via Digitalist Magazine
What Manufacturers Must Do To Become Omnichannel
Despite the rise of omnichannel retail, shoppers still have a hard time buying a product. Sometimes the retailer’s website doesn’t indicate whether the product is available in a store, and other times it’s only available in stores far away from the customer’s location. If we talk about omnichannel, we have to talk about all the channels – not just those directly under the parent company’s control. Wholesale and retail will increasingly have to go hand in hand to provide a truly omnichannel experience.
Consumers increasingly expect to be able to make purchases in real-time. Demanding consumers expect an unlimited availability of goods, simplified accessibility, free shipments and returns, and competitive prices, and companies are trying to satisfy their demands.
Omnichannel is an effort to respond to this challenge by promoting an operational strategy that integrates sales channels (online and physical) at all levels, both vertically and horizontally. It requires the company to re-examine its organizational structure and the value that every business process generates for the company and the consumer.
The mistake that companies often make when undertaking a strategic review of the omnichannel paradigm is considering only direct sales channels (for which there is full visibility of inventories, sales, prices, and customer data) and not including indirect channels (where key information is scarce or difficult to find), which would create a single, holistic view of product availability for the consumer. This is particularly important for manufacturing companies that make extensive use of indirect channels to distribute their products.
Starting with direct channels is the most obvious choice due to greater control, a faster return on investment, and the ease of obtaining data. Indirect channels are the next step, but to harmonize them, you need a completely new business model based on three fundamental considerations.
1. Consumers want to feel the products
Companies have always used product segmentation strategies to bring goods to the market. The most common variables are related to intrinsic elements of the asset, such as price, target, size, product category, etc. The classic segmentation models ignore one key dimension: the level of interaction a consumer wants to have with the product before making a purchase.
Consider the difference between buying printer cartridges and selecting things like clothing, furniture, cars, and cosmetics. To buy printer cartridges, the consumer can enter the part number into a web search, find the best price, and place an order for home delivery. The consumer can trust that the cartridge has the correct characteristics without ever seeing or touching it. But that’s not the case when buying a suit, a sofa, a new perfume, or a car – these consumers want to use their senses to choose the best product. A dress should be worn to evaluate its fit, a sofa should be tested to verify its comfort, a scent should be applied to perceive its fragrance, a car should be driven to assess its handling. These are sensations that – so far – can’t be perceived through the web, only through the in-person experience.
For these products, the physical channel is a fundamental strength. This is underscored by the fact that all the major investments in online channels (e.g., virtual and augmented reality, detailed technical specs, high-quality assets) are aimed at recreating the physical experience virtually.
2. Search generates engagement
Consumer goods companies must also provide a way for people to discover where they can experience a product in person, including how far away it is from their home or business. This tells consumers that the company is willing to help them satisfy their needs.
The first step in the buyer’s journey is when the consumer develops a want or need for a product, often with the encouragement of the marketing department and advertising. In the second step, the consumer wants to interact with the product – immediately, if possible – to see if it meets their needs with the least possible commitment to buy. The third and fourth steps are buying and using the product; both are supported by supply chain and customer service processes. But the second step – providing access to the product at the exact moment the consumer is looking for it – is one of the most effective ways to demonstrate the company’s interest in helping the consumer, not just selling something.
3. Consumers don’t care about channels
Consumers need to know product availability in both the channels managed directly by the manufacturing company and the indirect channels. People who want to try a pair of shoes or glasses don’t care whether the channel is managed directly or indirectly. They just want to be sure the product is what they want. And they want to learn this in the shortest time possible. They don’t want to waste time going to a store (especially one far away) without feeling fairly certain the product will meet their needs. Too often, the inability to guide customers towards the products they are looking for represents a lost sale, especially in an increasingly interconnected and fast world. Driving consumers to the product is a key factor of being omnichannel, and this business model can generate value by harmonizing direct and indirect channels.
Creating shared value
For this model to work, every physical point of sale (direct or indirect) must make its inventory information available to the manufacturer, which, through a single online channel, can direct the consumer to the closest point of sale.
The manufacturer, the indirect retail channel, and the consumer all benefit from this model. When the indirect store communicates product availability, the manufacturer can optimize internal processes; provide dedicated planning, inventory relocation, and shipping services; and direct consumers to the store closest to them, increasing shopper traffic and sales. In addition, the consumer can satisfy their desire to interact with the product as soon as possible in the closest location. Other, intangible benefits include collecting customer data from indirect channels, which opens marketing prospects that are barely recognized today.