With many large brick-and-mortar stores closed for extended periods in 2020, digital shopping channels seized the opportunity to establish an even more outstanding market share. Post-pandemic, omnichannel retail is a new reality, giving empowered customers the personalized experience and convenience they demand. E-commerce stands to benefit, but it will require a significant change in logistics, distribution, and warehousing operations for many. Find out how e-commerce businesses need to adapt to capitalize on the omnichannel opportunity.
What Is Omnichannel Retailing?
In the brave new world of omnichannel retail, customers buy in-store, on mobile, on external platforms like Amazon, via branded apps, and on social media. The journey from awareness to conversion might cross several platforms and span several touchpoints, but the overall theme is the same: the customer is the narrative’s hero.
In this customer-centric landscape, retailers can no longer dominate by having the biggest store in a prime location. They need to come to where the customer is, with the right offer at the right time. To do this, retailers need to use data and behavior from one channel to entice their customers to another through loyalty rewards, discounts, educational content, referral incentives, and retargeting.
Get it right, and retailers who offer an omnichannel experience can expect to increase sales by 15% to 35%, on average. But there’s a problem. Some 80% of retailers struggle to offer an omnichannel experience because they lack the organization, data, analytics, and awareness of where buyers are in their journey.
Evolving Trends in Omnichannel Retail
Although e-commerce presents a direct threat to brick-and-mortar retail, the two have learned to complement each other. After all, shoppers had enjoyed mail order or home delivery for decades, during a time when malls and department stores also flourished.
The difference with omnichannel retail is that online and offline work harmoniously through a planned, integrated strategy. Customers are free to view or try on items in-store, compare prices online, and arrange home delivery or in-store pickup. Whatever the journey, the retailer secures the sale. So far, so comfortable; but two recent factors have disrupted the omnichannel model for good:
The Amazon Effect
The retail giant not only tore up the rule book when it came to automation, data integration, and supply chain but also has established free two-day shipping as the norm, at least as far as customers are concerned. Consequently, any new e-commerce retailer entering the market must offer fast, free shipping, as well as free returns, by default. That increases stress on the bottom line.
The Pandemic Shift
With brick-and-mortar operations suspended, the pandemic led to a 28% increase in buying online for in-store pickup and a 57% increase in grocery delivery. Those numbers are unlikely to return to previous levels. To remain relevant and retain market share, shifting from sale to distribution is something that many large brands have focused on since the pandemic began to take advantage of their extensive local footprint.
Just as retailers have been forced to transform their front-of-house operations, so too are they rushing to rearrange the back end. We’re seeing the rise of omnichannel warehousing, where brick-and-mortar and e-commerce inventory share the exact location and on-demand warehousing instead of using fixed sites and distribution centers. In both cases, the goal is shorter delivery times and greater efficiency.
The Omnichannel Challenges Facing E-commerce Retailers
AmazonAmazon’smerce market share is expected to reach 39.7% in 2021. Meanwhile, other big retailers like Walmart and Target partner with or acquire final-mile shipping operators to secure a seamless end-to-end experience. These set a high mark for competitors to match, typically with only a fraction of the resources. So what should they do?
To acquire and nurture customers, retailers must first invest heavily in digital channels, social media, and app development. The accumulated data must be shared through a combined strategy to track customer behavior. More importantly, e-commerce retailers have to streamline their in-store and online inventory, sales, order processing, and distribution. That means potentially bringing two point-of-sale systems and warehousing management systems together and setting up “click” and collect” distribution to offer a competitive option for last-mile delivery.
These challenges are fearsome. If the resources or expertise are not there, to begin with, now is probably not the time to experiment with an in-house solution.
The Benefits of a 3PL Solution
Although e-commerce retailers have to court customers across various channels, the only connection that matters is delivery. If the product or service is delivered late, incomplete, or at additional cost, the last interaction becomes the first impression — and it will not be a positive one.
With a 3PL partner, e-commerce retailers can entrust the complex logistics to an expert team and focus instead on growing the business. E-commerce retailers simply have to set up the front-end architecture, including point of sale, inventory, and order management. At this point, the 3PL partner can integrate it with their warehouse management system. Data can then flow freely between channels so that wherever a customer interacts with the business, their journey is nurtured in real time for a streamlined customer experience.
Taylored Services is a fully integrated third-party logistics provider specializing in wholesale, retail, and direct-to-consumer unit fulfillment. Since our humble beginnings in 1992, we have become a trusted partner for brick-and-mortar and e-commerce retailers in distribution, fulfillment, and warehousing.
Sources:
Shopify – Omnichannel Retail Simplified
Forbes – The 5 Stages of Omnichannel Retailing
McKinsey – Adapting to the next normal in retail: The customer experience imperative
