Business today, regardless of sector, is conducted via multiple channels, among them: Digital; mobile; voice - through call centres; and, of course, brick-and-mortar outlets. This is multi-channel.
Omni-channel accommodates the reality that more than one channel is used in a single sale and the customer must receive a consistent experience across all channels used.
Omni-channel has become a buzzword clouded in hype, with businesses incorporating it into their market strategies, but mostly failing to answer the glaring question of: When, or even how, digital and virtual channels will become more important than physical channels?
The answer to this question is - never!
The omni-channel journey is a fine balance of multiple aspects of digital commerce that, when implemented properly, will result in a customer interaction that is conducive to market growth and development of opportunities, while at the same time dealing with hazards across: Logistics, communications, customer acquisition and retention, data and process management. And that's just the tip of the iceberg - the next big challenge is ensuring the brick-and-mortar function plays an integral role in the virtual and digital service strategy and delivery.
Omni-channel transformation
Omni-channel accommodates the reality that more than one channel is used in a single sale, and the customer must receive a consistent experience across all channels used. The prime example is the customer who researches a purchase online and then goes into a store to touch and feel the various options, but finalises the purchase either in store or back online. Another example would be the use of a mobile device while in the physical retail outlet, either to investigate competitive prices or ranges, or to query stockholdings across the same group of stores. Omni-channel depends on a high degree of integration across systems in order to provide an individual customer with the ability to channel hop at will, while keeping the customer experience consistent, devoid of frustrations and engaging.
The move to omni-channel is being driven by a new generation of consumers who are now habituated to a certain level of service and personalisation - examples include the likes of Amazon and eBay. Traditional brick-and-mortar retailers must now compete with these pure-plays by providing similar digital channels and a similar level of experience. This ultimately means they will have to integrate their existing operations with these digital channels in order to provide the holistic experience customers now expect.
This is no mean feat - adapting systems and, more importantly, mind-sets to new paradigms is always a challenge, but companies can take heart from the fact that their existing network of physical outlets gives them a significant advantage over online pure-plays. The ability to experience the product before purchase is invaluable, as is the opportunity to build relationships in person. Research conducted in SA** attests to the propensity of local consumers to ensure they physically experience the product before purchasing. This fact must be leveraged and incorporated into omni-channel strategies.
Adapt or die
In mature retail markets in developed countries like the UK, companies have already begun to invest substantially in creating an integrated omni-channel experience. UK research* reveals many companies have reached the halfway mark with regards to the implementation of the various omni-channel building blocks, with only a minority having reached the desired destination. The UK is regarded as the most advanced when it comes to transacting online, with almost 15% of all spend already online.*
The omni-channel journey is a fine balance of multiple aspects of digital commerce.
In Africa and the Middle East, omni-channel retailing is less advanced. For one thing, Internet penetration lags Europe and America, and the uptake of digital commerce has been accordingly slower. In Africa and the Middle East, online sales represent only 2% of total sales.
However, in SA, the situation is somewhat different. Almost half (42%) of shoppers within malls are already shopping online**. This group is made up primarily of millennials (the so-called Net Generation) and those in the LSM 10 and 10+ groups (that is with a monthly income in excess of R37 000). It's important to point out that while the size of this group has remained constant, the frequency with which it is using digital channels is increasing. Heavy users (four or more times per month) spend much more online than light users. The other big trend is that social media channels are growing as a source of information.
In the South African context, it is also important to emphasise the importance of mobile technologies. Computers, and thus conventional online retailing, look set to remain the preserve of the relatively affluent minority; most South Africans will access the Internet - and thus their retailers - via mobile devices.
The research conducted by the South African Council of Shopping Centres** is quite clear in its conclusions. While the use of digital channels is growing, brick-and-mortar stores remain critical particularly in the South African context. Even if the move towards greater use of digital channels continues, South Africans look set to continue being avid in-person shoppers, and physical stores will continue to play a pivotal role in the omni-channel experience, both as a way of experiencing products directly and to collect goods ordered via another channel. This in no way denigrates the urgent imperative for digital channel engagement as more local consumers move online.
Omni-channel is critical to survival and growth. Achieving it is complex as it includes integrating: IT, supply chain infrastructure, company processes and culture.
In the next Industry Insight in this series, Marcello Pompa will continue the discussion around the multifaceted monster - change.
* Chloe Rigby, Towards omni-channel maturity. A study of UK retailing in 2015. (Internet Retailing and OSF Global Services), no date
** Dirk A Prinsloo, Omni-channel retailing. Changes, trends and strategies (South African Council of Shopping Centres), no date. For more information, see www.sacsc.co.za
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