Omnichannel Distribution: Delighting Customers with a Connected Experience
By Kapil Thakur | January 8, 2024
Forum Romanum and Trajan’s Forum – the history of organized retail starts from these two public squares, which ancient Romans established for direct selling and bartering systems. From there to Bon Marche of Paris, the world’s first department store opened in the 19th century to the United States retail industry garnering $12.4 billion on 2023 Cyber Monday, the world of retail has evolved by a thousand-fold to cater to ever-evolving today’s modern customers.
A few decades ago, retailers focused on shelf-life and store inventories to run their brick-and-mortar stores. The emergence of the internet has twisted the retail tale to stores supported by online selling. But retail distribution took a giant leap of evolution with the advent of e-commerce, smartphones, social media and call centers. Digital-age brands adopt an omnichannel distribution model to delight customers.
What is Omnichannel Distribution?
Omnichannel distribution is a buyer-centric retail distribution model that allows customers to order, receive, and return orders from more than one sales channel. Different forms of sales channels include in-store, online sites, discount sites, and social media platforms. All these sales channels are integrated with one another, that allows customers to experience a seamless shopping experience.
An example would be a construction manager placing an online order for two toolbox equipments, using a retail brand’s website, for two of his site locations– site A and site B. And he prefers one box to get delivered to site A on the same day and pick up another box himself the next day from the physical store closer to site B. An omnichannel distribution allows such possibilities for customers.
By offering the flexibility of anywhere shopping and everywhere delivery, omnichannel distribution provides an irresistible incentive for buyers to make repeated purchases, Increased share of wallet, higher customer lifetime value, improved brand loyalty, and top-of-the-mind brand recall are some of the benefits a brand can expect by adopting an omnichannel distribution approach.
Omnichannel Distribution Vs. Multichannel Distribution
Omnichannel distribution provides a seamless buying experience to customers regardless of the sales channel they buy from. The omnichannel distribution model is built on the foundation of a cohesive system that interconnects the chain of physical stores, e-commerce sites, mobile selling, and backend inventory systems. The above model ensures a tight integration between various business functions of a retail organization to provide a delightful customer experience.
Similar to omnichannel distribution, multichannel distribution also allows customers to purchase a product from more than one sales channel. But the key difference is, the latter won’t allow customers to combine more than one sales channel in their buying journey. For example, an order made through a reseller discount site cannot be cancelled on the brand’s website due to a lack of backend technology integration.
A multichannel distribution fails to offer customers a connected buying experience. This limited distribution model can affect a brand’s reputation as there is a risk of customers experiencing inconsistent buying experiences from siloed sales channels. Without second-guessing, a customer-centric retail brand will go with the omnichannel distribution model.
How Omnichannel Distribution Works?
The first step is to chart out an organization-wide plan to develop business processes that can connect sales points of all physical stores; a salesperson in one store should have the visibility of on-the-shelf products of every other store. Then, the connected sales channels should be integrated with the inventory in the store warehouse. Also, it is important to broadcast the live centralized sales data.
Tethering the processes and data of interconnected physical stores with your online site is the subsequent step. Next, the system should be upgraded to take instant online orders from all kinds of mobile devices.
An omnichannel project can never see the light of day if it is not backed by appropriate technology at every step of the transition. The integration of softwares of various retail functions like sales, marketing, human resources, operations, inventory and logistics into a unified technology platform is a crucial step. It allows seamless data exchange and establishes a single source of truth.
Armed with the perfect blend of domain expertise and technology know-how, FarEye has championed omnichannel logistics projects for leading retail brands. Automatic carrier selection, returns handling, Realtime Track and Trace, CXO analytics dashboards, and a host of modern-day last-mile logistics features empower retailers to provide a connected delivery experience.
Benefits of Omnichannel Distribution
Implementing an omnichannel distribution is not an easy feat. It involves visionary thinking, meticulous planning, and coordinated contributions from multiple stakeholders of a retail organization. Some of the key benefits of this model are:
1. Enhanced Customer Experience and Satisfaction:
Customer satisfaction is the number one metric discussed in a retail enterprise's corner offices and coffee machine squares. Providing a seamless, connected buying experience across multiple sales channels will invariably increase your customers' happiness quotient.
And today's digital age customers expect an immersive omnichannel experience from brands. According to a McKinsey article, nearly one-third of American shoppers have made omnichannel buying behaviors part of their regular shopping routine. Your customers should be able to order, receive, and return products through more than one sales channel.
2. Increased Sales and Revenue:
When you offer more touch points – sales channels – for your customers, they are bound to engage with your brand in various ways, and the continued interaction will create an emotional appeal to your brand. Emotionally invested customers are likely to buy products from a brand repeatedly.
As per the research data from Think with Google, omnichannel distribution strategies can increase store visits by 80%. This shows that a connected experience can exponentially increase store footfalls, and customers are most open to purchasing new products with recurring visits. The pervasive habit of impulse shopping also has to be accounted for.
3. Improved Inventory Management and Reduced Costs:
Inventory can be perceived as a less significant backend operation, but it is the backbone of any retail enterprise. Improper inventory management can result in lost purchases, wrong deliveries, lower customer satisfaction ratings, and ultimately lead to a downward revenue curve. In an archaic multichannel strategy, inventories of each channel or different stores are siloed.
Without a unified view of inventory management, the supply chain team operates in a dark hole. The extra space to hold more product stock in one store's inventory is oblivious to the members of another store, and the additional room goes underutilized. But omnichannel strategy provides a single view of inventory and helps in cost reduction.
4. Greater Flexibility and Scalability:
An omnichannel strategy ensures improved efficiency. The end-to-end operations – sales, marketing, customer experience, store operations, human resources, general administration, and supply chain – are tightly aligned. One of the secondary benefits of the omnichannel model is centralized data – a single source of truth. It opens up new business possibilities.
Having a bird’s eye view of the entire business operations and simultaneously possessing the ability to drill down to nuances gives senior business executives an unparalleled advantage. They can open more stores, launch new sales channels, experiment with innovative discount models, expand to new territories, predict accurate sales forecasts, and improve profitability.
Challenges in Implementing Omnichannel Distribution
Transitioning from a single channel or multichannel sales to omnichannel is a highly complex business task. From connecting multiple physical stores' point of sales (POS) machines to legacy inventory systems to individualized employee management software, the transition is an arduous task involving the support, inputs, and coordination of multiple stakeholders in the organization.
In any large organically-grown retail chain, each business function would be using a software system procured on its own with or without the inputs of the IT team. Over time, these systems would undergo a custom-functionality metamorphosis to cater to the unique needs of a store in a location. Eventually, multiple systems from multiple software vendors will be added to a complex and disconnected technology stack.
These systems operate in silos with scattered data and it can create operational complexities. The company's e-commerce website might show a product's availability without having it in the store warehouse. The payment gateway of the e-commerce site could be different from third-party payment merchants integrated into the in-store POS machine. CRM systems might be unable to handle customer data from social media handles.
The subtle yet the most important component of a successful omnichannel migration is employee training and change management. Defining a vision, building a task force team, and implementing the plan do not signify the completion of the transition. Your employees need to embrace the change, get trained on new ways of working, and adapt to the new reality. They need to imbibe only connected employees can offer a connected customer experience.
1. Establishing a Cohesive Omnichannel Distribution Strategy
Kin + Carta’s, a global digital transformation consultancy, 2023 retail research consumer study in the US and UK, reveals that 66% of consumers have spent more time and money than intended because of an immersive experience. After the pandemic’s surge in online buying habits, it is safe to say that almost all retail brands have understood the importance of the omnichannel business model.
2. Building a Roadmap
It has become imperative for retailers to implement an omnichannel strategy to outsmart the competition. Once the executive leadership team nods yes to an omnichannel model, the consensus must go through the layers of individual functional leadership – marketing, sales, operations, HR, and supply chain. The IT team needs to map out a practical strategy to integrate the disconnected systems of individual business functions without affecting the ongoing business.
3. Omnichannel Task Force
It is advisable that the IT team create a task force committee comprising a representative from individual business functions. These representatives can provide functional and business-specific inputs to the IT team to build an integrated technology stack.
Instead of overhauling the entire system simultaneously, the IT team can carry out the transition in three phases – prototype build, test & validate, and full-length rollout. The prototype build phase will allow functional users to test if the new connected system can offer the envisioned immersive experience.
4. Reaping the Benefits
From a data and analytics perspective, the final built-out omnichannel system should be able to help each department function efficiently. The system needs to help the supply chain team maximize warehouse space utilization. Marketing teams uncover buyers’ demographic trends; sales organizations pinpoint a set of elite stores overachieving the targets, and customer service teams identify opportunities to serve cross-sell and upsell.
Many retail giants have shown how the omnichannel model has helped their businesses. At the moment, two retail brands are making a splash.
5. Warby Parker
Lifestyle eyewear brand Warby Parker started its business with online selling and then later branched out to in-store retail. The brand offers prescription glasses, sunglasses, and contacts in distinct designs and shapes. By seamlessly integrating its online and offline selling channels, Warby offers its customers a stellar eyewear buying experience.
Customers can try glasses with a virtual try-on feature on Warby’s website and then decide to purchase either online or from the store. The experience is seamless. The brand also allows customers to order up to five frames for free to try, with return shipping. It has made customer feedback an essential part of the buying process and asks customers to share their thoughts on quality, pricing, and home try-on topics.
The well-known office supplies brand Staples is setting an example by offering a smooth online and in-store customer experience. Along with office supplies, the brand offers products for businesses to improve their IT.
The brand enhances the customer experience by increasing the number of touchpoints. If you walk into a staples store, you will find resourceful services such as printing stations, workplace design services, shredding, and subscription tech support. Through its omnichannel reward program, staples offer special deals like ink cartridge refills at discounts when a customer attains an elite tier.
Importance of Omnichannel Distribution in Retail
A few years ago, Instagram was simply a cool photo-sharing social media app. But today, marketers would unanimously agree that Instagram is the go-to place to target Gen-Z customers. From viral videos to memorable stories to curated posts, retail brands engage with digital-age customers creatively to gain their mindshare.
Suppose your retail brand does not have a fluid process that connects social media channels with offline store business. In that case, it is almost certain that your customers will abandon you for your competitors. Kin + Carta’s 2023 consumer research study suggests that 44% of consumers have stopped shopping with a retailer because of digital channel frustration.
Today’s customers are well-informed and like to shop from everywhere – stand-alone stores, large retail supermarkets, boutique shops, coupon & discount sites, e-commerce sites, and social media channels. As an omnipresent customer, they expect retailers to provide a seamless, connected experience. Data from the website customerthink.com well represent this. It states that retail companies with a strong omnichannel model can retain over 89% of their customers compared to retailers with a weak omnichannel strategy.
Macroeconomic outlook, customer preferences, new technology landscape, fluctuating inflation rates, and seasonal spending habits are factors that affect the ever-evolving retail business. Amongst these uncontrollable factors, fierce competition is an additional hurdle that a retailer must cross to thrive in today’s digital age consumer-driven market.
While omnichannel distribution strategy can be one of the differentiating factors to stand out in the competition, retailers have to come up with novel ways of building a loyal customer base. It could be a rewards program, free hyper-fast delivery, minimal cost special packaging, and sending personalized gift coupons. Every touch point should be aimed at building loyalty with your customers.
Role of Technology in Omnichannel Distribution
Technology plays the guiding role in perfecting the implementation of the omnichannel retail model. FarEye, a leader in last-mile logistics, has been orchestrating omnichannel logistics for retail and e-commerce brands with accurate, on-time, and environmentally conscious order deliveries.
The product and engineering team at FarEye has been investing in resources to support, strengthen, and amplify the omnichannel distribution model that retailers consciously choose. Our features and capabilities include:
- Reduce Cart Abandonment: Add more joy at the cart checkout. Boost your omnichannel strategy by providing flexible online delivery choices such as next-day, in-store, curbside, scheduled, and time-window-based deliveries.
- Ramp up Delivery Networks: Manage seasonal spikes in order volumes by quickly onboarding brand-new carriers and allocating orders based on key criteria such as performance, cost, and serviceability.
- Automate Carrier Selection: Expand your delivery zones with the help of multicarrier operations. Use our algorithms to automatically choose the best 3PL carrier for you based on factors such as delivery speed, NPS, and cost.
- Dynamic Delivery Option: Gain competitive advantage by leveraging our algorithm and updating digital-age consumers with 95% accuracy in predicting delivery time slots.
- Route Optimization: Our proprietary loop optimization algorithm considers data like traffic, delivery routes, fleet capacities etc., and the AI/ML Models constantly learn from the historical data and thereby reduce the delivery routes by up to 40%. Reduction in routes translates into cost savings.
- Cross-dock: Streamline and organize your cross-dock operations, including scanning, sorting, and bagging. Gain complete visibility into the inventories of your products in the cross-dock stage.
- Driver Mobile App: Facilitate driver crowdsourcing, managing, job allocation, routing and delivery sequencing with the help of our mobile app. It also allows real-time communication with customers.
- Proactive Notifications: Mitigate your customers' order-receiving anxiety by providing accurate ETA communication via SMS and email-based real-time tracking.
- Returns Handling: Easy returns would be your customer experience policy. Our self-service interface integrates directly into your e-commerce website and makes returns handling a cakewalk.
- Data & Analytics: Utilize our Analyze product suite, provide data-driven logistics insights, and help your C-suite executives make informed logistics business decisions.
Fantastic Results for A Fashion Brand
The customer Zalora, is Singapore’s leading e-commerce platform specializing in fashion and footwear. The brand rapidly expanded its business operations into neighbouring countries, Indonesia and Malaysia. While the brand’s mission has been to provide the best shopping experience, which entails on-time and accurate delivery of orders, conquering localized geographies, traffic conditions, and customer preferences of three distinct countries proved challenging.
Zalora chose FarEye as a partner of choice to tackle its logistics challenge. FarEye has implemented its low-code/no-code logistics platform with customized features including Driver App, Real-time visibility, Real-time Navigation, Proof of Delivery, External Client Tracking, and Identification and Approval System. The brand achieved an impressive outcome with the implementation – 98% successful first-attempt delivery rate and 91% return pickups.
Customer’s thoughts about FarEye:
FarEye’s platform is flexible, easily configurable, scalable, and future-ready. It’s helping us provide delightful delivery experiences to our customers by making delivery processes transparent and personalized. FarEye improved the number of successful deliveries that we do in a day while reducing overall logistics expenses – Silvia Thom, Chief Technology Officer, Zalora
Kapil Thakur, is a seasoned Solution Consultant with a decade of rich experience in Information Technology, Services, and Digital Transformation within the Logistics and Supply Chain domain.
Throughout his career, Kapil has collaborated with clients spanning diverse industries and geographies (APAC & EMEA), ensuring the successful execution and implementation of Logistics and Supply Chain projects with an innate understanding of client needs, aligning them with business goals, and designing tailored supply chain & logistics solutions.