Friday, April 12, 2013

Five reasons why omnichannel retailing could be distracting you from success

Lost everything through Omnichannel

1. Multiple channels to a bad business model still make it a bad business

No matter how much lipstick you put on that pig, it's still a pig.
Business models that provide customers with little value or brand promise aren't going to turn around immediately by making their website mobile friendly and releasing an app. 
The traditional retail business model is one that has aged quickly in the digital era. All you needed to do was to source products that people needed or wanted and then put them on a shelf for a price people would pay.
Your workforce would be cheap to employ and the biggest decision was where to locate in order to catch footfall. Your value proposition was in knowing what customers would want and having it on the shelf at a fair price.
This model of business is quickly becoming a relic. Manufacturers or distributors can now go straight to market. In this case what value do you add and can you really charge extra for it? If the answer is we don't add extra value it may be time to consider a new venture.


2. The multichannel leaders are impossible to surpass

Do you really think you're going to get better at online distribution than Amazon? Do you really think the new app you've launched is going to go viral and be number one in the iTunes charts?
Time for a dose of reality: The online pure plays are massively further along the experience curve than you at just about everything. Not only are they better at it than you but it's getting cheaper and cheaper for them. So whilst you're pouring huge amounts of CapEx into multichannel programmes they're refining warehouse processes with Sigma Six to save pennies and improve customer experience.
You cannot spend your way out of digital procrastination.

3. Play to your channel strengths

If you're a bricks and mortar business that employs people who understand that model of retail, why not stick with it? Create the best bricks and mortar retail business in the world. Take the money you'd have spent on multichannel initiatives and throw it at building better/cheaper/bigger/smaller/smarter stores.
Sure, throw a little bit of money at multichannel initiatives (£100 a month on Adwords and get a neigbour to knock up a Wordpress site) but focus on getting customers back to your core channel. Attempting to transform your entire company from the top to the bottom into a digital superstar is going to distract you from doing what you do well. If you have a core competency stick at it.

4. Omnichannel investment could be better utilised in other areas

£10m is set aside on the books for your two year omnichannel program. Do you?
  1. Invest it in omnichannel where channels are constantly appearing?
  2. Invest the money into your supply chain or IT systems where profit gains are more certain?
  3. Acquire one of your competitors or a complimentary business with a strong financial history?
  4. Expand internationally to reach huge new markets?
Investment in multichannel is expensive and not without risk especially if digital channels are completely new to your business. When you're playing with investor's money and people's jobs the stakes are high.
How certain are you that omnichannel will play out well for you?

5. There is no competitive advantage in omnichannel

Imagine this: Awards are coming in. Industry pundits are celebrating your company in blogs and articles. Your CEO's photo appears on the cover of Forbes/Wired/FastCo as the omnichannel champion. Omnichannel has succeeded.
Or has it? If we define competitive advantage as something that your competitors are going to struggle to neutralise, then it isn't. They can launch mobile apps, new websites, in-store experiences and get to learn from your experience. This second mover advantage is available as omnichannel is being built through open platforms that everyone can access.
Omnichannel has given your firm the appearance of having a future. It hasn't guaranteed it.

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