Why omnichannel matters
The retail industry has been significantly transformed post-GFC. Advancements in technology and shifts in consumer behaviour have created a retail universe where consumers care about one thing more than anything else – themselves. These empowered consumers are demanding a personalised shopping experience across both digital and physical worlds.
In response, retailers now have to operate in a universe that traverses physical, online, mobile and social channels – 24/7/365. In this universe, retailers need to connect and interact with consumers across multiple touchpoints to provide a seamless experience – in other words, an omnichannel experience.
While best practice retailers are beginning to realise the benefits of an omnichannel business model, many retailers in Australia are still struggling to move beyond providing merely a multichannel experience. For example, retailers who have physical and online stores that operate in silos result in a disconnected consumer experience and often end up losing the consumer to a competitor.
Business solutions, such as click and collect, instore fulfilment, online returns across all channels, a single view of inventory and price parity, present largely untapped opportunities for many Australian retailers to improve their omnichannel operations.
Creating an omnichannel experience is not only good for the consumer, but it also makes good business sense for the retailer. A 2015 study by IDC found that a shopper who buys a retailer’s products both instore and online has a 30 per cent higher lifetime value for the retailer than those using only one channel.
The modern consumer’s pathway-to-purchase
The modern consumer’s behaviour during their pathway-to-purchase has created unprecedented complexities for retailers.
Nielsen’s 2016 Australian Connected Consumers Report (see Figure 1, above) noted that consumers now have a wide range of preferences with how they connect with brands – be it online, offline, both or online-to-offline-to-online. Nielsen’s report found that 82 per cent of consumers ‘often’ or ‘sometimes’ look at an item online but ultimately buy it instore. Amazingly, 27 per cent of consumers often or sometimes use a mobile device instore to actually purchase instore!
Limitations of a retailer’s business model
Omnichannel is all about seamlessly facilitating the interactions between consumers and retailers across all consumer moments of truth.
If you are a pure play online retailer, your biggest stumbling block will most likely be delivery costs and your inability to provide a physical shopping experience your consumers may desire.
A number of traditionally pure play retailers, such as Amazon and Shoes Of Prey, have taken their online expertise into a physical store environment.
For example, Amazon is now planning to expand their physical stores footprint to allow them to service same-day delivery at a lower cost, offer instore collection and engage instore marketing and engagement opportunities. On the other hand, a traditional ‘bricks-and-mortar’ retailer may be failing to capitalise on a range of opportunities to influence its consumers and drive traffic to its stores through digital channels.
Business model innovation is the key
At the end of the day, it is all about creating a business model that seamlessly integrates both the digital and physical retail worlds. The best omnichannel retailers will be the ones that successfully challenge and transform their business models by placing the consumer at the heart of their business.
Neeraj Sharma is a Partner at Azurium, a wholly owned subsidiary of Ferrier Hodgson, one of Australasia’s leading independent financial advisory and restructuring firms.
Azurium is a sponsor of the inaugural Retail Customer Excellence Awards. Don’t miss the Retail Customer Excellence Awards gala dinner, which is taking place at the Plaza Ballroom in Melbourne on Wednesday May 11. Purchase your tickets now.