Brands need to find their 'omnichannel equilibrium'

More shopping is moving online & fewer shopping missions are exclusively done ‘in store’. To stay relevant bricks-and-mortar brands need to identify and head for an ‘omnichannel equilibrium’ which is right for them, where the business model and its sales channels are in balance.
By
Julian Dailly

February 8, 2018

The growth in online shopping

Last week ASOS published a set of stellar results. Sales were up 23% over the Christmas period. ASOS’s sales have been supported by technological leaps: Try before you buy, same day delivery and an easy, fluid shopping experience all make it easier to shop with ASOS.

15 years ago, web shops were inferior versions of real shops. Over time, they have overcome so many of their initial weaknesses. Oddly, many high street shops now feel like inferior versions of their online counterparts. For example, browsing a large range of products is far easier online than walking round an entire department store.

Many categories we once thought were unsellable online are now freely available over the web; everything from banking, grocery shopping, cosmetics and clothing to holidays, houses and legal services.

The role of store

Internet shopping works best when we are searching for an item with which we are already familiar; a commodity (screws), standardised items (tickets) or branded products (Nike trainers). We don’t need to touch or investigate these items because we already know them. This is why searching and ranking is so central to internet shopping: we are assembling simple lists and picking from them.

Where shops succeed over their online equivalents is their ability to inspire consumers with new and unique choices. Shops offer multi-dimensional, multi-sensory spaces, not just a touchscreen. The value of this difference is that shops enable selling premium new products, an essential activity for many brands.

For most items, in most shops, consumers don’t have to wait for delivery. Online delivery times will continue to fall, they will never be quicker than shops for many items. This means shops will remain the most convenient option for many last minute, impulse, small batch, local and perishable items.

As Aaron Shields, Strategy Director at FITCH a leading global brand and retail consultancy says: “We will always need a mix of physical and online shopping channels because they suit different missions and have their own natural advantages. Nothing beats a physical shop for creating an immersive experience, being able to touch something or getting an item immediately. Physical shops are a poor cousin when it comes to infinite choice, comparison shopping and easy convenience”

Channel strategy would be far easier if brands could segment their selling channels neatly into premium experiences (off line) and value focussed search (online).  The challenge is that stores always contain a mix of experiential and convenience driven consumers. The solution is to decouple brands from their sales channels and to couple particular shopping missions to a composite idea of the brand and one of its channels. For example: Waterstones online – to pre-order Dan Brown’s next book. Waterstones stores – to be inspired by other readers.

The importance of the omnichannel customer

Sales and research data show brands whose customers shop BOTH online and in-store do better than single channel buyers. This is because their customers use them for multiple buying occasions, leading to a superior purchase frequency and value.

Further, as a significant volume of store transactions are convenience driven, those brands offering any familiar or commodity items in store, must remain price-competitive. Consumers will offer footfall to convenient retailers but are increasingly unwilling to also pay price premiums for convenience.

Brands that exist to offer new and unique products in a multisensory environment will need to retain and focus on their retail spaces to maintain volume. Those brands that set out to fulfil replenishment, or sales journeys around familiar brands and products, will find themselves increasingly drawn to competing only online to maintain margins. And those brands that seek to do both will need to develop sustainable omnichannel strategies.

Dependencies: Proposition X Channel

Finding an ‘omnichannel equilibrium’

As more shopper missions move online, brands with stores will find it harder to balance the economics of less busy stores.

The challenge is catering to both types of shopping missions. Brands will have to give clear roles to their channels, ensuring their more expensive spaces deliver real excitement and inspiration and avoid offering an inconvenient version of online shopping.

Conversely, those brands who focus on selling familiar items that can be found online, may need to get off the high street altogether and focus only on online retailing.

 

How do I find my omnichannel equilibrium?

We have worked with clients to identify and plan for an ideal omnichannel equilibrium. The process begins by setting out a number of strategic hypotheses from which omnichannel endpoints emerge, typically working groups and also in senior leadership 1:1s.

The answers to these and other questions are the basis of identifying and planning for an omnichannel equilibrium, where the business model and its sales channels are in balance. The answers may lie within management and they may also require fresh consumer research.

We have worked with many brands to help them implement proper roles for their online and offline channels, to establish the right missions and ranges and to install the right KPIs to manage a successful omnichannel experience and strategy. 

To get in touch, please email julian.dailly@morarhpi.com

 

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