What's in Store for Omnichannel Retail?

Retailers say endless aisles, optimized distribution and more mark the next stage to unlocking the full potential of seamless shopping.
Customer Experience

Shopping is no longer as simple as heading to the supermarket a few blocks away. The average consumer may use several devices and channels for a single transaction, but expects to receive a unified or "omnichannel" experience throughout the buying journey.The good news is that retailers are getting closer to bridging the gap between online and in-store experiences but challenges remain.

More efficient fulfillment operations and intuitive mobile buying experiences are just some of the areas that retailers are prioritizing for the coming year. Here, we examine the current state of the retail experience and the important role inventory management plays behind-the-scenes.

Endless Aisles
Premium jeans maker True Religion offers a wide range of denim in various washes, colors, and styles, but its stores are typically small boutiques with limited inventory. Shoppers were therefore out of luck if a specific item wasn't in stock at a store.

But in the highly competitive retail space, True Religion couldn't afford to turn customers away. Last year, True Religion turned to Aptos Inc., a commerce technology provider, and the digital agency Formula 3 Group to develop an "endless aisle" solution.

Associates are now being armed with Apple Watches embedded with an app called Band that integrates with the Aptos Enterprise Order Management and Mobile Store Point of Sale solutions. Swiping a finger across the Apple Watch screen lets store associates access True Religion's full inventory and filter it by size, style, color, or wash.

Associates can then send the image of the merchandise from the watch to a large high-definition monitor for the customer to view. The image includes a barcode that can be scanned to complete the sale and the items are shipped to a customer's home. The company ships merchandise to customers from its warehouses, but the next step is to fulfill orders from local stores.

An endless aisle combines key parts of the online and in-store experience to better engage the customer, notes John Hazen, vice president of omnichannel commerce and digital innovation atTrue Religion. "This approach lets us talk to customers and create another touchpoint, which gives us a better chance of converting them," Hazen says. "Customers are buying $300 jeans so delivering that concierge experience is also important."

True Religion will be distributing one Apple Watch per store and plans to roll out the program to about 30 stores by the end of Q1 this year. So far only one store in Beverly Hills, Calif. and New York City are using the watches. "We have the technology to do it but there's still a lot of training involved and our associates weren't ready to become a mini-fulfillment center during the holidays," Hazen explains. "But now we can work on it."

Omnichannel Fulfillment
Indeed, enabling store locations to serve as fulfillment centers is a growing priority for retailers. According to research from PricewaterhouseCoopers, 71 percent of retail and consumer goods CEOs say omnichannel fulfillment is a top or high priority.

Omnichannel fulfillment is comprised of three initiatives: buying online and picking up the merchandise in a store (also called click-and-collect), ship-from-store, and endless aisles. Making more efficient use of store inventory has clear benefits for customers and retailers, but logistical challenges and high costs make it difficult for most retailers to quickly optimize their fulfillment operations.

"The retail store wasn't built to be a cost effective fulfillment center," observes Forrester Research analyst Adam Silverman. "And the retailers that rushed into providing services like ship-from-store often didn't think clearly enough about the long-term expenses."

February 2016: Omnichannel Fulfillment

For example, while retailers are accustomed to shipping large orders to stores, frequently sending small shipments directly to customers or stores is a different and more expensive practice. Retailers must also decide how long to hold inventory in case a customer orders it online or make it available on the store floor.

Retailers may even reach the point where they can tie information from an order management system with a CRM system, Silverman adds. "The retailer might be willing to spend more to fulfill an order faster for a high-value customer and that's where CRM data can eventually work with order management," he says. "Retailers are wrestling with these challenges and more as they gain more maturity in how they run their omnichannel businesses."

The Power of Mobile Commerce
Mobile commerce continues to gain momentum as a way for consumers to shop online. In fact, mobile commerce now accounts for nearly one-third of all U.S. e-commerce sales, according to an analysis of data from Internet Retailer's 2016 Mobile 500 report. This finding is in line with IBM's 2015 Black Friday benchmark report, which found that more than 50 percent of all online traffic came from mobile devices.

"There's a seismic shift in how retailers must interact with customers, notes Jay Henderson, director of offering and product management at IBM. "The prominence of mobile as a channel for shopping and making purchases will be a huge thing for retailers in 2016."

Mobile devices are becoming a consumer's go-to shopping companion for everything from comparing prices, looking up store information, and making purchases. While mobile conversions still lag behind in-store and desktop conversions, retailers are realizing that mobile combined with social media offers numerous selling opportunities.

Facebook, Instagram, and Pinterest have become important sites for reaching today's increasingly photo-obsessed consumers. In addition to boosting brand awareness, photo-friendly social sites are looking to close the gap between browsing and making a purchase.

Buyable pins were the "number one requested feature from users," noted Pinterest CEO Ben Silbermann in 2015. There are now more than 60 million buyable pins on Pinterest that allow users to directly purchase merchandise from brands like Macy's and Neiman Marcus on the social site. Twitter, Facebook, and YouTube have also made their sites and apps shop-able with the addition of buy buttons.

The rise in buy buttons supports the notion that "images don't just inspire, they sell," says Ragy Thomas, founder and CEO of Sprinklr, a social experience management firm. "And with preferences and markets constantly shifting, it's important for brands to collaborate globally in real-time, monitor consumer conversations outside their owned channels, and understand their audiences by channel."

The importance of customer insights also speaks to a larger issue, which is the need for a unified view of the customer, adds Matthew Rhodus, industry solutions executive for retail at NetSuite, a business management software provider. As seamless experiences become integral to customer engagement strategies, retail brands must ensure that its channels are aligned internally in order to outwardly deliver consumer satisfaction.

Although retailers and other business owners are investing in technology solutions to better serve the customer, without a strategy for integrating those data points, they're "still blind," Rhodus maintains. "Retailers have been buying the best-of-breed solution for this and that in an effort to cobble together a unified experience, but when the data lives in multiple places, you're bound to have duplications and other errors," Rhodus says.

Before investing in the latest tool or platform, retailers would be wiser to "get back to basics and make sure that they have a unified system for tracking and leveraging customer data in a consistent manner," Rhodus continues. And while no single vendor will be able to provide all the data or capabilities that a company needs, remaining focused on the customer will make it easier to guide decisions on which solutions or services to pursue.

"Start with the consumer experience and work backwards," Rhodus advises. "Retailers will then realize that the stairway to customer experience nirvana begins with the basics."