The Retail Omnichannel Imperative

In 2021 and beyond, successful retailers with physical stores will likely become powerful omnichannel sellers as shoppers choose merchants with superior end-to-end buying experiences.

“The reason that omnichannel is critical for retailers in 2021 is because the customer demands it,” said Jess Huang, a partner at McKinsey & Company. “The customer is omnichannel. In fact, they don’t think about channels at all. They just think about shopping and buying. So to meet your customer where they are, you have to be omnichannel.”

A July 2020 McKinsey & Company survey of North American retailers found that most expected ecommerce sales to account for 25 – 40 percent of total sales in some categories, such as sporting goods and leisure, home improvement, apparel, and mass merchandise.

The pandemic has forever changed shopping habits, forcing brick-and-mortar retailers to adopt a seamless omnichannel shopping experience.

On the one hand, omnichannel retailers need to meet shopper expectations, such as placing an order online and picking it up curbside. But omnichannel digital experiences are not limited to convenience.

Channel Convergence

The lines are disappearing between selling in a physical store and selling online. Even brick-and-mortar stores need to become digital-first in a sense.

Retail customers “will really see the brick-and-mortar store as a part of the shopping journey. They will have done their research online. They will have comparison-shopped online. They will have, perhaps, consulted an app. They will show up in the store. They may research more, and they may or may not buy there. Then they will go home and continue the purchasing process,” said Raj De Datta, CEO of Bloomreach, a digital experience platform, as he described the blending of online and in-store shopping experiences.

Owners and leaders of retailers should stop thinking about online and in-store as separate businesses.

“Our digital platform is the front door of our store. Customers are taking us down that path — purchasing online and using online platforms as the start of the shopping experience, even if it ends in the physical world,” said Craig Menear, chairman and CEO of The Home Depot, according to a McKinsey & Company report.

But separating online and in-store functions with different managers, goals, and financials remains the case at many retailers. This is especially true for the supply chain.

Supply Chain

Consider the traditional retail supply chain. Merchants may place orders months in advance, allocating units to stores or warehouses without regard to immediate in-store pick-up or next-day delivery anywhere in the country.

To be competitive, some retailers should change their supply chain. This might mean adding a combination of new fulfillment capabilities, including drop shipping from the factory, shipping from inventory in transit, better distributing inventory, or automating portions of the fulfillment process.

Consider, as an example, the emphasis grocery retailer Kroger is placing on delivery. The company has announced 20 new delivery fulfillment centers across the U.S. and is investing in automation to collect products for those deliveries. According to published reports, Kroger’s dishwasher-sized robots can pick a 50-item order in five minutes or less.

Kroger has spent as much as $50 million on robot-driven fulfillment centers — at least one in an area with no physical stores. Kroger’s CEO, Rodney McMullen, expects the company to generate $10 billion in digital sales annually by 2023, thanks, in part, to its investment in the supply chain and the technology to manage it.

Infrastructure

Selling seamlessly through several channels requires improvements in technical infrastructure.

Retailers will need “to build the data and analytics capabilities that are necessary to underpin all of the new ways of working,” said McKinsey & Company’s Huang.

For example, some retailers still struggle to show all inventory online. That is no longer an option.