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INDUSTRY INSIGHTS

  • 21 May

The Economics of Omni-channel

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Andy TudorAt the moment, the evolution of omni-channel goes hand in hand with the economic climate. What we’ve seen within the retail sector in general in the early part of 2012, is that there have been a number of casualties and we’ve witnessed some traditional names disappear from the high street. For other retailers, economic pressures are such that their budgets are extremely tight; the reality of that is that they have to prioritise where their capital investment is going to be allocated.

Whilst omni-channel is extremely important, we see different investments going towards this across our client base. Some are striving forwards and integrating their different trading channels seamlessly, others are making sure that their financial pressures are well managed and are therefore not putting so much money towards omni-channel investments this year. However for those retailers that are embarking upon omni-channel developments, we’re seeing clients at different stages of that journey. For example, we’re working with some customers that are still trading in siloed channels, so they might be putting their capital investment towards increasing those channels.

At one end of the spectrum, the retailer is perhaps in a situation where they have not embarked upon their mobile strategy and are still trading via traditional bricks and mortar stores, or on the web. At the other, we’re working with customers that are at the forefront of the omni-channel customer experience and who merged their channel strategies over the course of 2011. This enabled customers to begin their product research using one channel, and make their purchase using another.

Behind the scenes, our clients at the forefront of omni-channel are joining up their fulfilment options for customers and making their stock and inventory work very hard for them. They are enabling the customer to make a purchase on the web that might not necessarily be fulfilled from the Distribution Centre, if the DC is not holding the product in stock. Instead, the product is actually fulfilled from store, which in my mind is a great example of omni-channel.

Three to five years ago, if a retailer had a trading website they were considered to be at the cutting edge regarding customer purchasing options. Over the past twelve to twenty-four months, we’ve seen multichannel retailing become more commonplace, which has allowed customers to transcend different channels in relation to their purchasing journey. Most recently, omni-channel is about the customer shopping the brand as opposed to shopping the channel. A consistent brand experience is provided regardless of which channel the customer chooses to shop within.

In conclusion, if the retailer gets omni-channel right, I would advocate that there are financial benefits to be gained. If we take a client that we have been working with, that has enabled fulfilment from stores as well as the DC for purchases made on the web; they saw a twenty percent uplift in sales on a like-for-like basis in the 8 weeks leading up to Christmas 2011 as a result of this. That is a significant return on investment, which cost-justifies the initial capital outlay.

What are your experiences of balancing the economics of omni-channel? Please post your comments below or email info@retail-assist.co.uk.

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