By Ralf Gladis, CEO, Computop
For all the talk about omnichannel and multichannel, these terms mean virtually nothing to consumers. They simply want to shop where it suits them, and the better the experience the more likely they are to come back for more.
Retail is, for the most part, business administration. But the rest, and most important part, is psychology. Right now, consumers like to flick through the options – not just shopping around, but looking around for exactly what they want – whether they’re in brick and mortar stores, on their phones, or sitting in front of a computer. It makes them feel good.
But delivering a true omnichannel service is a challenge and one that retailers have been facing for a long time. All the subsystems that support an omnichannel approach must harmonize with each other, from enterprise resource planning and customer relationship management to the complex interaction of accounting and payment.
Many retailers have been questioning whether it makes sense for them to continue operating their physical stores at all. The answer is yes, it does, brick and mortar is alive and well, and it has a crucial role to play in the modern omnichannel strategy.
The new role of the store
Against the doom-mongering that accompanies any discussion about physical retail, we must look at how the options for customers have changed and why the store plays such an important part: click-and-collect – the fastest way to a product for customers who know exactly what they want; in-store ordering – a customer finds what they want but orders it in the right size or colour, for example, while they are in the store; ship-from-store – which uses store stock to fulfil not only online orders, but out-of-stock requests from nearby stores so that the physical outlet becomes a mini warehouse; and instore return, which allows customers to take goods back to shops that they have mistakenly purchased online.
The hypothesis that physical retail is no longer profitable if, for arguments‘ sake, 20 per cent of sales fall away rapidly, assumes that the retail business model will never change. It doesn’t take into account that the high costs associated with rent and rates on the high street are unsustainable if retailers simply don’t pay. In light of the Covid-19 lockdown, change will happen and landlords will need to adapt too.
Retail is not black and white
Retailers have been engaged in the battle to find a happy ground between physical and online retail for years, weighing up the increasing cost of their stores against the knowledge that consumers do not just want to shop online. They understand all too well that society does not break down into two static sociological milieus – analogue is yesterday, digital is today. In practice customers enjoy the mix. Very few never go to physical stores, just as, increasingly, very few have never ordered online. They want, and expect, to make a shopping choice based on lifestyle, on how they feel on a particular day, on what else they are doing.
The most important argument in favour of combined offline and online trade is called ROPO, which can mean both “Research Online, Purchase Offline” and “Research Offline, Purchase Online”. Some customers enter a shop, having already read all the Amazon reviews and they are fully aware of prices. Others come in to question the sales staff because they don’t trust online reviews, they want to touch the goods, but they then go on to order from the cheapest web shop after they’ve made their purchase decision. If shops were to close, neither of these large groups of customers would be satisfied. And many online retailers would face higher returns because the goods they have delivered are not to the customer’s taste. Retail outlets are, after all, experience-generating showrooms and satisfy a lot more than just a desire to enter a physical store or avoid ordering online.
Merging of two worlds
Merging online and offline is complex. Chain stores that have not migrated online have faced the biggest challenge; meanwhile many online pure plays have benefited from pop ups in town centres and shopping malls, establishing a physical presence, albeit temporary.
Ecommerce is the predestined platform for pull marketing, while store chains find push marketing easier. Unlike the classic retail outlet which can buy in a special item, hang a poster in the shop window or place promotional items in an eye-catching display, the product ranges of online merchants are virtually invisible until a prospective buyer starts a browser search. Apart from spam and intrusive banner advertising, it’s not supply that creates demand, but demand that must first be created – even if it’s a simple Internet search that triggers targeting via cookies. The art of omnichannel is to merge two conflicting retail approaches.
While some retailers persist in their belief that their ‘regular’ offline customers will automatically migrate to them online, one only needs to look at the influence of Amazon to understand that loyalty is limited. The online giant’s ever-increasing share of the market from department stores and specialist retailers is often attributed to its aggressive pricing policy and convenient delivery, but Amazon grew on the back of selling books. Its recipe for success was its integrated search engine combined with automated recommendation marketing. As we all know, this tactic causes ancillary goods to sell like hotcakes.
It also gave Amazon access to invaluable information about customers, and a sharp competitive edge over offline merchants whose single sales-polarised buyers never knew what else their customers could have bought, even if they had it in stock. Of course, sales staff in-store have personal contact with customers, but this is only a benefit if they can give them what they want, which is why they also need online access to the warehouse, and the ability to order and arrange delivery of items in one seamless transaction.
Completing the sale
The trick, therefore, for retailers is to be where your customers want you to be, to understand what they want, and to make it easy to order, deliver and pay.
When it comes to payment, omnichannel still presents hiccups. Payment methods offered at the POS and online are traditionally channel-specific, and the options at the online checkout may be different to those at the till in a physical shop. For credit to be made to a card, the same card must be presented, and the contractual partner must be identical in both channels – this can be an issue for retail chains with many subsidiaries. Retailers that use one payment service provider (PSP) like Computop in-store and another online will generally find it difficult to get an overall view of the business.
This can be prevented by locating payment and data with a service provider who offers e-commerce, m-commerce and POS from a single source and operates globally. No retailer operating internationally should need separate contracts with local service providers in each country and a hodgepodge of different terminals and software solutions anymore. Today’s modern systems guarantee true omnichannel reporting, i.e. the consolidated evaluation of all sales and transactions, wherever they occur. The PSP enables the accounting department to access globally standardised settlement files which enables them to automatically assign each incoming payment to the respective order (reconciliation). If new geographical markets are added, everything still runs via the same central access point. The payment data from all regions becomes a valuable building block of a big-data strategy and helps to identify how customer behaviour differs from country to country, or how it can be influenced in a test market.
Protecting customers and data
Winning customers is a challenge, so looking after them has to be a priority. Nowhere is this more important than during the payment process regardless of whether it’s online or in-store. Terminals at the POS should support the P2PE security standard of Visa and Mastercard, ensuring that the payment data is strongly encrypted. Since real data is neither displayed nor stored, it cannot be stolen. At Computop we are encouraging retailers to adopt P2PE, which requires only a few crosses on a questionnaire, and saves a lot of time and money. Using the central access point of an independent PSP, retailers can easily select the most important local payment methods and the best acquirers for their international business. This gives them the greatest possible flexibility for international expansion and optimises running costs. And last but not least, P2PE allows sales staff to use mobile devices such as smartphones and tablets at the POS.
Despite the challenges, for a true omnichannel approach, retailers need to bolster and support their physical stores. When it comes to truly immersing customers in the look and feel of the shopping experience, brick-and-mortar is incomparable. Yes, it might require retailers to reinvent themselves, and this might be difficult, but if they want to keep customers happy, they need to serve them wherever, whenever and however they want to shop.