Covid Economics: 3 Ways OEMs Can Reduce Margin Erosion
by 
Kayla Matthews
An omnichannel strategy is great for customer service, but it can be challenging to implement. Omnichannel requires a fine-tuned system that functions across multiple channels, mostly in-store and online. No matter where the customer interacts with the company, the experience is the same.
This strategy isn't to be confused with multichannel marketing, which only uses a few methods to engage the customer. Omnichannel marketing has everything working in-sync. For example, if a client orders something online, they should be able to pick up that package in-store without any problems.
Still, omnichannel is complicated. Here are three pros and three cons of omnichannel marketing.
Pro: Customers have better access to products
When a customer has the option to buy a product anywhere, they’ll have a better experience with more than one option. In fact, 54% of shoppers claim they're more likely to do business with a brand that uses multiple channels to sell products.
Having a physical and online presence enhances brand recognition and loyalty. Customer retention is easier, cheaper and more efficient than attracting new customers.
Con: More channels opens the door to online competition
Competition with other stores or brands is always going to be an uphill battle. When you offer multiple sales channels, you have more competitors. If customers like something in a showroom, they can pull out their phone and comparison shop.
There aren't many ways to circumvent this problem except to incentivize customers to choose you. Offering discounts for loyal customers or providing a certain percentage off for online purchases/in-store pickup could increase your number of buyers.
Pro: Customers spend more time and money in your store
Being an omnichannel business is already an incentive for consumers to choose you. Offering your inventory on multiple channels can lead to more web traffic, which could produce more in-store sales. Shoppers who only focus on physical or online stores, not both at once, will still be drawn in with the omnichannel offering. More incentives to shop in-store, online or both at once can create more omnichannel shoppers from your pool of customers.
Urban Outfitters is a prime example of a successful omnichannel strategy. Urban Outfitters' omnichannel shoppers spent 3.5 times more money than their regular customers. However, success may be due in large part to their many store locations. Having so many brick-and-mortar stores allows shoppers from almost anywhere to take full advantage of the business' strategy.
Con: Multiple channels leads to weaker margins
Omnichannel seems like it should command higher profit margins. However, each channel comes with expense. Storage, packaging and delivery of inventory from multiple sites costs money.
One such solution involves company vehicles. In 2016, small work van sales in the U.S. went up by 8%, but large van sales grew 18% in just a single quarter. Other businesses have already sought out solutions to increase their margins. Adding extra storage space and faster delivery also helps.
Pro: More flexibility saves time
An omnichannel distribution strategy means keeping track of everything across multiple platforms. If customers can pick up an online purchase from a store, they should also be able to return that same product — even to a different location. The flexibility of options boosts customer satisfaction and sales.
According to Accenture, 75% of B2B customers are more likely to make additional purchases from the same companies if their omnichannel strategy works well. Additionally, 72% of B2B companies in the same survey said they value their omnichannel customers more, primarily because they quickly become loyal and are more easily pleased.
Con: Omnichannel relies on open communication
Direct lines of open communication is good for business, but it’s also complicated. If different systems don't talk to each other, then an omnichannel system won't work. Creating a communication plan is vital, such as implementing a common IT system across all channels. While initially working out the kinks might be stressful, the effort will be worth the trouble as the process gets simpler with time and experience.
The start of an omnichannel system may be easier with the proper back-office technology in all areas of the company. If every sector has a different priority and vision of the end product, then the organization will most likely fail. Keeping the expectations of omnichannel systems in manufacturing aligned business goals increases revenue and service continuity. Technology such as automation and RFID can also keep communication flowing.
Omnichannel strategies are essential
Technology has impacted the way we shop. A company unable to merge online and offline platforms is less competitive. To get ahead, an omnichannel distribution strategy might be necessary. Preparedness is crucial for making this potentially successful transition.
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