OMNI-CHANNEL—FOR TODAY OR TOMORROW?
Omni-channel is easily the most discussed topic in all retail conferences over the past years. Underpinning all the discussions are two consistent themes—a) lack of clarity about what omni-channel really means, and b) a strong belief that it is the right thing to do for everyone. The term omni-channel is increasingly getting used almost interchangeably with digital, indicating that a digital play necessarily means an omni-channel play. We suggest retailers take a deep breath. Omni-channel, while a priority on the horizon, is not imperative for everyone.
The case for omni-channel is built on the underlying premise that most, if not all, consumers like to have multiple touchpoints —both online and offline—in their purchase journeys. To understand the current reality, we studied the pathways followed by a sample of active internet users in urban India for over a month. The study showed that the extent of interplay between online and offline is significantly over-imagined. Only 5% of transactions across all categories had both online and offline touchpoints, 78% of the transactions were purely offline, whereas 17% of transactions were completed purely online. These statistics are quite contrary to the commonly believed pathway in the digital world i.e. consumers visit the stores to touch/ see the product and come back to order online in order to get better prices.
As we looked deeper, three interesting findings emerged. First, there are large variations across categories—making it critical to de-average and disaggregate. There are categories like staples, fresh food that are dominated by pure offline pathways.
Given the smaller ticket size and high purchase frequency, online-offline interplay for these categories is limited to 1-2% of all transactions. Then there are categories like mobile phones, large appliances where mixed pathways (with both online and offline touchpoints) are dominant—largely driven by higher ticket sizes and need to touch and feel the product. Online-offline interplay here happens in as high as 40-50% of all transactions. And lastly, there are categories like hotels, airline tickets that are quite mature in online adoption and are dominated by end-toend online pathways. Online-offline interplay here happens in about 10% of transactions.
Second, the pathways also vary across consumer segments. For the same category, consumers across gender, age, city type demonstrate very different behaviour. For example, almost half of all mobile transactions in metro and Tier-1 cities are completely online. As against that, only one in five of mobile phone transactions in Tier-2 and -3 towns are end to end online. Tier-2 and -3 city customers are much more likely to research both online and offline along their pathway—as high as two-thirds of their mobile phone transactions have both online and offline touchpoints.
Third, in categories where mixed pathways are significant, the role of channels is different. Automobile, for example, is a category where the research process has drastically moved online. 43% of new buyers decide their car model even before their first visit to a dealership. Consumers are, therefore, looking for much more brand/ product information online, whereas the visit to dealerships is much more about paper work/deal closure, etc.
These findings present a case for companies who are looking to be ahead on the curve and build an omni-channel play to pause and ask themselves the following questions:
•Have we really fixed the individual channels before attempting to go omni-channel? There is a lot to be done in fixing the basics—getting the individual channels right before attempting to integrate them seamlessly. That seems more valuable from the consumer’s perspective and simpler to execute from the firm’s perspective.
•Are we designing to follow the consumer pathway relevant to our category and target consumer segment? Instead of blindly adopting omni-channel because it seems like the next big thing to do, companies need to pause and ask how important it really is for their consumers and category. There is no debating that it will happen—the question is when and how much.
•Are we aligning our channels closely with the role they play in consumer pathway? In the future, channels will play different roles from what they play currently. In case of automobiles, for example, a lot of brand building effort needs to move online, whereas the focus in the dealerships may be more around delivering a superior customer service experience.
Companies need to offer consumers a variety of channels. It is critical to fix them individually before embarking on the path to integrate them. Attempting to create a utopian seamless customer experience without understanding the actual consumer pathways might not be really the ‘next’ big thing for you. As they say “the best preparation for tomorrow is doing your best today!”
Abheek Singhi is a senior partner and leads the consumer goods and retail practice in Asia Pacific for the Boston Consulting Group (BCG). Kanika Sanghi is principal at BCG. All views are personal.