Written by Kristina Carlsson
In the late 1990’s a couple of missionaries of the IT-world thought that it was time to bring retailing online. The London-based company Boo.com had Swedish founders who saw immense opportunities in offering home delivery of clothing and interior design online, accessible for everyone with an IT connection. Unfortunately, they were a couple of years too early and the company went bankrupt in 1999 (Stockport, Kunnath & Sedick, 2001).
15 years ahead of their time, Boo.com, tried to offer something that online retailers do today. They wanted to make the online experience valuable and competitive to the offline shopping experience. The competitiveness between offline and online retailing still stands but when thinking about what could be the key to success in the next 15 years, a combination of the offline and online environments, so called “Omnichannel retailing” seems like an obvious answer for many researchers as well as retailers. According to Aubrey & Judge (2012) the merge of the two worlds has already started evolving for some companies but many are still facing Internet retailing as an external competitor and threat, thus acts defensively instead of seeing the omnichannel solution as an opportunity for innovation and prosper. Catching the new customer in the Internet era, Rigby (2011) argues that the attitude towards e-commerce and omnichanneling must be changed, many traditional retailers are still anxious about e-commerce, seeing its bubble burst as for example with boo.com and thereby are critical towards it.
Omnichannel retailing is a fairly new research area where traditional retailing research combined with online brand building research is combined. Different objectives to why omnichannel retailing is necessary are presented and various solutions to how retailers can deal with issues arising are offered. Hence, this paper is a theoretical study of the most important challenges found in existent research, but at the same time provides hands-on advice to how one can face challenges, with suggestions from researchers as well as from the author.
The research question is thereby:
Why and how must retailers of today adapt to an omnichannel strategy?
Arguments for implementing an omnichannel retail approach
Rigby (2011) defines the omnichannel concept as the following;
“Retailers will be able to interact with customers through countless channels—websites, physical stores, kiosks, direct mail and catalogs, call centers, social media, mobile devices, gaming consoles, televisions, networked appliances, home services, and more.” (Rigby, 2011, p.67)
Frazer & Stiehler (2014) further describes the idea of omnichannel retailing as an integration of various channels with the goal of servicing the customers in their preferred channel or channels, in a personalized way. This means that one transaction can span over different channels in the ecosystem of channels that the omnichannel retailer has build up. The end goal should be a complete integration of online and offline environments. This is also why omnichannel is different from multichannel retailing, where the latter only focuses on having many channels coexisting instead of focusing on the integration of channels (Stone, Hobbs & Khaleeli, 2002).
According to Brynjolfsson, Hu & Rahman (2013) more than 50% of all American mobile phone users have a smartphone and over 70% of them have used it when shopping. Of Swedish mobile phone users, 65% have a smartphone with an Internet connection. Furthermore, 85% of Swedish people have ordered a product or service online, a number that can be compared with 54% In 2005, proving a continuous growth in this behavior (Findahl, 2013). The growth of this behavior is a further argument for why offline retailers should see an opportunity in omnichannel retailing.
One of the largest reasons to why the omnichannel-retailing concept has grown in the past couple of years is according to Pratt (2012) that many of the “brick and mortar retailers” today, in the Internet era, are facing “showrooming”. Showrooming means that customers walk around, sensing and evaluating products while at the same time getting service from in-store personnel but later on ends up buying the product from a cheaper e-commerce alternative. The problem has been acknowledged for some time and several of the larger retailers in the U.S, like Sears, Macy’s and the Home Dept. are investing immense sums to create new IT solutions that might bring the offline and online environments together, creating one large seamless omnichannel-experience for the consumer.
Cathy Hotka in Pratt (2012) argues that the old view of how to differentiate one self in the retail sector has changed from price and location to customer experience and the promise of the brand. Retailers must be creative in the way they compete while at the same time there is a larger range of ways to compete nowadays than it has been before. Jeffery Grau in Pratt (2012) continues with emphasizing the importance of creating a smooth experience for the consumer, if anything is disappointing during the process, it is most definitely going to reflect upon the brand.
Liebmann (2013) underlines that consumers now buy from many more places and channels than what they did five years ago, according to “How America Shops 2012”, a research made by the Newspaper Association of America, American women purchased products from 11,5 different channels in three months, an average increase of three channels more than what they did in 2008. Furthermore, Liebmann (2013) also underlines that to avoid showrooming, retailers need to be aware of what problems consumers have with their offline shopping experiences in order to make a cross-channel process smooth for the consumers. Today, 42% of American consumers use their mobile phone and 16% use their tablet while shopping. If retailers want to be successful in the battle against showrooming, the opportunity to incorporate technology and Internet into the offline experience must be grasped according to Liebmann (2013). Whilst working with an omnichannel strategy, Rigby (2011) agrees with Liebmann (2013) that stores must push on their key asset, their physical store, when competing with pure e-commerce businesses, since it is the only thing they have that e-commerce does not.
According to Aubrey & Judge (2012), offline retailers need to transform their businesses so that the new omnichannel retailing strategy excels in four different areas. The four areas being: 1. Experience, 2. Service, 3. Consumer-focused logistics and 4. Integration into its omnichannel system. The dimensions should be taken into account when creating the e-commerce strategy since the e-commerce operation should work in harmony and balance with the already existing offline retail store. Despite a lot of growth in the e-commerce sector, Aubrey & Judge (2012) points out that consumers like shopping in physical stores as a form of leisure activity and thereby the physical stores should be kept in the omnichannel ecosystem since they bring value to the customer experience and in extension to the brand. The final result of the transformation of retailer’s strategy should thereby be a seamless omnichannel business and an increase of the overall brand value for customers.