Omnichannel is not an option … it’s a question of survival
There is some debate as to the source of the quote, which is the title for this blog. Brainy Quote attributes the source as Michael Enzi, and American politician. Regardless of the source, I can’t think of a more appropriate summary for the current state of retail right now. Without addressing omnichannel, you are basically going to be lunch for someone else to poach your customers and sales. But, there is a more a salient aspect of being at the “omnichannel table”. One size doesn’t fit all. Each retailer needs to leverage their own strengths to create a compelling value strategy of where and how they will create unique value in an increasingly competitive battle for of omnichannel consumers.
Why this is important: What many retailers still do not understand is that omnichannel is not their choice. Today’s consumers vote when, where and how. Survival depends upon how build relationships that create perceived consumer value.
Saying that you are omnichannel doesn’t make it so
The simple truth about omnichannel is that this phenomena is all about consumers and their behaviors. Simply put, “omni” means both “many” and “omnipresent”. Today’s consumers have amazing and unprecedented options and flexibility:
- Shopping anytime and everywhere 24/7/365
- Purchase anytime, and everywhere from any device
- Payment via multiple options, multiple locations and devices
- Delivery at place of choice, at speed of choice, or pickup in person
- Returns at place of choice, convenience of shipping back
Declaring that you are an omnichannel retailer means nothing, unless you are able to engage consumers where they want to engage, how they want to buy, and how they want to be served … whether it be in store, online, direct or even via social media.
Why the 800 lb. gorilla is at the table and eating everyone’s lunch
It’s difficult to escape Amazon headlines in the news every week. From droids to drones to leasing planes and boats … Amazon is always on the forefront of innovating consumer centric service. In the past, the critique was that Bezos never makes a profit. But, with recent reports and projections, Amazon’s market cap now surpasses Walmart and Exxon Mobile Corp.
Make no mistake about it … EVERYONE competes with Amazon! It is not because Amazon is online, it is because they have created a very compelling value ecosystem for consumers. As a result, Amazon now commands 38% of the consumer share of US online sales.
Do Amazon’s numbers prove online is the way of the future? Not necessarily. What Amazon’s success demonstrates is that if a retailer can deliver the seamless experience that consumers highly value, they will be very successful. With its new stores and pickup lockers, Amazon is now delivering on all 5 of the omnichannel consumer dimensions listed above. In oh so many ways, Amazon is now seated at the head of the table for omnichannel.
Different paths to omnichannel – How to earn a seat at the table
What Amazon has effectively done is create a universal alternative customer tailored to omnichannel consumer expectations. Even the largest retailer in the world has found that consumers vote with their wallet. And, to do nothing means that Amazon and other effective omnichannel retailers will “eat your financial lunch” even if you are Walmart.
There is no universal formula. Each retailer must create their path based upon their strengths, and their ability to differentiate value to the rising expectations of omnichannel consumers.
Jet’s Path – Out Perform Amazon?
Jet.com was founded by Marc Lore who founded Diapers.com, which he sold to Amazon. So, Mr. Lore has a track record in the ecommerce path and omnichannel consumers. Lore was able to secure almost $1 Billion startup capital to create unique real time pricing algorithms designed to save customers at least 5%. Jet has also been successful in recruiting over 2,300 retailers to its marketplace.
The best projections indicate that Jet won’t be profitable until at least 2020. Jet has burned through the startup cash to rapidly grow a customer base, which was exactly Amazon’s play. But, competing head to head on pure online play with best prices and services is now much tougher to do when the 800 lb. gorilla is established and making money. So far, Jet doesn’t get much of a backward glance from Amazon. It is getting attention from others … including Walmart.
The Walmart Omnichannel Conundrum – Which Path(s)?
Let’s be clear, Walmart has a prominent seat at the table today. Walmart is still by far the largest retailer, with revenues 4 times Amazon. Yet, store sales are flat, and Walmart’s core customers are increasingly becoming omnichannel in how and where they shop. So, the Walmart conundrum is that it is both “at the table” and “on the menu”, with ecommerce rapidly siphoning off sales.
While Walmart has grown to #4 in US online, that only represents a scant 3% share of online sales. It can’t seem to crack the code online. Current rumors have it that Walmart might buy Jet to give online sales a jolt. Yet, the real asset that Walmart brings to the table is more than 4,500 store locations in the US that Amazon does not have. Walmart’s best positioning might be more “click and collect”, which optimizes both online and store options for omnichannel consumers. To remain at the table requires more than a legacy or good prices – even Walmart must have a strategy for growth, especially with omnichannel consumers.
Best Buy’s Path – Is Differentiation Enough?
So, what does this all mean for a specialty retailer like Best Buy? Best Buy is the last national retailer specializing in consumer electronics in the US. Best Buy has been aggressively growing its online, as well as price matching in stores. Yet, overall sales growth is static.
Best Buy’s CEO Hubert Joly is on the path where he “wants his company to make it easy for consumers to understand technology”. Said another way, Best Buy wants to be and do what Amazon cannot – use stores, staff and the Geek Squad to provide a level of service that you can’t get anywhere for the increasingly complex technology products at home.
Best Buy’s last quarter’s results show store sales declining only 0.1%, which indicates that Best Buy has at least stemmed the tide of being “on the menu” and susceptible to consumer showrooming. Whether Best Buy can avoid being eaten for lunch will depend upon whether it can invest in ways that enable staff to create the experience consumers value beyond the price and product sold.
Bottom line – Consumers vote whether you are at the table, or on a menu
Omnichannel consumers are no longer constrained by how or where they shop. The retailers who will earn a spot at the table must find compelling ways to create value through: seamless experience, consumer flexibility and differentiated service. While size helps, it is no longer a guarantee for success.
The single most overlooked success factor in being a success at the omnichannel table is empowered people.
Zappos is an incredibly successful online retailer (purchased by Amazon). The key ingredient to Zappos ongoing success is the culture and policies that empower their staff to do almost anything to satisfy the customer. Best Buy’s and the local hardware store’s survival depends upon finding and investing in the right talent to can create a differentiated experience.
Systems, infrastructure and expertise are all necessary, but not sufficient for a seat at the table. So far the keystone of omnichannel success, online or instore, are the right people equipped and empowered to serve omnichannel consumers in how they shop.
- Woman Shopping Image: khunaspix; Freedigitalphotos.net
- Table Image: Serge Bertasius Photography; Freedigitalphotos.net