The Perils And Joys Of Omnichannel

A popular buzzword floating around today is ‘Omnichannel’. Those who already know what this is, can perhaps, save four minutes of their time by skipping this column, but those who still want to know, omnichannel simply means that all the different sales channels of a company, wholesale distribution, retail shops, online sales through an app, ecommerce store, ecommerce marketplaces. different social media outlets plus phone marketing, onboard sales, duty free sales, door-to-door sales, all sing from the same hymn sheet, producing the same beautiful music.

*Things to Consider First

Firstly, many organisations do not have a unified information base. I have seen companies operating with one, two or more legacy systems at the same time. For example, different software platforms could exist for accounts, stocks and logistics, retail points of sale, wholesale and marketing and communication.  While each department functions smoothly on its own, there is often little or no sharing of information between them. Top bosses and CFOs usually have data formats with the top-level views that they need to make decisions and it often requires some hard selling to get them to see the pain points.

The most crucial factor with the highest cost, is usually inventory. And frequently there is little shared visibility of stocks in different silos? For example, the main company warehouse has stocks to feed the different channels. But a retail chain with 100 stores, would have stocks of largely the same items in all the locations. When the company then decides to start an ecommerce store, is it going to create one more stock location for this?  And, what happens if the products are then listed on Amazon or some other marketplace? Will that require adding more sets of merchandise to service these sales? All these different inventories add to the cost of launch and create a risk of unsold stocks at a time when only sales assumptions are available.

The obvious solution is to find ways to share the stocks, adopting hybrid solutions which link the online business to offline shops. So, every time a sale happens online, the item is picked up from a shop, or shops, and gets delivered? Each additional step however, adds time and cost to the delivery. First find where the item is sitting, then arrange to get it to the ecommerce despatch location for the delivery team to pick it up. If the order is for multiple products, stocks may need to be collected from more than one location, which means further cost, plus delays of one, two or more days. Where a click and collect option is added, another level of complication is introduced,  ensuring the product is available at the specific place and time indicated.

Sales people in retail shops are known to jealously guard their inventory and when an ecommerce order for a high selling product comes up, they are reticent about losing their own sale and end up hoarding it. This means a confirmed ecommerce order could be lost due to the stock suddenly becoming unavailable, when it was earlier showing as ‘in-stock’.

Another common problem is different channels offering different prices, or different promotions running on the same product at the same time. Besides creating friction between channels, this provides the higher priced outlet an easy excuse for lack of sales, “What can we do, our customers are buying it from the ecommerce site because of the lower price.”  An unintended consequence is the introduction of an element of doubt in the customer’s mind about the company’s products or correct pricing.

Companies continuously communicate with customers through email, social media posts, messages, word of mouth through promoters or sales people, advertising in the cinema, TV or print, radio, outdoor media and more. While universal branding messages work well across all sales channels, when a specific message is intended for a particular channel, it causes friction with others. For example, when a particular offer in a specific store, city or mall is noticed by an ecommerce customer, or someone in another mall or location where the offer is not available, it creates an unhappy customer.

*Capital Efficiency & Customer Confidence

For a successful omnichannel operation therefore, sales, pricing and stock priorities must be pre-defined and solutions found to ensure that they are uniformly implemented. Manual solutions may work initially, but as scale increases, one of the myriad technical solutions available could be considered. Large ERP (enterprise resource planning) solutions have long been around providing uniform accounting and logistics backbones for different parts of the business, but they come at steep prices, require serious organisational commitment and at times need further customisation for atypical requirements.

Other available software solutions provide a middleware, usually driven by AI, sitting between the accounts, sales and inventory programmes. These are designed to provide visibility and manage stocks and prices across channels. They can increase the probability of fulfilment by prioritising movement of particular products either automatically or through manual intervention. Thus, a fast-selling sku (stock keeping unit) for Location A would be transferred from Location F where its velocity of sale is much lower. 

Customers get really unhappy when they find the same product at different prices in two different places and such programmes can ensure uniform pricing across channels. In case there is a specific promotion in one channel, it can remove or block the product from other channels for the specific period, enhancing the exclusivity of the offer where it is available.

Additionally, communication platforms such as Salesforce, HubSpot and others, can be used to provide information smoothly and concurrently across internal and external networks, so that all channels are in sync with communications going out to customers.

*Harness the Benefits

An omnichannel organisation harnesses the power of its data and information, it increases efficiency of working capital by rationalising the overall level of inventory while ensuring that products are available where they are needed, when they are needed. It increases credibility among its customers by removing price variations in different channels. And it creates a more coherent and transparent organisation with all stakeholders sharing information and data and communicating it across channels.

If you are still sitting on the omnichannel fence, it’s time to look at it again.

With over 30 years’ experience managing brands and businesses, the author has been consulting and writing on retail, ecommerce and marketing. He has been a commentator and columnist in leading publications.

Ajai Kumar Dayal

Guest Author The author has over 30 years’ experience in managing and consulting on big brands, retail, and ecommerce. He has been a commentator and columnist in many publications.