Why Omnichannel is so Hard to Get Right

Every modern retailer wants to deliver on the omnichannel experience—which means that customers can shop anywhere, pick up their goods from everywhere, have their order delivered anywhere, and return goods anywhere.

The problem is that delivering this kind of experience puts tremendous strain on the infrastructure of retail and eCommerce operators.

To get omnichannel right, a retailer has to have a sophisticated, multifunctional order fulfilment strategy in place. Most retail executives find this extremely challenging.

In a recent survey of retail industry insiders, more than half acknowledged that they still haven't achieved true omnichannel for their retail operations. About a fifth of those executives openly admitted that they didn't expect to ever be able to offer true omnichannel for their customers.

The question is, why is omnichannel so hard to get right? And what can you do to overcome these challenges in your business?

In this article, we will look at some of the challenges that come with implementing a multichannel operation. We will particularly focus on these challenges with regards to mid-sized companies.

When you consider the challenges of getting omnichannel right, the survey results will look less surprising. It will also give you valuable insight in the omnichannel process.

Which will allow you to evaluate your own business to see if omnichannel could be achieved in your particular setting—and if you're willing to accept the omnichannel challenge.

Omnichannel is the future

Before we delve too deeply into the challenges that come with implementing omnichannel, it would perhaps be prudent to define omnichannel.

In the simplest terms, omnichannel can be described as employing as many channels as possible to get the attention of potential customers. You open up as many avenues as possible to reach customers through several marketing channels at once.

Furthermore, these channels need to be integrated to such an extent that the customer experience is truly seamless across all those channels.

This is, of course, a wonderful way to keep your brand front and centre in your customer's attention—which will increase sales and market share. No wonder that omnichannel is considered the future of retail.

Omnichannel is a trend that has taken over our culture in recent years. People want their digital and physical lives to be integrated. When they look for something online, they expect to go into your store and see the same marketing campaign and the same product offered for the same price.

This has been proven out by statistics:

• It has been found that brands that employ an omnichannel strategy experience a staggering 89% customer retention rate.
• Brands that don't do omnichannel only retain a paltry third of their customers.
• When surveyed, almost 90% of customers say they crave a more seamless experience from retailers and brands.
• What is also interesting is the level of consumer adoption of omnichannel. For example, more than two-thirds of American consumers have already bought something by purchasing it online, and then picking up the item from a physical store—one of the calling cards of omnichannel retail.
  

The challenges posed by omnichannel

Many companies are encumbered by legacy technology and processes that, while effective in the past, are woefully inadequate when it comes to omnichannel.

Getting several legacy systems that handle different aspects of order management and business operations to work together seamlessly, is never easy to achieve. Usually it involves a lot of hard work, time, and expense.

In this section, we will look at the most egregious challenges that retailers have to overcome if they want to transition their business to an omnichannel model.

1. Endless Aisle is difficult to achieve

One of the foundational principles of omnichannel retails is the endless aisle. This means that customers can buy the same product, for the same price, through any one of the channels in service.

So for example, customers should be able to view and order the same inventory in-store and on their mobile device. If a product is unavailable at a retail location, they should be able to order that out of stock item from their phone.

The challenges here are obvious. Work the endless aisle to work, all the retail locations and warehouses need to have access to the same inventory and inventory figures.

You need a system that makes it easy to locate inventory for a specific item and then automatically move that item to a location where it is needed. That item then needs to be put into reserve and shipped out before someone else goes into the store and buys it.

All of your warehousing and retail locations should be able to seamlessly share inventory. This means that any of your stores or warehouses should be able to pull an item from any other store or warehouse.

This requires sophisticated technology integration between locations and business units. There needs to be some kind of centralised order management system that keeps track of all inventory business-wide. Each location should also have complete visibility to all company inventory.

Many big box retailers and apparel stores struggle to get the endless aisle right. What often happens is that a store has to phone the warehouse to verify inventory or contact another store to locate an item. This manual system is ripe for mishaps and inevitably leads to some customers having a bad experience in your store.

2. In-store pickup is challenging

In-store pickup is a wonderful way to improve customer experience. It gives them the ability to buy something online and then take delivery directly at a physical store. Which means they don't have to wait for their item to be shipped out to their home.

There is an instant benefit to in-store pickups for retailers in that it drives foot traffic to their physical locations. When customers are in your store, they tend to browse and buy more.

The benefit to the customer is obvious. They get their item straight away instead of waiting for the courier company to make a delivery. This instantly improves their experience with your brand and boosts customer retention.

The challenges of such a service are also easy to see. Most retailers have more products available on their webstore than they stock at their physical locations, which tend to only keep the most profitable items.

In fact, most retailers carry more than double the amount of items on their webstore than at their brick-and-mortar locations.

So offering this fulfilment option is challenging.

3. Ship from store is a logistical nightmare

Ship from store is similar to in-store pickup in that items ordered online are dispatched from a physical store. Ship from store, however, takes this concept one step further.

The customer doesn't pick up their order from the store, the store sales team will pick, pack, and then ship the items to the customers' home. In other words, the brick-and-mortar stores are engaged with shipping out orders instead of using a dedicated distribution centre.

With this method, the retailer would be able to sell more of those slow-moving items that normally would have had to be marked down. This increases sales and boosts profit margins.

But shipping from the store can get complicated, especially when orders have to be split. In other words, some of the items are shipped from the store, while others have to be sent out by a distribution centre or another location.

This increases shipping fees and creates opportunities for human error. It is the reason why retailers that offer a wide selection of products have problems making ships from store work.

This model definitely favours retailers with consistent inventory across all their locations. It also helps if they don't have to stock a wide selection of sizes and other variations.

Nevertheless, many retailers have adopted ship from store to such a degree that they ship almost exclusively from their physical stores.

4. Cross-channel returns is challenging

Cross-channel returns make it possible for customers to buy an item on a webstore and then return it to a physical store.

This is one of the strongest selling points of omnichannel from the customer's perspective. It gives them complete freedom to return an item to the location that is most convenient to them and puts them in control of the returns process.

The customer gets an instant refund or replacement product, and doesn't have to wait for the product to ship back to the retailer's warehouse.

There is also benefit for the retailer as it increases foot traffic to the physical store—which will inevitably boost sales. While the customer is there to return or exchange an item, they might be tempted to make another purchase.

This becomes challenging when a customer wants to return an item that is only sold from the retailer's webstore. It’s difficult for a retailer to display a single item on the shelf and then sell it for full price. So that item will probably have to be marked down.

Here, the retailer will benefit from an order management system (OMS) that manages inventory from a centralised hub. Because once the item is returned, the OMS will register the product as part of available inventory to be sold online. When someone else buys that item, it can then be shipped directly from the store to the customer's home.

Otherwise, the retailer will be forced to send the item back to the web store distribution centre to be sold. Or alternatively, it would have to be put on the shelf at a markdown, as mentioned.

5. Same-day delivery is expensive

When an omnichannel system is running effectively, it becomes possible to offer same-day delivery to customers. In other words, customers would be able to take delivery of items they bought online that very same day.

This level of service poses the same type of problems you would expect from in-store pickup. Most retailers don't make their whole online catalogue available for sale at their physical locations. Which means that only the items they have available on their shelves could be delivered to their customer on the same day.

Same-day delivery can also get expensive. Some models project delivery costs as high as $20 USD for the manual labour component alone. Most customers aren't willing to pay such a high premium to get their item  a day or two earlier than normal.

Conclusion

In the modern, ultra-competitive retail space, you need to employ as many channels as possible to grab attention from your customers. This does not only include marketing your brand as widely as possible, but also having an effective means to process sales from multiple channels.

You want to offer your customers a seamless shopping experience—regardless of the marketing channel through which they're interfacing with your brand.

Using more channels through which to sell goods, instantly translates into more sales opportunities. But it also means that you have to keep more inventory. When you increase the amount of inventory you have to keep in store, you have to secure more storage space and expand your distribution capacity.

As your business grows in its reach and service area, you will probably have to add warehousing space that is located nearer to your expanded customer base.

This adds to the complexity of your business. All of these warehouses and distribution centres will have to be managed from a centralised hub to ensure that you have access to the latest, up-to-date inventory figures across your entire operations. For effective omnichannel operations, your inventory and order information has to be accurate and consistent across all your business units.

You need the right systems and processes to handle your order management processes—technology designed from the ground up to seamlessly integrate the various parts of your ecommerce-businesses">order fulfilment workflows in an automatic and smooth whole.

There are several types of systems that can help you achieve the goals of omnichannel. There are sophisticated warehouse management systems (WMS) on the market that are designed with omnichannel in mind. These systems can automatically keep track of your procurement schedules, process inventory receipts, and allocate the appropriate storage space.

The technology is usually designed to work through  mobile POS systems, which makes it both convenient and efficient to implement.

Omnichannel is hard to achieve—that much is certain. For many retailers it remains a distant pipe dream. To turn the omnichannel dream into a reality, you need an extensive, meticulously-planned, and fully optimised order fulfilment strategy.

Delivering on the omnichannel experience isn’t easy. But the sooner you get involved in transitioning your business to omnichannel, the sooner you will future-proof your operations and ensure your success for years to come.