The transition to a digital economy has disrupted traditional ways of doing business, and companies are scrambling to keep up with consumer preferences in a digital marketplace. Slowly but surely, consumer habits are changing, and direct brands are weakening the stronghold long held by indirect brands. In fact, a recent report from the Interactive Advertising Bureau (IAB) states that “direct brands are supplanting the indirect brands that dominated the U.S. economy for nearly 140 years, one fraction of a share point at a time.”Competition is fierce, and it is nearly impossible to win a price war. Low barriers to entry mean that few products are unique, and there are always alternatives available if customers aren’t satisfied with service or quality. Instead, today’s retailers are competing through relationship-building. The path to success with this strategy requires developing a deep understanding of omni-channel retail opportunities, and then forming an appropriate distribution and marketing strategy that considers the nuances of various channels.
The Omni-Channel Impact on Customers and Retailers
Each year, businesses invest countless resources in researching consumer habits, always with the goal of discovering what causes individuals to make their final purchase decisions. While it may be next to impossible to find an unequivocal answer to that question, studies have given retailers insight into the customer journey. Although certain demographics show a preference for particular channels (for example, online or brick-and-mortar), one fact is clear: despite an individual’s general preference, nearly all consumers move fluidly through various retail channels depending on the item and the circumstances.
Traditionally, retailers offering multiple distribution channels developed each one as a separate line of business. Organizations that started with brick-and-mortar saw the need for an online presence, and they created a separate branch of the business to focus on e-commerce. While products may be identical, the siloed strategy of managing channels separately meant that consumers had different experiences when shopping online versus shopping in-store.
This has been an issue for consumers, regardless of the quality of online user-interfaces, web design and store layout. Consumers have clearly indicated that they expect to connect online, in-person and through social media without any disruption to their transaction. This is a true omni-channel experience.
For 2018, retailers that have not already harmonized their channels are making it a priority. This omni-channel approach guarantees a seamless consumer experience when moving between channels. The most innovative companies are creating a strong presence anywhere and everywhere their current and prospective customers spend time, from participating in online forums to sharing short video clips on social media. When consumers respond to any of these touchpoints looking for more information, their experience is the same regardless of the channel, and they can switch channels within a single transaction without disruption. In short, the omni-channel approach strives to keep consumers engaged and connected, whether in-person, online or through social media.
Omni-Channel for Digitally Native Brands
One of the biggest changes in consumer behavior over the past two decades is the dramatic rise in online purchases. This increase has inspired a variety of new retailers that operate entirely online, with no brick-and-mortar presence. Examples include Birchbox, Dollar Shave Club, Blank Label, Warby Parker and Casper. Such brands are referred to as digitally native.
As they launch, digitally native brands focus on consumer experience and relationship-building, developing a strong presence online and through social media. However, those that intend to grow further must eventually take the need for an omni-channel approach into consideration. While web-based purchases are growing, Americans are almost split on channel preference: 51% think shopping online is best, while 49% prefer shopping in store.
The omni-channel question presents a challenge for digital brands, especially those whose business model is based entirely on avoiding the complications and expenses associated with brick-and-mortar retailers. Fortunately, there are several solutions that meet customers’ needs without moving too far from core business models.
Some businesses are choosing to transform the online experience into a physical one by opening select in-store locations. While these shops do sell products, they offer far more than a standard retailer. Instead, they create a place where their online presence comes to life. For example, Alo Yoga’s brick-and-mortar experience will be more than a place to purchase yoga attire and equipment. It will house a yoga studio, a kombucha bar and a lounge area, mirroring the look and feel of other channels. The result is a solid omni-channel presence.
Other digitally native retailers are partnering with existing brick-and-mortar shops to create omni-channel opportunities for their customers, or they are launching pop-up stores and other in-person distribution methods. They are focused on meeting the needs of consumers wherever they are and however they prefer to shop.
The core features of a retail business may stay the same year after year, but what, how and why consumers make purchases is changing constantly. In a recent podcast, Terry Lundgren, newly retired executive chairman and CEO of Macy’s Inc., talked about how the line between online and offline commerce is blurring more and more. He describes how legacy brick and mortars and online only digital natives used to play on opposite ends of the field. "Today the game is being played much more near mid-field – that’s where customers are," he says. “It is a false distinction to say it’s retail vs. online because that’s not the way customers think. They want this seamless, integrated experience across all channels. Customers don’t think about channels. They just want to buy the product.
”To survive and thrive in the current digital economy, smart brands are moving toward a fully omni-channel model that connects online, in-store and through social media.