IBM Websphere. hybris, a Zug, Switzerland based start up was recently acquired by SAP is among the fastest growing technology companies providing cutting edge technology solutions for the omni channel world.
Leading brands like Levi’s, Samsung, Nikon and retailers like Migros, Galleries Lafeyette, H&M, Toys R Us and now Future Group works on the hybris platform to develop the future of retailing today.
Beyond omni channel capabilities, physical stores are rapidly changing by using technology to provide new experiences, choices and options to customers – whether through integrating access to social media and information on digital displays at store racks, augmented reality, smart carts or technology-enabled trial rooms.
Simultaneously, large ecommerce players are also experimenting with new techniques and initiatives. In the United States, the likes of Ebay or Amazon are experimenting with physical stores to augment the digital experience. New partnerships are evolving outside the United States. China’s second-largest ecommerce player, Tencent and search giant, Baidu recently formed a tripartite partnership with the country’s largest mall operator Dalian Wanda to combine the physical and digital world. In India, Future Group has entered into partnership with Amazon to leverage the synergies of the physical and digital world for the benefit of consumers.
The days of pure-play retail or being present only on physical or only on ecommerce platform is numbered. The world of retailing is changing rapidly. Physical retailers are in the midst of transforming their stores, business platforms and the experience they provide to consumers. The stores of the future – whether physical or digital – will be vastly different from what they are today. And in much the same way, ecommerce and online shopping portals too will have to transform not just their business model but also the experience they provide to their customers.