For fashion and lifestyle (comprising apparel, footwear and accessories) players in developed markets, omni-channel is like a second skin. It is the way consumers interact with brands and retailers. Consider this: ‘Buy-online-return-in-store’ (BORIS) is offered by more than 40 percent of the retailers in the US. Over 60 percent of consumers in the US use the ‘Click & Collect’ option offered by retailers.
Closer home, in India, this adoption is less pronounced. Except for a handful of players, omni-channel has remained a glossy concept on paper with little to show around implementation and results. Part of it has to do with the fact that some elements (BORIS, C&C, self check-out) are probably not so relevant in the Indian context (driven by low cost of labour across sales and delivery personnel, as well as qualms around pilferage). A lot of it, though, has to do with organisational buy-in, capability and implementation challenges.
But consumers are looking for more, with the Covid-19 pandemic likely to amplify the proportion of transactions that go through both digital and physical channels, across the consumer journey. For instance, a sizeable share of offline-only consumers will start buying on e-commerce while still wanting to use their 'offline loyalty points'. At the same time, the need for retail therapy and 'touch-and-feel' associated with the offline channel will not go away. However, consumers might want to minimise the possibility of an unproductive visit, by confirming product availability on the shelf via real time view of store inventory on brand / retailer website.
Given this, it is imperative to identify the key omni-channel elements that will be relevant post Covid-19, in the Indian retail context. The three most important ones are:
Integrated promotions/ loyalty programmes
As consumers shift online, it is almost a hygiene ask to enable cross-channel promotions and loyalty programmes for consumers. There are obvious benefits to doing so, for instance, Pottery Barn’s cross-channel loyalty programme saw members spend 3x more and purchase twice as frequently.
In India, several established players (brands and retailers) have deployed this element, but large-scale adoption is yet to be observed. Further, given the dominance of marketplaces in the online space, players need to think through how consumers could log in purchases made on the marketplace and still accrue loyalty points with the brand.
In a post-Covid world, offline stores could become more spacious to allow for comfortable distancing. At the same time, the need to drive profitability will limit store sizes. Combine these two, and it means that lesser inventory will be held on-site. Even consumers might prefer trying a few well-sanitised products for size with a limited physical collection, and the rest being showcased virtually. Enter endless aisles. These virtual products could be in neighbouring stores or e-commerce warehouses, and consumers could lock in their purchase through a tab or equivalent, the product thereafter shipped to their homes or available for collection in store in a few hours or days.
Endless aisles have seen a relatively higher adoption in India, compared to other omni-channel elements. They have proven benefits: A mass-market retailer that installed endless aisles in select stores could bump 'available inventory' by 2.5x, eventually increasing store conversions by approximately 15 percent.
Ship from store
Enabling an online view of inventory held in stores, plus ordering and shipping-from-store, can have multiple advantages. A pair of shoes delivered to a customer in Jaipur from a regional warehouse in Gurugram can cost upwards of Rs 100. Fulfilling this order from a local store could reduce this cost by 50 percent or more. Further, the delivery time could reduce drastically, from a few days to a few hours. The need for faster deliveries / same-day delivery could see a rise post Covid, as consumers work from home and seek to replicate the instant gratification (touch, feel, try-on and buy) experience at home.
Select Indian players have started ramping up this element, with clear benefits. A leading apparel player, for instance, saw a jump of ~20 in store sales after enlisting select stores online, with a ship-from-store option. Scaled-down offerings within this element are ‘view store inventory’ and ‘book time slot in store’ (discussed earlier).
While 'what' needs to be done is fairly clear, a more difficult question is 'how'. Brands and retailers need to be cognisant of the capabilities needed to execute omni-channel successfully. Some critical aspects:
Technology and systems are key. Ship-from-store, for instance, needs a single view of inventory across stores and warehouses, with minimal latency. Even an hour of delay in updating records could result in a product being booked with the promise of a wrong delivery time, or worse, leading to an eventual cancellation.
Training and upgrading employees is also essential. Store-staff need to be trained on use of online stores / endless aisles, and discipline needs to be instilled around updating inventory as soon as a product is sold offline (in case POS systems are not connected to the omni-channel portal).
Another consideration is organisational performance metrics. Store and store-staff KPIs need to be adjusted accounting for omni-channel operations. For instance, looking beyond sales per square feet, footfalls etc. to incorporate the role of the store as an experience space leading to online purchases (via endless aisle) or as a fulfilment location.
In summary, choosing the right omni-channel elements and executing them well is critical. Indian brands and retailers need to move, and move quickly, to bring to life the long standing omni-channel dream.
Siddharth Jain is Partner, Deepak Maloo is Principal & Prabhu Dhev R is Manager at Kearney