Jim Danahy’s 5 Things About Omni-Channel Retailing

February 27, 2014 Jonathan Paul

Darwin would love omni-channel retailing because it’s about survival of the fittest. New tech consumer habits have put the power squarely in the consumer’s hands. The prevailing mantra now is: Adapt or die. Retailers need to change in order to give consumers what they want, how and when they want it, or risk losing them forever to a more savvy competitor.

Yes, it’s the consumer’s way or the highway and that’s why facilitating omni-channel retailing has become so important. But what the heck is it? Jim Danahy, Managing Principal and CEO at CustomerLAB and Director of the Centre for Retail Leadership at the Schulich School of Business’ Executive Education Centre will be on-hand at Dx3 Canada next week to address just that, but we asked him to give Dx3 Digest a little preview.

Jim Danahy of CustomerLAB.

Jim Danahy of CustomerLAB.

What’s omni-channel retailing?

Omni-channel retailing is about ALL methods of distribution of goods and services to end users. It’s evolved from multi-channel retailing to describe the first truly consumer-controlled marketplace since the age of bartering in the local farmers market or bazar. CustomerLAB and the Centre for Retail Leadership describe omni-channel retail as being comprised of three main pillars: Bricks & mortar locations, catalogue/e-commerce and mobile commerce. It’s used to promote, transact and fulfill, whereas the older multi-channel model only defined a channel by it’s ability fulfill – the rest was marketing.

Omni-channel retail is the most important shift in marketplace power in a century.

Why is it important? Is it a “must do” for brands these days?

Omni-channel retail is the most important shift in marketplace power in a century. Omni-channel is the proof that consumer markets have shifted from push-based to pull-based. Where availability used to allow manufacturers and retailers to dictate terms, universal accessibility regardless of geography puts control in the hands of the consumer – literally. A smartphone can be used as a pager for your prescription, the simulator for trying on a watch or jewellery, a payment method, identification and, most importantly, the tool by which a mobile population can decide whether to buy in-store, pick up at a convenient location and time, or have it delivered. Omni-channel means that consumers, not manufacturers or retailers, control what and when they buy, at what price and where they will receive goods. Future losers will be those who fail to fall in line with what consumers want. Fail me once and you just lose out on this transaction. Fail me twice and you may lose me for good.

Omni-channel is bigger than strategy. It must become a central cultural condition of the company.

What’s the most important thing for retailers to keep in mind when creating an omni-channel retail experience/strategy?

Omni-channel is bigger than strategy. It must become a central cultural condition of the company. As Peter Drucker said, “Culture eats Strategy for breakfast.” For retailers, the most important thing to keep in mind is that the consumer is in charge now. We must be customer-centred and channel agnostic. We need to focus on differentiating with better products, better service and better customer experience with our retail brands.

Is there anything that brands shouldn’t do when creating an omni-channel retail experience?

There are two things. First, we no longer control channels and shouldn’t try. Customers don’t like to be told what to do. Channels belong to consumers so invest in order to be available where and when your consumer chooses, whether that be bricks, clicks or a blend of both. Second, study best-in-class omni-channel retailers, not pure-plays or pure bricks & mortar retailers. Integration is key. Your retail brand should be best-in-class in each channel …and seamless. Service through any channel, or a blend of channels (i.e. click & collect), should appear to come from the same brain. With retail brands, it’s not the goods, it’s the guarantor.

What trends are driving omni-channel retailing?

Innovation is making many new things possible. It’s compressing the supply chain to allow retailers to have the right product in the right quantity at the right place at the right time at the right price. P&G’s Quantum Tunnel project with Amazon is innovative thinking to put Amazon inside the manufacturer’s warehouse for direct-to-consumer shipping. That’s low tech but innovative thinking. Tech innovation like item-level RFID is even more valuable than the bar code revolution a generation ago (it saved billions and fuelled the big box discount retail boom).

The bricks and mortar components of the omni-channel experience must innovate to do what only a physical presence does best.

Big data is allowing retailers to assort merchandise according to distinct micro markets around each bricks & mortar location (which still account for 95% of Canadian retail spending). Tech innovation like Shopify.ca has levelled the e-commerce playing field between big chains and main street independent retailers. Tech innovation is enabling advanced payment and checkout outside conventional store environments with the sophistication of the big guys. And, technology is re-localizing markets as we see efficient local sourcing of food products after a generation of centralization on a continental basis. Localization is not far off in consumer goods too as the cost falls and quality improves on made-to-order products with 3D printing technology.

How has omni-channel retailing evolved. How do you see it evolving over the next few years?

Multichannel retailing is more than a century old. Retailers have sold and fulfilled provided products and services in-store, door-to-door, in-home and via catalog since the late 1800’s. They were the first to fix prices and free delivery goes back almost as far. The change from multi-channel to omni-channel was the result of a tipping point when technology put more power back into the hands of consumers, similar to what they had in the days of angling between stalls at the local farmer’s market. “What’s my bid” is now just done electronically between vendors who may be a world apart rather than across the aisle at the market.

Omnichannel retailing will evolve as retailers differentiate with methods other than traditional channel tools of restricted supply and fixed pricing. Re-verticalization to differentiate with exclusive products (Apple, Aritizia, H&M, Joe Fresh, Whole Foods) and highly localized, even individualized assortments and shopping experiences will return to prominence. That’s why you are seeing companies like Canadian Tire investing heavily in experience – in their new Sport Check flagship bricks & mortar stores – and commerce at the same time. The bricks and mortar components of the omni-channel experience must innovate to do what only a physical presence does best, just as the e-commerce and mobile components must innovate. The difference with omni-channel retailing is that all three components must be connected to allow consumers to mix and match shopping, paying and fulfillment in the combination they choose.

Learn more about Jim Danahy’s 5 Things Session at Dx3 2014.

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