Multichannel, omnichannel or channel-less; which is right?
Rapid multiplication in channels is great news for consumers, but challenging for retailers
Channel proliferation has been happening more or less since online commerce first came along. But it has accelerated noticeably in recent years and is a trend we can expect to continue through the 2020s – and omnichannel appears to be the end goal.
After ecommerce pioneers first challenged the hegemony of going to a store to buy whatever it was you wanted, we tended to speak about ‘channels’ in digital commerce as one of three options. Consumers could shop online through a retailer site, through a digital marketplace like Amazon or eBay, or direct from a brand’s own website (D2C). In many respects, this remains the model the industry uses to this day.
It’s a model that should be left behind with the 2010s. The modern consumer now has many more than those three options. If they choose to, they can browse and buy through their preferred social media platform. The likes of Facebook, Instagram and Pinterest are enthusiastically embracing the ‘social commerce’ opportunity, with the former launching a peer-to-peer marketplace based on the eBay model, and the latter two adding buttons, pins and other gizmos that link products featured in user’s photographs to commerce platforms. In 2019 Instagram also launched ‘native’ shopping, i.e. the ability to buy direct through the platform.
Consumers can also take advantage of Google Shopping, shortening the journey from product search to purchase. They can use their Amazon Echo or Google Home smart assistants to order goods using the power of their voice alone, or they can buy devices such as coffee machines or water coolers that automatically re-order goods when they run out. Significantly, with smartphone in hand, consumers can also cross the divide between online and offline shopping, looking up prices and product alternatives on their phone as they browse in store, or picking up a product they ordered online in a shop for faster fulfilment.
This rapid multiplication in channels is great news for the consumer who demands choice and flexibility, but not such great news for retailers. With all of those options available, which channels should you be focusing on? Which will help you reach your target markets most effectively? Which will help you achieve the best sales figures? In the highly competitive current climate, these become key strategic questions. Choosing your channels advisedly or ill-advisedly can be the difference between success or failure.
Covering all bases
As part of our latest report on the future of digital commerce, Ready or Not? The Digital Commerce Leader, we asked more than 500 senior decision-makers about their views on channels and which ones were most important to their business.
What was clear from our survey is that not one channel stands out as most significant. When respondents were asked where they were currently focusing most of their energies, brand sites came out on top with 19%, but that was only six percentage points more than the least common response, physical retail (13%). In between were retailer sites (18%), social media (used for marketing / brand awareness –17%), marketplaces (16%) and social commerce (selling through social media – 14%).
Asked their thoughts as to what the most important channels would be by the end of the next decade, there was hardly any more consensus among respondents. Social commerce (20%) leapt to the top, but it was still very tight with brand sites (19%), marketplaces (17%) and social media for marketing (17%) close behind, and a slight gap then to retailer sites and physical retail (both 12%).
We got a similar response when we asked about sales models rather than channels, throwing in subscription services, Programmatic Commerce™ (automated, IoT-powered reordering) and conversational commerce (‘active’ selling through digital communications). Again, there were just 10 percentage points separating social commerce at the top with 19% and conversational commerce at the bottom with 9%.
Superficially, such an even spread of opinions might suggest that, across the board, digital commerce leaders are struggling to separate one channel from another in terms of importance. So, we asked them, what about all of them? Their response? Getting the right balance across channels, topped the list with 17% of the vote. A further 12% said the way the brand is represented through omnichannel was the most important. This strategic quest for a balanced mix across channels is encouraging; it’s also the mantra that Wunderman Thompson Commerce has preached since its formation.
From a customer experience perspective, taking a balanced omnichannel approach makes most sense because it gives consumers as many options as possible, maximising choice and flexibility.
This naturally prompts another important question – what exactly do industry insiders mean when they speak about omnichannel? Do they really mean every channel available?
Physical retail: still part of the mix?
Our survey suggests that digital commerce leaders have a tendency to overlook the role of physical retail and increasingly view ‘omnichannel’ in digital terms only. It is notable that physical retail ranked as the least popular choice when respondents were asked to consider their strategic priorities, both in the present and in 10 years’ time.
Elsewhere, the view that in-store retail was sliding into insignificance compared to digital commerce was much more apparent. More than half of our survey participants (54%) said their organisation did not see any value in physical commerce –interesting view, given that digital giants such as Amazon and Alibaba are starting to make their first major strides into brick-and-mortar retail. More than two thirds (68%) told us they thought physical retail was suffering because of digital commerce, while seven out of 10 (70%) said they felt in-store operators needed to embrace digital in order to remain relevant.
Perhaps most significantly in terms of physical retail’s future stake in omnichannel considerations, when asked about current investment priorities, 17% said they were still putting money into both their digital and in-store operations – the third highest figure behind social commerce (21%) and speeding up delivery (20%). But when asked where they thought they would be investing in 10 years’ time, a dual physical-digital approach fell to the bottom of the list with just 10%. Amongst digital commerce leaders, the thinking seems to be that physical retail is a legacy channel that will become less and less relevant over the next decade.
This is perhaps in part inspired by a belief that a preference for digital commerce correlates directly to age. Three quarters (72%) of our respondents told us that they thought children and young people preferred to shop online to going to a store. But it’s our view that brands and retailers have to be cautious about making those sorts of assumptions about the link between digital preferences and age.
In our Future Shopper report earlier this year, more than half of 16-24 year olds (53%) told us they preferred to shop with brands that had both a physical and an online store, along with 50% of 25-34 year olds – the highest proportions of any age groups we surveyed. And in our Generation Alpha survey of 6-16 year olds, one in five children (19%) told us they would most like to shop in a store when they are older, the second most popular response behind using a screened device of some sort (21%). Three quarters (75%) told us they liked the experience of going into an actual shop.
While the digital commerce leaders we spoke to listed various reasons why they believed online was putting the pressure on traditional retail – factors like convenience for the customer, greater choice, better deals and more personalisation – the golden rule in commerce is listen to what your customers are saying. From what the youngest consumers we have spoken to this year are telling us, there is still a lot of affection for the experience of going into a store. This is no doubt why the likes of Amazon and Alibaba are looking to move into bricks and mortar just as other players are suggesting they are on the long road out. For the most successful retailers, the key is being everywhere your customers want you to be, both online and off.
20 February 2020
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