Omni-Channel Retail 101

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Online Commerce Site. Image: Branding. Inc.

Online Commerce Site. Image: Branding. Inc.

Today I gave a presentation on Omni-channel Retail to the China Chain Store and Franchise Association. The fact that there isn’t even a term in Chinese for Omni-Channel retail shows how new the concept is to China. Truth be told, the concept is relatively new worldwide.

So what exactly is omni-channel retail anyway? Essentially, omni-channel Retail is where retail stores, e commerce, m commerce, social networks, technology etc. all collide to connect the entire shopping ecosystem and experience. The diagram below displays the concept best.

Omni-Channel Diagram. Image: Tyco.

Single Channel:

Very straight forward. There is only one-way to purchase a particular brand’s product, usually a store, but could also be a catalogs etc.

Multi-Channel:

This term has been around for a while and seems to be the lead topic for many retail conferences around the world this year. Multi-Channel involves several different ways to purchase the product from one particular brand. This could be through he store, e commerce, m commerce, or catalogs etc. All are separated from each other causes inconsistency and confusion. For example, the same brand may have price discrepancies between the store and their e commerce.

Omni-Channel:

Omni-Channel is essentially the same as multi-channel, except that all purchase channels are seamlessly connected which enables consumers a great deal of flexibility and convenience. In this case prices are consistent across all channels and if you buy something online should be able to return it to the store. Perhaps the best example of an omni-channel retailer to date is Apple.

Empowered Customers:

Omni-Channel isn’t something that retailers have invented or are necessarily even happy about. Its more a result of advances in technology that are empowering customers and putting them at the center of the retail spectrum.  With smart phones and mobile technologies customers have access to almost perfect information about products and prices etc all around the world. Retailers that are failing to adapt to the new world of e commerce etc. are being left by the wayside and going out of business. The bankruptcy of Tower Records and Borders Books are two examples.

Stores will still remain important but the way customers are behaving is undergoing radical change. Traditional retailers are struggling to come up with solutions to shopping platforms like e commerce and m commerce that are developing at lighting speed.

E commerce:

The mechanism doesn’t need explaining, but the consequences do. Now there is almost perfect price transparency of products across the board and around the world. The biggest effect of this is price competition and the eroding of profit margins. Now, more often than not (depending on the product) lowest price wins.

In China e commerce is fierce and requires an entire series of posts to unravel and explain. I am working on this.

M (for Mobile) Commerce:

Generally an extension of e commerce, but may include anything done through mobile devices such as phones or ipads etc. M commerce is enhanced by technologies such as QR codes and Location Based Services that will also be featured in an upcoming post on the future of retail.

S (for Social Network) Commerce:

Basically any transactions conducted through or originating from a social network, which in the case of China could be many, but the main ones to know are Sina Weibo, Renren, and Taobao.  I’m hoping to cover these Chinese SNS in more detail in the coming weeks too.

In many parts of the world people also speak of F (for Facebook) commerce which comes under the banner of S commerce. But this doesn’t apply in China where Facebook is blocked.

Social commerce is deeply related to PR, marketing and communications of brands. A brand, friend or influencer can make a recommendation on their social network page and this can translate to sales. Or there can be direct sales through a social network.

Issues with Omni-Channel retail:

Of course E commerce, M commerce, and S commerce are all intrinsically linked together which aids and convolutes the situation for retailers. On the plus side a standard e commerce site optimized for mobile can avoid creating two separate systems. But on the other side, how does the organization treat and register that sale? Is it an e commerce or m commerce sale? This is significant for companies who may have different divisions covering each sales channel.

The challenges of setting up omni-channel retail is also a topic for another day, but suffice to say that the entire organization’s operations including logistics, supply chain, IT systems, social networks and advertising etc. need to be connected and know what each other is doing. This is such a difficult and daunting task for most retailers, which is why it’s still really just a concept and to date not many brands have implemented successful omni-channel retailing systems.

More to come on this topic…..

Chinese E Commerce Site 5Lux.com (5 for Fifth Avenue)

Chinese E Tailer yihaodian.com Offering M Commerce Via Subway Ads and QR Codes

Burberry's Page on Chinese Social Network Sina Weibo

Logistics are a BIG Challenge in China. Amazon.cn Delivery Vehicle

 

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