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Omnichannel operations

  • by Tom Marston

Now is the time to bring store & ecommerce operations much closer together.

The past decade has seen a steady rise in online commerce with declining shop sales for the majority of established Retailers. Yet operations are all too often separated between shops and online making it difficult to respond quickly & efficiently to this changing landscape and the recent shock of Covid-19.

Retailers should take this opportunity to rethink their “go to market” operation with 3 goals in mind:

  • Better serving the customer across all channels
  • Having a clear picture of purchase profitability “end to end”
  • Faster and more informed decision-making 

Historically, most physical Retailers developed their ecommerce operations as ring-fenced teams given the different capabilities required to market, serve and fulfil customers online. There were advantages to this initially: attracting new talent, greater speed & flexibility to develop online operations and not “disrupting” physical retail with, for example, integrated logistics. But with increasingly few exceptions, customers today are browsing and shopping in both channels and operations need to follow suit.

“A recent Harvard Business Review survey found that 73% of today’s buyers use multiple channels to search and spend”

Let’s break this down into some of the key processes to highlight where inefficiencies might lie when operations are kept apart:

1) Customer Insight

The gathering and interpretation of customer insight is often fragmented across an organisation. This makes it difficult to observe customer behaviours across channels (stores, online, app…) and how journeys might change depending on frequency of visit, or a particular shop mission. By pooling data and the insight services that mine this information, a company has a better chance to build this capability and make it available across all sales channels. 

Spotlight: MatchesFashion – At its flagship store in London, staff use software provided by Proximity Insight that uses online customer data to enhance every in-store interaction. This is especially key with its personal styling appointments which in turn, informs the online shopping experience and subsequent marketing communications.

2) Buying & Merchandising

Buying & merchandising is often segmented between online and stores. Most retailers will join up their “buy” orders to get the best commercial terms, but planning the range and demand forecasting is often done at the channel level. This has advantages in maintaining clear P&L accountabilities by channel, but inhibits free movement of stock based on where demand is greatest, and leads to greater discounting and clearance across the season. 

3) Marketing

Measuring the impact of Marketing spend for a single channel journey is not consistent with the way customers shop. Customers may be inspired in one channel (e.g. an online Ad, or billboard message) browse in that channel, but then transact in another. Marketing ROI models need to be evaluated across online & offline media through the context of both engagement (web traffic or store footfall) and transactions. Tracking repeat purchases is also important to assess the impact of retention techniques. 

Spotlight: Nike – At the heart of its strategy is the Nike+ app which connects seamlessly with stores (check for sizes, reserve fitting room or checkout) and online. Nike uses this data to reward customers and tailor the experience showing products based on preferences and limited exclusives based on geolocation. 

4) Fulfilment

We’ve mentioned the importance of more fluid stock. This then needs to be supported with the relevant systems and operations to enable stock to move freely between warehouses and stores (and back again). Stores are becoming increasingly important as service points (order/ collection/ returns) and could go further to supply online deliveries with shorter lead times, and in some cases, more cost effectively too. 

Spotlight: Bed, Bath & Beyond – This US home goods retailer plans to convert 25% of its stores into “dark stores” in the wake of the Covid-19 impact. While some of these stores may return to retail in the future, it points to a trend by Retailers (including Target, Walmart) to use retail locations to fulfil local delivery and plan for an increase in pick-up orders. 

This is not an exhaustive list but rather a few examples of sub-optimal processes we’ve seen across the Retail industry. Each Retailer will have its own priorities based on either improving the customer proposition or driving efficiencies across the channels. 

So how should Retailers approach this?

1. Identify key omnichannel processes

Put yourself in the shoes of your customers. Are there known frustrations with how customers research and buy from your company across channels? What do your data sources tell you (online, returns, surveys, feedback…) If not fully understood, then organise some focus group sessions to explore areas further. Similarly what does “good” look like in your industry – what are competitors and innovators doing that may raise the bar again?

Secondly, put yourself in the shoes of your CFO! Where could processes be made simpler or more efficient through bringing channel operations together? We’ve explored a few above, but there will be others too. 

2. Prioritise – focus on a “top 3”

Most Retailers will not struggle with identifying where things could be improved, but rather where to start! A business strategy can help to focus on the areas where your business will win, and criteria should be formed based around delighting the customer while driving a profitable operation. What are the key objectives and what impact is anticipated from making the change? How much further can you go by focusing on a smaller number of changes executed really well? 

3. Design

Once areas for improvement are identified (and prioritised), how do operations need to change to support the new customer journey or process?

  • Ways of working: which teams are impacted by the change and how might roles and responsibilities need to change to support the new process?
  • Data & systems: what information or system changes are needed to support the new process?
  • People: would the process work better with a different (simpler?) organisational structure, or are new capabilities needed either through training or hiring?
  • Measures: what are the expected benefits of the change and how are these best measured to track progress? 

4. Operationalise

The best ideas fail unless they’re executed well. Defining expected outcomes and putting in place a leadership model to oversee progress across the functions is key to ensure any objections or issues can be quickly overcome. Changing processes which may have been embedded for years is often one of the hardest changes to embed so invest in the right programme structure to facilitate change from “within” the teams and get everyone focused on the right goals.  

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