Omni-Channel Strategy – A Viewpoint From Abroad

Omni-Channel Strategy

July 31, 2017

In the Gulou neighborhood of Nanjing, China where I live, on the corner of Shanghai Road and Hankou West, there’s a small food stand that sells plum blossom cakes. The dessert resembles an ice cream cone, except that it’s served piping hot, made of rice flour, and stuffed with sweet red bean paste. The stand occupies prime real estate in Gulou: jammed between two colleges, Nanjing University and Nanjing Normal, it serves legions of hungry students and teachers looking for a snack break between classes.

Usually I pay with a handful of coins, but it’s not uncommon to see people walking up to the stand and, instead of their wallets, pulling out their phones to scan a small, blue QR code pasted to the wall. The app they use to do this is called Alipay: a mobile payment system owned by Chinese ecommerce giant Alibaba, and these days it’s ubiquitous in China.

People from nearby cities like Shanghai and Hangzhou, however, tell me that mobile payment systems like Alipay—and Alipay is far from alone—have only become common in China within the last few years. That’s a quick rate of change for any retailer to contend with.

As technologies like Alipay become available to consumers, it becomes more and more possible to buy anywhere, pay anywhere, and fulfill anywhere (the essence of omni-channel retail) as customers are starting to expect. QR code scanners, touchscreen kiosks, mobile payment systems—all of these put within reach as a possible solution to the problem retailers across the globe face today: how to hang on to customers who might otherwise take their business online.

For many, competing with the octopus-reach of Amazon means turning to an omni-channel strategy. Brick-and-mortar stores aren’t deadweight, but assets to be leveraged in creating convenient and positive shopping experiences. These efforts are already paying off. In Vietnam, for instance, retailer FPT Shop saw its ecommerce revenue jump 280%, from $14 million to $53 million, over two years. For most, however, it’s not always that easy: implementing a successful omni-channel system requires a significant amount of foresight.

Ann Grackin, CEO of Chainlink research, writes that retailers worldwide face several common challenges in pursuing omni-channel solutions. For instance: how to gauge customer interest in-store, and not just online? How to maximize inventory accuracy and minimize fulfillment missteps? How to grapple with the expensive logistics of home delivery? At the end of the day, a lawyer buying groceries in Shanghai and a teenager buying jeans in Tacoma want the same thing: a fast, convenient, and satisfying purchase.

That said, Grackin continues, “different geographies, cultures and customs, and the demographics of consumers significantly impact the methods retailers are adopting as they develop their omni-channel framework.” All customers want essentially the same thing, but different customers will be best served by different delivery mechanisms.

Grackin goes on to describe two examples of where culture influences the needs of an omni-channel strategy. These are Massey’s Professional Outfitters of Louisiana and Kathmandu of New Zealand, two retailers of outdoor sporting goods:

“Sporting goods and outdoor stores like Massey’s and Kathmandu have gone all out to develop community relationships to educate customers and support local events, charities, and social—as in real, physical social groups—to foster sports activities such as fun runs, ride and climbing clubs, and so on.”

Customers at these stores are highly interested in learning about the equipment they are purchasing, Grackin writes: “Hence it is important for Massey’s to maintain a smart sales staff and have clever inventory management to ensure that good demonstration items are on hand when customers come in to shop.” A long-distance cyclist, for example, might want to come in and talk shop with the person selling the bike. Better yet, learn everything they need to know on their phone.

Another example takes us back to China. Writing for Nasdaq.com, Prableen Bajpai describes the recent efforts of Alibaba to develop its own omni-channel system, which it calls “New Retail.” Alibaba has recently opened a chain of brick-and-mortar supermarkets, Hema, which integrate big data and smart logistics into the shopping experience: “Shopping at a Hema fresh store begins with a download of the app, which uses Alibaba’s Alipay as a payment gateway. Each product in the store features a bar code that can be scanned to get all the information about the item chosen.” Hema fresh stores, then, are designed for customers who want to understand where their food is sourced. Unsurprising, given that Alibaba’s Hema fresh demonstration video shows that much of the supermarket’s inventory is made up of imported foreign goods. (Some observers, such as Business Insider writer Jonathan Camhi, have commented that Alibaba’s Hema stores might serve as a model for Amazon-Whole Foods.)

The common thread here is that customers demand pre-sale product information, and retailers use their omni-channel systems to provide it.

Others remind us that it’s important to keep in mind the variety of technology available to consumers. Retailers may be overwhelmed by the many technologies used to reach consumers, but cannot afford to neglect some in favor of others. Dieter Schoene, writing for Bob’s Guide, identifies “diversification of consumer touchpoints” as one of the most important strategic factors for an omni-channel strategy. Customers want to be able to use their platform: what good is a system that only uses Alipay as a gateway when a third of one’s customers might use WeChat Pay instead? “In the ecommerce field,” Schoene writes, “competition between gateways is fierce. However very few solutions have been designed to be flexible enough and adapt to merchants of different sizes and with different requirements. … Standard gateways are good for many merchants but all-in-one solutions do not take into account new regulations, nor do they consider the variety of payment services being deployed in Europe.” It is not enough to simply acquire gadgetry. The key to success is in creating an omni-channel system that accommodates customers’ technology, and being able to adapt that system quickly.

Vietnamnet offers similar advice: “it is no longer a matter of speed but of agility to comprehend and lead the industry landscape by market shares. … The ultimate success factor lies in a delivery network that can address the complexities of increasingly customized demands.”

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