Omni Channel Retail: An opening to Team Up to Survive and Enhance Customer Service
For past six decades the formula for any business to succeed was to have a relatively better
product, fair prices, and an apt location and then business could make money. The retailer had
control over the stock in the store, and the customer lacked an alternative. Clearly this is not the
scene anymore. Today however there is clear visibility that the face of retailing has changed
significantly over recent years, with the brick and mortar retail model facing survival threat due to
ever rising operating costs (rent, staff etc). Consumers are reluctant to splurge, rather are tightly
closing the fist even while shopping for essentials. The brick and mortar Retailers in the current
economic ambiance feels further threatened by the rapid growth of online retailing.
Customers now 'shop' in numerous ways, checking a store's website, looking at product reviews,
viewing the prices of competitors on a smart-phone whilst standing right outside a store and finally
making up mind as to whether to buy the goods in-store or online and collect it in-store or have it
delivered to at desired address. The continued growth of e-commerce sales across the globe has
definitely put the pressure on retailers with physical premises. This growth in online sales is already
started having a devastating impact on traditional retailers. The big question is... can they co-exist
and ultimately thrive? Traditional Retailers have to make clear strategic responses to the consumers’
fast changing shopping behavior and how to coherently integrate their multi formats of physical
stores and online sites.
Classic understanding tells that the Internet has made the world flat and diminished the influence of
the physical location in our buying practice. Anyone can go online and buy but fact is that the factors
like availability of stores nearby and availability of time also, play a critical role in our decision
making when it comes to buying online. Increasingly, customers are not making rigid distinctions
between online and offline shopping. In a shopping mission, consumers figure out what they want
and are driven by primary considerations of convenience and price. Convenience includes desire to
get instant delivery (as in physical stores) as opposed to waiting normal transit time of 2-3 days,
typical for e-commerce.
In the retail realm, Wal-Mart, the world’s biggest retailer in one side and in the other side is Amazon,
the online giant that seeks to be “the complete store.” It is more than a decade since Wal-Mart
introduced Walmart.com but online sales just sputtered. Wal-Mart’s online sales are just over $10
billion in 2014. Right now Wal-Mart ranks fourth in online sales and nowhere near its online retail
rival Amazon.com. Online retailers are seen offering huge discounts by paying these price-offs
themselves. E-commerce majors claim they are building customer loyalty to their websites. This is
not sustainable. The blunt truth is that shopper loyalty is not high anywhere in the world. Customers
will go anywhere and to any channel for a great deal.
Wal-Mart, with its large bricks-and-mortar network, fully grasps the significance of e-commerce.
Slashing price and intensifying the free, same-day delivery-and-return services are some of the
model pursued by both in pursuit of establishing market dominance. Amazon so far is working on an
assumption that it can crush all challengers by its sheer size and that seems to be working, at least
in terms of sales revenue but then profit is a totally different story when seen against WalMart. Amazon’s investment in technology and now on its monstrous infrastructure was based on
expectation that economies of scale will ensure stacks of cash by running a retail engine so efficient
and omnipresent that none else can compete appreciably. The Amazon went for a delivery
arrangement “Locker” to addresses concerns of customers missing the mail delivery. Amazon has
expanded its Sunday delivery by arrangement with U.S. Postal Service. U.S.Postal Service can be
expected to come with similar arrangements with other retailers.
Not just one behemoth but with two cutting into profit margins in a race for market supremacy, there
is every possibility of other retailers getting crushed in a manner similar to grass getting trampled
under marauding elephant legs. If both Wal-Mart and Amazon keep progressing better, it will
increase comfort to their ever growing customers. Amazon and Wal-Mart both will definitely expand
into other categories and geographies in order to take over the market for people who want stuff
cheap and delivered it quick. Already we are seeing what Wal-Mart and Amazon does have a
trickling down effect. Google in November 2012 acquired Canada based startup BufferBox (who
leveraged parcel kiosks to provide consumers the convenience of picking up their online purchases
24/7. BufferBox kiosks used to sport the famous tag line “why wait for your package when it can wait
for you”) and eBay’s acquisition of Shutl in October 2013 are all manifestation of the urge by the
online retailers to ensure quick delivery of merchandise and enabling customers to collect the
ordered items at their convenience. Since February 2014, BufferBox kiosks have ceased to operate
as a service distinct from Google, in order to concentrate on efforts to build out future Google
Shopping products. Now why even a pure technology company like Google is getting involved into
delivery logistics is because grocery retail is a $600 billion market in U.S.to be ignored but ecommerce share is less than 1% in retail grocery market as grocery retail demands same delivery or
still shorter delivery time.
Growth opportunities are in plenty to both Amazon and Wal-Mart despite their dominance. Amazon
reported in $74.4 billion in revenue in 2013— all online. Wal-Mart, with over $476 billion in revenue
but with just $10 billion in online, is just skimming the surface of its online potential. Even as focus is
just on the Amazon – Wal-Mart turf battle, the search engine leader Google whose revenue model
is built on advertising has come up with Google Shopping Express, a delivery plan unleashed in
limited markets, which shall be used by Target, Office Depot, Walgreens and other retailers to give
member customers same-day delivery for orders. Everyone knows Google makes its dollars
through searches, and if customers continue to connect directly with Amazon only for shopping and
thus not searching for that item through Google, then Google is losing the revenue it collects when
people search. So it was no surprise Google is now concentrating on delivery of goods to customers
doors. Advertising, distribution, shopping etc all these distinct activities are getting blurred under
expanding online retail portfolio.
Amazon has a huge lead in online market and Wal-Mart has decided to continue expanding in this
area. The Wal-Mart-Amazon clash, in a way forced other retailers to spend billions of dollars in new
warehouses to facilitate quick delivery as the imminent shift toward online shopping pick up the
pace.. Amazon has funneled about $15 billion into warehouses. Many of the warehouses being
built by big retailers are located close to urban centers. Today more companies out there now selling
things online but still all of these sales are to customers who live in the actual world. Companies do
need to operate both online and offline. Online environment does make fulfillment easy, it is easy to
scale up. We have also seen business has some customers in one location and none in another
location even as customers at both places get to undergo same digital experience? So there is
something about the physical world that is challenging what is being effectively projected in the
virtual world. This could be reason for Alibaba’s $206-million purchase of 39% stake in ShopRunner.
The benefits of the ShopRunner deal for Alibaba is not limited only in the US but ShopRunner is also
expected to give U.S. retailers a trusted, US-based platform for selling to Chinese consumers.
American Express has also invested in ShopRunner.
We have experienced in our daily life that energy interaction increases as interface moves from
email, to phone and face to face. Once face to face interaction happen subsequent interaction over
phone and email increases the energy level in message irrespective of the medium over which
message is transmitted. This is akin to what happens in some sense with all offline and online
transactions. If the first experience was offline and it was a good experience, it is seen that the firms
are able then to subsequently serve these customers online. Definitely there are great operational
advantages from doing business online since it is less expensive to cater the customer out of a
warehouse than to always having customer come into a retail store and from customer point; the
customer saves on time and fuel. So “Omni-channel” i.e. online and offline should be integrated
without a glitch. Once this robust e-commerce facility is made available it is a win-win situation for
the retailer as well as the customer. Thanks to internet and smart phones customers have a wealth
of options in their possession.
It is also increasingly seen that consumers are opting for Omni-channel shopping based on the item
needed. Shoppers cannot at all time shop online especially for fresh and perishable products like
milk and fresh fruits and vegetable. But for expensive long lasting purchases like Laptops, Cameras,
Refrigerators etc, customers would do plenty of online and offline research before settling on the
brand, model and price. The ubiquitous of traditional retail means that Omni-channel shopping will
take off best only if online and offline pool their resources and the partnership will be best positioned
to encourage Omni-channel buying habits by offering great convenience and variety to shoppers.
Delivering orders small in value (less than $50), that still represent average basket size of food
articles to a household, will be too much expensive as warehouses will be situated on the outskirts of
cities for prohibitive real estate costs. E-commerce players can overcome this problem by doing
delivery from large modern-format stores based within city limits. Availing the stock in the physical
stores as a method of executing online orders is both time and cost effective. Customers also have
the option of placing orders online and taking physical delivery if they are in a hurry or if the store is
conveniently located for them. In Britain, Tesco's physical stores act as fulfillment centre for online
purchases.
Combining online and offline shopping and, thereby, improving supply-chain efficiencies is an idea
worth exploring. The pie is getting bigger only. Those who can give better customer experience
stand better chance of picking up a bigger share of the pie. New technologies will enable physical
retailers to reach more customers, with a larger variety. According to the analysts and entrepreneurs
in retail the Online versus Offline is the big retail battle. However this need not be a battle it is an
opportunity to collaborate and serve customers better. Done with right spirit, this partnership will give
customer wider choice, better price and convenience of delivery, and be a win-win for both online
and offline retailers.
(By Moorthi – Morison Menon)