The State of Omni Channel: What Can Retailers Do to Keep Up in Today’s Marketplace?
The State of Omni Channel
Omni channel, multi-channel, webrooming, showrooming—the abundance of buzzwords that are used to describe the changing state of retail (and that spellcheck can’t even recognize) indicate that we are in a period of transition and innovation. There is no doubt that the omni channel marketplace would not exist today if it weren’t for the evolution of technology, but it is undeniable that human behavior and psychology have played a role in the evolution of omni channel as well. The current challenge for retailers is in delivering a seamless customer experience across all channels, including online, in-store, and via mobile, so that they can meet customers’ high expectations as well as optimize sales and revenue. Whether they choose to turn to third-party service providers to deliver the necessary tools, or opt to build out the tech and marketing in house, businesses who once specialized in brick-and-mortar or e-commerce are now struggling to redefine themselves as players in the omni channel marketplace. The ones to watch are the early adopters and industry leaders lighting the way with their creative, ground-breaking tactics and tools.
What is Omni Channel and Why Does It Matter?
An omni channel retail experience offers a customer the option of using any sales channel for any given transaction. While more retailers are moving toward a multi-channel model by allowing customers to make purchases online, in-store, from a catalog, or using a smartphone, many of those channels still operate independently. For example, if a consumer purchases a product in-store, they need to drive back to the store to return it; they can’t return it online. In an omni channel retail environment, customers can initiate any kind of transaction at any channel. Omni channel is focused on seeing and interacting with the customer as an individual, across multiple channels or touch points. Studies by McKinsey and Company have shown that consumers who shop across multiple channels spend approximately four times more than customers who only shop in one channel. As technology has developed and Americans are adopting technologies at a faster rate, retailers are finding it’s imperative to embrace an omni channel approach to keep up with their competition and stay relevant to consumers in today’s marketplace.
The Impact of Tablets and Technology
Remember the good old days before 2007, when all phones had buttons instead of touch screens (unless you had a rotary phone), one in three of your friends probably didn’t have Internet at their house, you had to watch TV on a television, and check your email on a computer? That was before the introduction of the smartphone and the tablet. Although there had been other smartphones on the market, the Apple iPhone hit the market in 2007 as the first smart phone with a touch screen, becoming the forefather of the modern smartphone. The iPad followed three years later, in 2010. In Pew Research Center’s Internet & American Life Project, researchers took a look at tablet ownership and access to broadband internet over time. They found that by November of 2010, 5 percent of all adult Americans owned a tablet. Fast forward to November of 2013, and 34 percent of adults in the US own a tablet; 61 percent own a smartphone; and a whopping 70 percent of American homes have a high-speed broadband connection.
By the end of 2013, analysts from Forrester Research, Inc. predict that 47 percent of the US population will have regular access to mobile Internet. According to a Forrester Research, Inc. report entitled “U.S. Cross-Channel Retail Forecast, 2012 To 2017,” 150 million people will be connected to the Internet via Wi-Fi, hot spots, and broadband nearly every moment of their waking lives. This non-stop access to e-mail, texts, social media, online reviews, and of course, e-commerce sites, has transformed the way people behave and interact with each other and with retailers. EMarketer recently reported that the average American adult spends five hours a day online, more time than they spend watching television. A little less than half of the time spent online (2.21 hours), is spent on smartphones, tablets, and other mobile devices, nearly an hour more than they spent on mobile Internet devices last year.
The Human Factor
For as far back as we can remember, humans have craved instant gratification and enjoyed acting on impulse. From the Polaroid camera to the microwave to smartphones, technology has evolved to provide immediacy. In the twenty-first century, psychologists fear that our hyper-connected lifestyles are making us more impatient. A computer scientist who studied the habits of Internet users found they were only willing to wait for a download for two seconds before some began to abandon the site. After only five seconds, the abandonment rate was 25 percent. People have become accustomed to instant downloads and streaming video on YouTube, Netflix, Amazon Prime, and TiVo. Today’s consumers expect what they want, when they want it, where they want it. Retailers are trying to meet their customers’ demands in order to maintain customer loyalty, increase revenues, and create differentiators between their brand and the competition. Just recently, Amazon announced a partnership with the postal service so that they can provide Sunday delivery in New York and Los Angeles, allowing Amazon shoppers to receive their packages seven days a week.
While consumers are growing more impatient, they’re also becoming increasingly comfortable making purchases online or on mobile devices as payment transaction technology has evolved into a fast, secure, and convenient buying process. Parks Associates, a consumer analytics research firm, finds that 43 percent of smart phone users have used their phone to make a purchase in the last thirty days. In that same study, quick checkout methods, which involve the retailer keeping the shopper’s credit card information on file, accounted for a quarter of mobile purchases. In 2012, e-commerce sales grew 15 percent in the United States, seven times as fast as traditional brick-and-mortar retailers. While the US Census Bureau reports that only 5 percent of retail purchases were made online in 2012, Forrester Research and other experts predict that by 2017, that percentage will double. They also predict that 60 percent of all retail sales will involve the Internet, whether a shopper is going online to compare prices or actually completing the transaction online using a computer or mobile device.
The Shopping Process
Not all shoppers are created equal. Four shoppers selected at random may all be in different phases of the shopping process. Regardless of whether someone is shopping online or in-person, the four phases of shopping are as follows:
- Research: Potential customers compare prices, features, and benefits before committing to a purchase.
- Decision making: The customer decides which product they want and who to buy it from. At this point, they put the items in a virtual or figurative shopping cart.
- Checkout and payment: The transaction takes place and payment is made.
- Fulfillment of the product: In brick-and-mortar stores, this phase is simple. The cashier puts the product in a bag and hands it to the customer. Online or via mobile, this phase usually involves shipping, either to a physical store for pick-up or to the customer’s home.
Omni channel is a response to the way humans actually shop. While the four phases remain the same regardless of where the transaction takes place, human behavior is complicated, and forward thinking retailers have realized that they need to meet consumers where they are—both physically and emotionally. In Accenture’s Seamless Retail Study, 89 percent of participants said it is important for retailers to allow them to shop using the sales channel that is most convenient for them. Instead of worrying about showrooming and the fact that customers might find a better price and use their smartphone to buy from another retailer online, retailers need to respect the power of the mobile experience. Different people respond to different triggers that will switch their mindset from research mode to buying mode, and retailers can use omni channel marketing to create that tipping point more quickly. For example, reading online reviews is a common way that shoppers use smartphones in store as part of their shopping process, especially when making a big purchase. Other consumers may need to physically see, touch, and feel a product before they want to buy it. By embracing omni channel retail and marketing, retailers can connect with their customers across multiple touch points through the buying process.
Being in More than One Place at the Same Time
Whether they originated as a well-known brick-and-mortar superstore or a niche online business, more and more retailers are trying to diversify in response to consumer demand for omni channel experiences, and the distinction between e-commerce, m-commerce, and brick-and-mortar is blurring.
Many brick-and-mortar mainstays are finding interesting ways to boost their presence online beyond their primary website, like starting their own flash sale sites. Although flash sales may have been inspired by the success of sample sales in department stores, they gained instant popularity with consumers online. Psychologists suggest that competing with other shoppers for limited time offers inspires urgency and excitement and that the resulting nervous system arousal can cloud thinking for up to twenty minutes, a trick of the brain that marketers and retailers use to their advantage to drive sales. Upscale shops like Nordstrom, Neiman Marcus, and Saks Fifth Avenue used to move their excess inventory by selling it to flash sale sites like Gilt and FAB, but now that they’ve seen the success of flash sales, they’ve started their own flash sale sites.
On the flip side, e-retailers are looking to give shoppers a more intimate way to experience their brands by creating physical locations where they can touch, try on, taste, and smell products in person. Some brands have done this by creating flagship stores in big cities like L.A., Boston, or New York, like Gemvara.com, a custom jewelry e-tailer who recently opened a showroom in Boston where shoppers can try on jewelry and select precious stones in person. After trying on rings, bracelets, and other pieces, Gemvara.com sales people help shoppers place their orders on tablets and at computer stations.
Other brands are taking advantage of today’s real estate market and launching pop-up shops. Warby Parker, which sells eyewear online, operated a pop-up shop out of a school bus where they took people on bus rides and hosted happy hours to draw in potential customers. People continue to respond very positively to pop-up shops, viewing them as fresh, fun, new, and local. The response has in fact been so positive that even traditional brick-and-mortar brands like Benetton, Sephora, and Nordstrom have launched pop-up shops, using the temporary storefronts to push the envelope with edgier displays or targeted campaigns that might not play out well in a more traditional space. Because of limited space, many pop-up shops only stock a sample product to display, and when shoppers are ready to make a transaction, they are directed to mobile apps, tablets, and laptops where they can make their purchase and have the product shipped to their homes.
In a gutsy move, Best Buy is going beyond opening pop-up shops, and actually encouraging people to come into their physical stores to check out products in person, and then purchase them online or on their mobile phones, a practice known as showrooming. In their 2013 holiday campaigns, Best Buy refers to their stores as “great showrooming floors” and dubs themselves “Your Ultimate Holiday Showroom.”
What Retailers Can Do
Embrace mobile technology. First things first, optimize your web site for mobile viewing and include transactional functionality. Look at the best ways to support mobile functionality in stores, either by providing self-service options and apps or by giving staff mobile tools like tablets to help shoppers find products, access mobile coupons and discounts, and order out-of-stock items online or for pick up at another store.
Keep pricing consistent. In a world where price comparisons are only a click or two away, price discrepancies are more problematic than ever. 75 percent of shoppers between the ages of eighteen and thirty-four will compare prices using their mobile devices in-store. While it’s normal for flash sales and daily deals to be offered exclusively online and for door busters to primarily be available in physical stores that actually have doors, everyday deals and discounts need to be available across all channels, including military, teacher, and student discounts. Verification eligibility platforms can help retailers manage their coupon codes and prevent fraud.
Recognize customers across channels. It’s important to not only be able to recognize a returning customer online when they log in to their account, but also at POS or from a mobile device. Whether a retailer chooses to do that by implementing an all-encompassing loyalty program, by using video surveillance, Wi-Fi sensors or indoor mapping to track behavior patterns in store, or by employing a multi-channel marketing platform like Experian, they need to avoid the “creepy” factor. The best way to do this is through customer managed relationships. This empowers customers to choose what information and which attributes they provide to retailers in exchange for spot-on recommendations, exclusive deals, and relevant direct marketing offers.
Connect on a personal level. Simply storing a customer’s purchasing history and recommending similar products is no longer enough. Retailers need to form relationships with their customers based on their affinities in order to cement brand loyalty and encourage repeat purchases. The boom of big data has created new opportunities for retailers who want to personalize messaging to their customers or reach targeted customer segments. For example, the PGA TOUR offers military personnel and Veterans free admission to select TOUR events and hospitality tents as a thank you for their service. In order to ensure only those intended access these perks, they use eligibility verification technology. Members of the military community are verified online, and then print authorized vouchers to show at the gate. Costco uses the same software to give teachers an exclusive offer, which they can redeem online and use in stores. Verification software also makes it possible to celebrate a change of status instead of penalizing customers. A customer who is no longer a currently-enrolled student, and therefore not eligible for a student discount on their cell phone bill, could be turned away, or they could be congratulated on their recent graduation and offered $100 towards a new phone (with a new contract and non-discounted monthly cell phone bill). Which is more likely to inspire brand loyalty?
Employ third party service providers. While most businesses see the advantages of an omni channel approach, not every company has the resources, time, or talent that Amazon, Best Buy, and Nordstrom have. Instead of hiring research analysts and devoting IT time to developing the necessary technology for an omni channel presence, many companies are following the lead of the early adopters and building upon their successes by using third party service providers to benefit from their expertise and quicker implementations. Many software developers recognized opportunities in the retail and mobile landscapes in the early days of e-commerce, when top retailers still considered mobile and web sites mere branding exercises. Combining forces brings a business to the forefront of their industry.
The Thirty Second Version
Omni channel retailing is a relatively new phenomenon, and the state of omni channel is constantly evolving as new technology is introduced and innovative companies find new ways to delight, inspire, and engage their customers. While technology is progressing and the retail industry is in flux, human nature is consistent. Retailers who can utilize the latest technological advances, their own analytics, and the new tools at their disposal will find cost effective ways to meet and exceed the needs and expectations of consumers in the omni channel marketplace.
Written by Jake Weatherly, CEO of SheerID
SheerID is the creator of the technology used to transform existing, protected private data into an omni channel service that benefits commercial enterprises and the public, while still keeping the information safe and secure. By acting as a bridge between secure databases, SheerID allows commercial enterprises to accurately and instantly verify whether their customer qualifies for a special offer like student, active duty military, veteran, first responder, or teacher offers—protecting the exclusivity of the offer and eliminating fraud.