Omnichannel & IoT: How retailers can be competitive in a time when refrigerators can order the milk themselves
Photo by iStock.com
By Urs Gubser, head of ecommerce strategy, SIX Payment Services
As with all stories, it is best to start at the beginning, and in order to do this, we need to take a trip back in time to the wild west. In the 19th century America, customers ordered their goods at the "general store" and prices were negotiated on an individual basis. That continued until Richard Warren Sears created a catalogue of items for his customers to choose from and for the first time offered genuine consumer choice.
Today Sears, the department store chain named in his honor, is one of the largest retail companies in the United States, alongside its main rival Walmart. While these two household names have competed for customers for many years, in 1994 a new player, Amazon, entered the retail sector and created what was regarded as a new form of "catalogue ordering" that radically transformed consumer shopping habits.
Walmart vs. Amazon
Walmart is working constantly on a strategy to hold its own against Amazon. Its differentiating feature, in contrast to Amazon, is that Walmart operates and distributes both online and through retail stores. In order to capitalize on its strengths and take full advantage of its dual distribution platforms, Walmart offers lower prices on orders that a consumer places online and collects in-store; a system known as click and collect. In addition, Walmart gives customers the option to return goods ordered online at a store, click and return, which is another way to encourage customers to visit a store.
Amazon has responded to this and recently opened its first physical store, Amazon Go, in Seattle, Washington. This is in addition to the branch network that came with the acquisition of organic grocery chain Whole Foods in 2017. According to analysts, if Amazon can make the technology successful in its pilot store, it is likely that Amazon Go will be scaled up both nationally in the U.S. and internationally.
What makes modern omnichannel?
Retail technology expert Dan Hartveld, at Red Ant, claims that for many retailers, the challenges in delivering a successful omnichannel experience lie in bringing separate business operations together. "A lot of the time, we will talk to the ecommerce team, and they will have very little contact with their IT team, or with the retail operations team who deal with the in-store staff. Customers are expecting the facilities they have are online when they walk into a store."
The Walmart example illustrates how important a sound omnichannel strategy is in order to remain competitive. Ideally, the customer should experience a brand — and not a channel. This is where "seamless commerce" enters the debate. Any interaction with a customer has a knock-on effect on any subsequent interaction — and this is completely channel-independent. The shopping experience must be perceived by the customer as genuinely seamless. Any retailer planning a comprehensive omnichannel approach should take particular note of a number of key transaction and delivery elements to ensure that their omnichannel offering is working hard and delivering results. These include:
• Click & collect: The customer reserves a product in the web shop and completes the purchase in-store. There is great potential for cross-selling. According to a recent study by ibi research and SIX Payment Services, up to 12 percent more sales are possible at the point of sale.
• Click & return: The customer orders online and returns the product in-store. There is an opportunity for impulse purchases, which can improve sales by up to 18 percent.
• Subscription payments: A customer can input his credit card details once and subsequently does not have to enter them again. It is shown that this increases both customer satisfaction and loyalty. In addition, it increases efficiency for the merchant.
• Endless aisle: The consumer has the opportunity to place an online order in the store which reduces the need to have every item in stock. The journey from expressing an interest to buying and making a purchase is kept to a minimum.
• Self-checkout: A shop provides a self-service checkout or an unattended terminal. This increases efficiency and customer satisfaction.
• Queue busting: An employee scans the goods in-store and hands a receipt to the customer. At this point, only the payment is necessary to complete the transaction. The result of which means better queue management and efficiency as well and improved customer satisfaction levels.
There is no doubt modern omnichannel solutions are increasing throughout the retail sector and the study from SIX Payment Services suggests omnichannel is a critical step toward improved customer service. Satisfied customers are more likely to return, which in turn means improved sales for the retailer. Companies should, therefore, understand that improvements in their customer experience are a key part of their digital transformation strategy.
The smart fridge: always milk in the house
In addition to omnichannel, companies must also consider other technologies that are likely to revolutionize commerce. This includes the words on everyone’s lips — The Internet of Things (IoT), the infrastructure which allows numerous 'smart' devices and appliances to be 'connected.' The IoT provides retailers with the opportunity to gain a decisive competitive advantage — for example, a refrigerator that can be programmed to always have two liters of milk available. If a carton is used, the refrigerator automatically orders a replacement. Whether the refrigerator always orders from a specific grocer or places the order based on the cheapest price or the fastest delivery or leaves the choice to the customer — remains to be seen. German companies such as Miele and Bosch are already working hard to develop smart products.
In this possible environment, it is vital for retailers to ensure their online product information is complete and not too complex. Only then will these smart devices find the right retailers which ensures a greater chance of becoming the preferred trading partner. The IoT will not only influence the sales process but also help with inventory control and tracking. Products, packages and pallets will soon require smart tags which can track items from manufacturing right through distribution and on to the final delivery to the consumer, and of course any potential returns.
It is widely anticipated both online and physical retail will continue to pick up speed as digitalization of the sector continues. This is certainly a challenge for department stores, supermarket chains and retailers, but with the right technology and payment partners, the future can be a new horizon of opportunities with tangible benefits for retailers and consumers. We live in a world where modern solutions coupled with a sophisticated mix of payment methods are all geared to creating a new journey that meets the rapidly changing needs and expectations of consumers.