The Retail March to Omnichannel 2.0 in the Post-COVID Era
Post-COVID retail sales are showing definite signs of rebound across the globe. The U.S. Census Bureau has indicated that total retail sales in the third quarter of 2021 increased by 13.2 percent from the third quarter of 2020. For the holiday season, Deloitte predicted that retail sales would jump by 7 percent to 9 percent year-over-year (YoY) overall, with e-commerce projected to grow by 11 percent to 15 percent. The National Retail Federation reports that there was a ~15 percent increase in November retail sales YoY.
However, there's another reality that retailers need to reckon with. Growth will not be evenly distributed — either across categories, regions or channels. According to McKinsey research, stores in September 2021 saw a 10 percent growth YoY, while e-commerce sales rose by about 35 percent YoY. About 60 percent to 70 percent of consumers were seen to research and shop both in-store and online.
In a scenario like this, how should retailers manage the interplay between physical and online sales to create a seamless, convenient and safe shopping environment — and take customer experience to the next level?
Omnichannel Re-Imagined for the New Normal
Amid rapid digitalization during the pandemic, the retail industry also witnessed a surprising development. The physical store became digital’s strong ally in driving consumer excellence. Successful retailers found themselves cracking the code of blending the best of physical and digital. Target discovered that an omnichannel strategy led its customers to spend four-fold over store-only customers, and ten-fold over digital-only customers. With a cleverly integrated omnichannel strategy, Target achieved a sales increase of 24.3 percent. Similarly, Zara’s intelligent mix of omnichannel features "Click & Go," "Click & Find" and "Click & Try" sent its digital sales zooming by 74 percent in the first half of 2020.
Today’s customers have a differently wired omnichannel mindset. Their expectations of customer journey have already blurred the lines between physical and digital. They want the physical experience in their digital journey as much as they want the digital in their in-store experiences. This is what some innovative retailers are successfully addressing today. Take for example Zegna, a luxury menswear brand, that has introduced virtual, personalized shopping where the staff shares tables of clothing over Zoom handpicked for customers, and takes them through the store to show what’s new.
This brings us to the importance of building the right omnichannel infrastructure. Today, it has been made easier and more affordable through partnerships with players that offer both software and supply chain as a service.
Omnichannel 2.0: A Blend of Transformation and Collaboration
Getting the supply chain right is critical for retailers to move into Omnichannel 2.0. How can the physical store be an efficient arm of the supply chain in the display, sales, delivery, and handling of returns? It has been shown that 80 percent of consumers who return a product to a store spend the refund in the store itself. Thus, significant revenues are realized by integrating physical stores in the digital process.
Omnichannel 2.0 requires a seamless enterprise transformation and integration of marketing, sales, stores, supply chain and IT. This entails:
- Discounts and promotions will have to be smoothened to not create excessive load on the supply chain and customer service teams.
- Complex demand patterns will need to be monitored to sense the changes in customer buying behavior and category preferences.
- Retailers must blend the rich data on consumption patterns, supply chain and service with machine learning (ML) algorithms and artificial intelligence (AI) tools to drive agile, customer-focused operations. For example, H&M uses store receipts data to hyperlocalize in-store assortments and pricing algorithms to account for currency fluctuations, raw material costs, and unsold inventory
Innovative Integration of Retail Space Design and Social Interaction
There's no doubt that physical stores are here to stay. Therefore, the question to ask is how do retailers raise the levels of store experience. Spaces will need to be created that equally fulfill functional needs, enhance safety, blend with the digital imperative, and create a powerful social-physical network. For example, Starbucks’ "My Starbucks Barista," which was launched in 2017, allows customers to place and pay for their orders through an initial conversation with a virtual barista, followed by picking up their order at a nearby Starbucks outlet. In today’s scenario, this may be a good way to manage store space effectively and safely.
Leaders in omnichannel are clearly looking beyond transactions to create customer experiences that are aligned with the brand. They're focused on understanding the customer journey in this new paradigm and building the requisite omnichannel functionality. The adoption of AI, ML, and behavioral analytics can play an instrumental role here. However, equally important is to ensure that a customer-oriented mindset permeates the organization.
Ten years’ worth of e-commerce transformation was accomplished in just 90 days during the pandemic. If it has taught retailers anything, it' this: move away from thinking like a retailer, and disrupt like an innovator. We're in the next-gen era of "pyhgital" customer engagement. Re-imagine your digital business, re-invent your operations, and re-create a fun and omnichannel customer experience.
Himanshu Bhardwaj is business unit head, diversified business, manufacturing, retail, CPG and telecom of WNS, a leading provider of global business process management (BPM) services.
Related story: 2021 Top 100 Omnichannel Retailers
Himanshu Bhardwaj serves as the Business Unit Head for Diversified Business, Manufacturing, Retail, CPG and Telecom at WNS. Prior to WNS, Himanshu has donned multiple global and leadership roles in Xchanging plc (a DXC company), Cambridge solutions Ltd. and FedEx.