‘Omnichannel means survival’

Source: Tijdschrift voor Marketing; May 2014. Author: Pascal Kuipers

Where the competition is fiercest, sales and marketing have to trade in their own interests for the interests of the customer. Otherwise retailers are digging their own graves, says Gino Van Ossel, marketing professor at the Vlerick Business School in Brussels.

Gino Van Ossel acknowledges that a lot has already been written and said about omnichannel. But because of its practical approach he believes that his new book, ‘Omnichannel in retail’, certainly has something to add to the growing pile of literature. Van Ossel: “This book is practice-oriented and deals with the suppliers’ perspective too.  It’s true that omnichannel is a retail strategy, but it definitely influences suppliers’ marketing and trade marketing.”

Are retailers flexible enough to switch to omnichannel?

“Retailers add a digital dimension to an organisation that has grown entirely from a physical shop network. The development pattern is predictable: a work group plans to set up a webshop. Only the project leader works on it full time.  Once it reaches a certain size it becomes a digital silo, parallel to the other silos in the organisation. This prevents the initiative being blown away immediately by the interests of the existing operation.

There is a disadvantage: you get an extra silo with its own sales and marketing department that is separate from the shop operation. Subsequently this has to be integrated into a single organisation that is organised completely around the customer.”

Is this intermediate step, a separate silo that you subsequently integrate, the only way to go?

“Yes. The bigger the organisation the more necessary the intermediate step. There are often four phases: the start-up, as a project in which the online activity gets a chance to prove itself; acceptance of the new cross-channel reality through the addition of a new sales channel; integration, as people who work in the physical shop operation help with ideas and the digital distribution; and, finally, a mature omnichannel organisation built completely around the customer. The webshop Albert.nl, for example, functioned autonomously for quite a long time, independent of the Albert Heijn organisation into which it is now being absorbed. Otherwise it would have been threatened immediately with the organisational straitjacket. That is why bol.com’s employees still don’t share Albert Heijn’s offices. So as not to lose their spirit. The bol crowd would definitely look askance if they suddenly had to go and have lunch in the same company canteen as the Albert Heijn employees.”

What does omnichannel mean for marketing and communication?

“Communication channels become sales channels and vice versa. Communication is traditionally aimed at strengthening the brand. Companies have had websites for a long time now, but webshops are much more recent. If you show customers products in your shops that they can also order online, the shop takes on a different, more communicative role. If you combine 360 degree communication with 360 degree sales, you’re active cross-channel. As an omnichannel retailer you are totally customer-oriented. Cross-channel retailers try to get customers into their shops to take advantage of upselling opportunities. That is not in the interest of the customers if they prefer to order online.

Omnichannel retailers don’t prioritise any specific channel. Ikea, for example, is not an omnichannel retailer because it is their shops that are central to their operations and not the customers, who have to pay extra for home deliveries. Ikea can do that, because it doesn’t have any trouble with competitors offering exactly the same products online.  That’s why Primark and Action don’t have webshops either. That is 360 degree communication, but not 360 degree sales. It’s not even cross-channel.”

In your book you write: ‘Those who don’t switch fast and fundamentally to omnichannel will go to the wall’. So why is the switch necessary? And why fast?  

“Whether it is necessary depends on your market position. Ikea has no online competitor, so it doesn’t need to. But many retailers do have to deal with fierce online competition. Zalando, Wehkamp, bol.com – the pure players are growing very fast. If, as a traditional retailer, you ignore that, you are digging your own grave. Those who still have to start are very late now. You can go a long way in three years, but that doesn’t make you a fully-fledged omnichannel retailer. And the characteristics of that label keep shifting because of the constant new developments offering technological innovation.

Many retailers are still in the phase of building up their webshop. Only once the webshop has proved its right to exist does integration into the classic organisation follow. Online is often managed as an extra channel in a multi-format approach these days.

Integrating online and offline is a complex process, and we don’t know yet where it will end. But speed is essential because e-commerce is moving so fast.  To do it profitably you need email marketing. Many traditional retailers have far too few customers’ email addresses to do a personalised email campaign. You won’t get your fair share of online growth like that. If the competition does it well – and the pure online players who are organised to obtain customer details certainly do – then you will trip up. So omnichannel is a survival strategy.”

Which of the classic retailers deal well with this?

“The Bijenkorf department store has made rigorous choices about positioning and the physical and online channels that go with it. On the other hand, pure online players like Coolblue are also opening shops and you can see bol.com at Albert Heijn again. Albert Heijn and bol.com are experimenting to see what works. This is the right approach: see whether it works and act fast. Now Albert Heijn is staking everything on encouraging customers to install its app - on their mobile devices as well as at home, on their laptop or desktop! Every registration is good for integration.  That way you are known as a visitor and are no longer anonymous. Encouraging customers to activate their Bonus cards is a smart move too. Jumbo can see that Albert Heijn is forging a way and is forced to follow suit fast, even though it has other priorities. Aldi and Lidl aren’t even making a start. Their position is comparable to those of Primark and Action.”

You describe letting go of silo thinking and the need to think ‘cross-functionally’. What is cross-functional marketing?

“Let me answer that from the manufacturers’ perspective, because the challenge is even greater there. Communication channels are becoming sales channels and vice versa.  Sales and trade marketing are aimed at shoppers. Their activities drive the manufacturers’ everyday sales. But the consumer is still in the marketing domain.

Websites are at the service of consumer marketing. If these communication channels have to become sales channels too, there’ll be friction. These sites give all sorts of information about how nice and good the products are, it’s true, but they pay little or no attention to how consumers buy. Shopper behaviour and the orientation and purchase decision tree are not assimilated into the websites. Marketers don’t want that, because it means that you have to dare to mention the products’ disadvantages too. That is the only way the shopper can weigh up the pros and cons properly.

Manufacturers’ webshops are seldom of the best type. They come under marketing and are therefore not good at informing the shopper in the orientation phase. So 360 degree communication is not adequately carried through to 360 degree shopping.”

Is this a basis for the new cooperation models between trade and industry that you predict?

“Yes. Retailers think too much from the perspective of traditional shops and work with the suppliers because they themselves have too little knowledge of the customers. If, as a supplier, you understand the 360 degree shopper, you are a valuable partner. Many multi-brand retailers will develop into a sort of online marketplace in the years to come. The classic retail activity of buying and selling, with all the risks of building up stocks, reducing prices, returns, dispatch costs and so on, is becoming impossible due to the cutthroat competition. Marketplaces where suppliers carry their own supply risks and dispatch products from their own operation on behalf of the retailer are the future. The business model is based on a commission per transaction. In exchange the supplier gets more grip on sales prices. This way both retailers and suppliers will earn money again. Multi-brand retailers have to participate in this to survive. And suppliers can mix exclusive product lines and products where they can be more competitive in terms of price.”

From an omnichannel perspective: what’s in it for the consumer?

“A lot of searches are not brand-specific but generic. If you can find the whole offering in one place and you can get free postage and packing too, it’s useful. C&A has its own webshop where consumers can find its products directly, but it also has a webshop through Wehkamp.nl which functions as a marketplace. Shoppers want that too.”

But shoppers also want low prices. What does this mean for comparative sites?

“They are losing their right to exist. Through this marketplace scenario the manufacturers can keep much tighter control of the selling prices. Within the limits of competition law, of course. Price comparisons are the comparative sites’ right to exist but they offer hardly any results now. Consumers look for other values in the orientation phase. It’s about confidence in the right price – that you’re not paying too much – and confidence in the service.”

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