Omnichannel Retailing: Tips and Best Practices

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Omnichannel Retailing: Tips and Best Practices
Chloe Xu, Consultant, Australia

Omnichannel is a multichannel sales approach that aims to provide customers with a seamless shopping experience across all existing channels so that they will buy more. Typically omnichannel strategies focus on taking the customers online (to some web site), and use various promotions and coupons to promote this behaviour.
However, little attention has been given on examining the effectiveness of such promotions. Retailers typically neglect an important variable that may impact customers’ decision on whether to shop online or in-store: the distance between their home and the nearest store.
A recent research on 56,000 loyalty program members of a Chinese department store revealed that distance affects not only customer behavior, but also retailer profitability:
  • NEARBY CUSTOMERS: For customers who lived nearby, no added motivation was needed to promote a trip.
  • DISTANT ONLINE CUSTOMERS: For customers who lived farther away and had previously shopped only online, coupon (either online, in-store, or flexible) helped to generate more profit from them.
  • DISTANT IN-STORE CUSTOMERS: For distant shoppers who had previously bought only in-store, giving an online coupon would only deteriorate the profitability.
In other words, encouraging distant online customers to visit a store increased profits, while incentivizing distant in-store customers to shop online decreased them.

These findings are well grounded with several key facts: Customers who shop in stores tend to buy more, partly due to emotional buying behaviours. They are also more willing to buy tactile or “experiential” products such as apparel, shoes, and makeup. And they’re less likely to compare prices, which is a bit more difficult to do in-store than online. Therefore, the winning omnichannel strategy is to persuade online shoppers to come into stores. What are the best practices?
  • The research shows that having in-store coupons and targeting previously online-only shoppers who live at some distance away works well.
  • Another strategy that Walmart and some other retailers have been implementing is to give online customers incentives (such as free shipping) to have orders sent to a local store for pickup instead of delivered to their doorsteps.
  • Finally, reducing the real or perceived costs of traveling to a store (by locating stores near public transportation hub or providing ample free parking) may also make distant online customers more willing to visit.
⇒ Do you agree with these insights?
⇒ Do you know of any additional omnichannel best practices? Please react!

Source: Zeng, F., Luo, X., Dou, Y. and Zhang, Y. (2016). How to Make the Most of Omnichannel Retailing. Harvard Business Review, 94(7/8), pp.22-23.


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