Published August 27, 2014
By Jim Tompkins
CEO, Tompkins International
I recently read a July 2014 report titled “On Solid Ground: Brick-and-Mortar Is the Foundation of Omnichannel Retailing.” While there are a few points in the report that show some understanding of omnichannel, I also disagree with many of the points it presents and believe it only adds to today’s confusion surrounding omnichannel.
Consider the following quotes from the report, as well as my thoughts:
- “Digital retailing is capturing headlines and inspiring spirited debate as retailers plan how best to invest for future success. But beyond the headlines, physical stores remain the foundation of retailing, evidenced by the fact that 90 percent of all retail sales are transacted in stores.” This is simply untrue. Omnichannel means all channels work together to provide a great customer experience. Most customers use multiple channels to shop, so to credit the channel where the actual transaction takes place indicates a total lack of understanding of omnichannel. In fact, where a sale is transacted has nothing to do with the importance of omnichannel. Think about it this way: If a customer finds an item that they like online and then goes to the store to buy it, is this an online sale? No. Is it an in-store sale? No. It is an omnichannel sale. Accounting systems that track where a sale takes place have nothing to do with the concept of omnichannel. Therefore, it is critical to identify the capabilities of your many segmented supply chains and enable them to achieve omnichannel sales potential at a minimal cost.
- “Physical Stores are clearly customers’ preferred shopping channel and a place where the most significant consumer and retailer value continues, and will continue, to be created.” This is also completely untrue. Place this in the context of the August 8, 2014 Wall Street Journal article “Shoppers Flee Physical Stores.” The opening sentence reads: “US retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online.” Omnichannel is not about a competition between channels. In fact, retailers need to realize that customers do not even think about channels. Channels are the retailers’ issue. Customers want to buy from you and use your various channels to support that purchase. Shopping is not about having a preferred channel -it is about finding the price, selection, experience, and convenience that fills your needs. Shopping must be omnichannel! Look at requirements of today’s final delivery to customers and you can see the major transformation that is occurring with same-day, next-day, second-day, and local delivery service providers. Innovation in final delivery is clearly being driven by the shopper fleeing the physical store and preferring alternative shopping channels. This may lead to a need for retailers to be creative in driving traffic to the stores, but clearly how retailers make innovations in their delivery capabilities is the key to future growth.
- “The store plays a crucial role in online purchases, as two-thirds of customer purchases online use a physical store before or after the transaction.” The whole point is that all channels work together for omnichannel success. All channels are critical, and a strong channel management strategy is the answer to the success of retail. Stores that support online are what omnichannel is all about. In a similar way, online helps stores: more than 60% of all retail purchases are influenced by online. But, this does not mean stores or online are the keys to success. This means that omnichannel holds the true key to success.
- The future of retail is solidly anchored in the brick-and-mortar channel.” Again, this is nonsense. If a portion of your channel management strategy is to have stores, then these stores will play a key role in your omnichannel strategy. But the future of retail is not in one channel or another, but in omnichannel. Retailers that do not recognize this will not only operate with a channel strategy that is inflexible and unable to adapt to the rapid changes in customer preferences, but the supply chain will be a huge driver for escalating costs and act as a bottle neck to achieving best-in-class customer satisfaction.
When I first read the article, I was confused. But then a second, more careful read brought an answer: A short excerpt about the study reads: “This independent survey of consumers and retail executives was funded by, and completed in cooperation with, leading U.S. shopping mall real estate developers.” There you have it -so much for trying to make sense out of nonsense.
Photo Credit: Tim Reckmann