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The Evolution of Omnichannel

Today, retailers are connecting online and offline touchpoints to create more effective purchase journeys. Here's how they're doing it.
Consumer using phone | Source: Unsplash
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Affirm was first to enter the pay-over-time space in the US and remains the category leader with a network of more than 5.6m customers and 6,000+ retailers. Affirm enables retailers to grow sales, providing flexible and transparent financing — including a commitment to no late or hidden fees. Affirm merchants typically see an 85 percent increase in average order value.

LONDON, United Kingdom — The events that have transformed the world in 2020 are transforming the relationship between retailers and consumers. As a result of increased health and safety concerns, and technological innovations shaping the experiential nature of digitally enabled commerce, customers' relationships to both physical retail environments and digital portals continue to be redefined.

Today, retailers are seeking to build consumer-centric strategies, which make their products available anywhere and anytime, in the channels where their customers seek them. Best-in-class operators maintain a cohesive brand experience across platforms while tapping into the positioning and preferences of different sales channels to better engage with consumers and drive conversion.

Below, BoF investigates the evolution of omnichannel retail as the second part of its retail thought leadership series, created in partnership with Affirm.

The Customer Is the Sales Channel

Affirm Insight: Increasingly, pay-over-time financing options are an extension of a customer-centric strategy, enabling retailers and brands to access new demographics and begin an on-going relationship with an eye toward growing LTV (Life-Time Value) earlier. Affirm takes a customer-first approach by allowing customers the option to pay how they want while ensuring 100 percent transparency. No late fees. No deferred interest. No surprises.

In retail, omnipresence is not always interchangeable with omnipotence. "There's this notion that we've got to be everywhere. As a practical matter, to try to be everywhere and be good everywhere, is a Herculean task," says Steven Dennis, the author of Remarkable Retail and founder of Sage Berry consulting, who was SVP of strategy and multichannel marketing at Neiman Marcus from 2004 to 2008.

“The customer is the channel. You have to think about what it is you're trying to do for them in a unique way. You've got physical assets, digital assets and you need to make them work together beautifully. The more you dissect your key customer segments and customer journeys, the more you can see where the greatest leverage is.”

By analysing the customer journey, retailers can assess what their customer base expects of them, and their competitive market, at each step of their journey to purchase. “That's kind of your baseline: ‘We want to at least see if we're a good brand for these customers in this occasion. Are we meeting their basic needs?’ Then, you try to find those places to really do something memorable, that either gives you better odds of winning the sale over the competition or doesn't make it all about price, encouraging that customer to come back again [and] maybe write a good review about you,” he continues.

“The [market-incumbent] retailers have big store networks, and they have begrudgingly entered the digital era — putting e-commerce together has never really been more than an afterthought,” believes Conor McGrath, the UK managing director of ParcelLab. “Covid-19 has turned that on its head. Retailers are realising the focus should be on the shopper, not on the store network. New digital retailers use great customer experience as their starting point. Then, you can basically merge a store network into that — perhaps via third-party return stations.”

Develop personalisation that offers entry points and [ensure] recommendations reflect current consumer interests.

WGSN Insight’s Senior Retail Strategist Laura Saunter agrees, believing retailers should “develop personalisation that offers entry points and [ensure] recommendations reflect current consumer interests. For instance, accelerate the implementation of buy now, pay later programmes.” This allows customers the ability to tailor their payment plans to their specific needs.

In addition to creating a more personalised experience for consumers, retailers must also reflect how well their business model reflects the preferences of Gen-Z and Millennial consumers, notably more eco-conscious operations and a growing interest in second-hand clothes. Gucci became a pioneer in the luxury market by entering into a major partnership with The RealReal.

“We have a shared primary goal to shine a spotlight on the sustainability benefits of recirculating fashion and supporting a circular economy,” explains Allison Sommer, senior director of strategic initiatives at The RealReal, an Affirm merchant partner.

“By encouraging their community to shop resale, Gucci is helping us bring more people into the circular economy and show that resale is complementary to brands. Gucci is also able to introduce new buyers to their brand with our 17 million members around the world. By making luxury more accessible, we are serving as a gateway and building earlier affinity for luxury brands, like Gucci, that ultimately expands their audience,” she continues.

Reimagining Retail Touchpoints

Affirm Insight: Retailers should evolve their distribution models from siloed sales channels to a connected eco-system of on- and offline retail touchpoints, which enables product and service discovery, while recognising that contactless payment is a business imperative. Affirm's payment solution is live in over 7,800 physical stores, and it supports BOPIS (buy online, pick up in store), telesales and online.

“If the customer really is the channel, you have to figure out the different and best ways to help them through the customer journey. Be where the customer is relevant,” stresses Dennis. Indeed, as stores reopen, brands are realising they may be able to serve certain customer segments more profitably via e-commerce, allowing them to address their retail networks by closing underperforming stores and focusing on locations and formats that are more productive.

“Bridging the gap between physical space and e-commerce is going to increasingly be about repurposing and re-evaluating square footage, remodelling physical stores as distribution centres or fulfilment hubs for online orders,” says Saunter.

Existing and new technologies are being baked into the customer journey at an accelerated rate, designed to ease friction around the path-to-purchase, share impactful storytelling and emulate the level of in-person interaction and experience that shoppers expect in-store, through education and entertainment.

BOPIS and BORIS were important initiatives that all retailers should have been prioritising, and with the pandemic, that need has only been exacerbated.

“I expect we will see much higher adoption rates of brands using live video/live streaming in the future, as well as an evolution of online discovery through virtual boutiques and the use of AR-powered try-on tools, such as Christian Dior’s virtual beauty boutique, especially for service-led, high-touch categories like luxury,” continues Saunter.

“Texting also offers a powerful way for store associates to connect with growing online traffic and also demonstrate expertise, particularly as consumers become increasingly demanding around service and convenience,” says Saunter. “It facilitates a new approach to clienteling [and] opens up a one-on-one conversation that feels friendly and human, building trust and driving loyalty.” In the first week of Nike's store opening in Melrose, Los Angeles, the unique store number received more than 1,000 texts via its Swoosh in-store messaging functionality.

But brands will need to go further than evolving physical connection points for safety and convenience. To attract increasingly grounded, anxious shoppers, they must offer unique experiences that go beyond mere transaction. This was already the case pre-pandemic, but the crisis has sharpened the issue.

In-store innovation is critical. Customers who are now more familiar with shopping online and wary of Covid-19 infection risk are unlikely to visit physical shops without a compelling reason even with social distancing and other safety measures in place.

For luxury, both personal and intimate shopping appointments create a compelling way to emulate traditional service within the parameters of Covid-secure shopping. By Appointment is a new app being trialled by Selfridges. “It overcomes the need to stand in queues via store appointment bookings, facilitating fast store entry. Meanwhile, OpenTable has begun offering grocery shopping reservations, partnering with retailers to offer a way to reserve a time to shop just like they would reserve a table at a restaurant,” says Saunter.

The RealReal conducted approximately 25,000 virtual appointments in their second quarter, which delivered comparable per-consignment results versus in-home appointments. The luxury consignment business launched self-scheduling appointments in May and rolled out contactless roadside pick-up by luxury managers and a van service, “to continue delivering an elevated remote consignment experience,” explains the company’s stakeholder letter. The business found that self-scheduling and roadside pick-ups together removed friction from the consignment process and drove higher shipped conversion rates for consignors.

Indeed, as the pandemic has taken away some of the more spontaneous elements of shopping in-store, new localisation technologies are giving customers the means to plan their visit to the store and allows retailers the ability to anticipate and manage footfall.

“Best-in-class brands and retailers will place renewed emphasis on services, convenience and speedy product discovery, while those failing to modernise in terms of contactless payments and touchless tech may face challenges,” says Saunter.

Stores will transform from experiential, socially interactive gathering centres to places of commerce and cleanliness.

“The evolution of BOPIS and BORIS were important initiatives that all retailers should have been prioritising, and with the pandemic, that need has only been exacerbated. Now, what is most important is that a brand is truly channel-agnostic. They need to be able to offer their products wherever the customer wants to purchase them, whether online, in their own stores, or through a multi-brand retailer. The brands that can do this quickly will benefit from a first-mover advantage,” adds Donny Salazar, the founder and chief executive of MasonHub, a fulfilment solutions specialist.

Earlier this year, Inditex announced it is investing €2.7 billion ($2.9 billion) in its network overhaul, which includes a €1 billion IT upgrade as well as the opening of 450 new stores. But rethinking the role of the physical store in retailers’ digitally connected networks of complimentary channels is imperative.

Ensuring that customers in a physical store feel safe requires highly engaged and newly trained staff, clear protocols and delineated use-case scenarios for shoppers to adopt.

“Physical stores will transform from experiential, socially interactive gathering centres to places of commerce and cleanliness. Spaces need to be flexible and agile to be ready for future changes, and design will have to make people feel safe and secure – with a forensic focus on transparency and cleanliness. Shrinking square footage and creating a more streamlined shopping experience with less SKUs on the shop floor is going to be really important too,” says Saunter.

Brands should again consider other potential avenues to communities of consumers. “We’re seeing a strong appetite for retailers and brands to join our B2B programme — they’re looking to our e-commerce infrastructure as an additional sales channel to reach our global audience of over 17 million. With Covid-19, we have seen so many retailers and brands significantly impacted by brick-and-mortar closures. Stores are an important touchpoint between customer and brand and, without them, there’s a need to bridge that connection digitally,” says Karin Dilie, director of B2B at The RealReal.

Driving Growth Across Platforms

Affirm Insight: Creating a holistic brand experience across multiple channels and social media platforms that reflect the idiosyncratic preferences of distinct communities and generational cohorts is critical to success. Affirm increases ADT (Average Dollars Per Transaction) or AOV (Average Order Value) by 250 percent in-store and 85 percent across all channels.

Mobile commerce is fast emerging as the most compelling vehicle for reimagined omnichannel strategies due to its ability to meet the customer wherever they are in the journey to purchase. “The most basic part of that is the immediacy, right? But some retailers have gone beyond that to say, ‘How is this going to help your shopping experience before you come in, while you're here, maybe after checking out?’" explains Dennis.

“I think it's rooted in the intersection between understanding customer journeys deeply. Understanding what is truly possible through smartphone technology and then creating a trusted relationship with the consumer. There's a lot of concerns, as there should be, about privacy, but plenty of consumers will give you information and access to [data points about them] if there's a good value exchange,” he continues.

Indeed, to gain a competitive advantage, companies must create engaging customer journeys that benefit from the opportunity of an interconnected experience across platforms, leveraging the idiosyncratic strengths each represents.

“Invest in social commerce strategies that allow people to transact as closely to the social network as possible through partnerships with platforms,” stresses Saunter.

“It’s just in the last year that we’ve seen some of these major [social] platforms… actually able to take the consumer, or the customer in this case, from the point of discovery and research all the way through the point of transaction without ever leaving the platform,” shared Carter Jensen, the global e-commerce strategy manager at General Mills.

Indeed, social commerce is a significant new growth driver for retailers impacted by vacillating footfall statistics. However, social media platforms are not immune from similar shocks to the retail market, through evolving algorithms and shifting business models.

There's a lot of concerns about privacy, but plenty of consumers will give you information and access to [data points about them] if there's a good value exchange.

“The way consumers connect with brands on Instagram is much more personal and much more successful than any other platform. Shoppable posts are one of the most apparent and logical ways that they have incorporated commerce. Pinterest is now allowing brands to incorporate a buy-it button, which allows individual pins to actually be shoppable,” he continued.

Despite the oversaturation of digital advertising impacting potential reach, which in turn requires brands to rely even more upon the ever-sharper tools deployed by Facebook to connect consumer preferences with relevant products, retailers are under pressure from consumers to be present — and visible in their feed — wherever they are.

Since the coronavirus outbreak, over 60 percent of global consumers have changed their shopping behaviour to align with convenience and value, according to McKinsey & Co. Indeed, if consumers cannot shop via their preferred channel, they will go to a different retailer. Competition is now one click away.

“Help them accomplish whatever it is they're trying to do, however they try to do it, to create a remarkable, harmonised experience,” says Dennis.

This is a sponsored feature paid for by Affirm as part of a BoF partnership.

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