Integrated Multi-Channel Retailing Strategies

By M. Isi Eromosele

Multi-channel retailing is the set of activities involved in selling merchandise or services to consumers through more than one channel. Multi-channel retailers dominate today’s retail landscape. While there are many benefits of operating multiple channels, these retailers also face many challenges.

Several unique aspects of the retailing business make multi-channel operations more complex and challenging.  In general, retailers have to manage a large number of stock-keeping units (SKUs) in their assortment of products (usually not manufactured by the firm), make decisions and frequent modifications on many retail mix elements for each SKU, interact with numerous and often diverse groups of end users, deal with a large number of vendors, and be responsible for the logistic process of selling and delivering products to their end users. 

In addition to the operational complexities, the potential benefits afforded to customers are also significantly greater.

Creation Of A Strategic Advantage 

The opportunities for multi-channel retailers to develop a strategic advantage arise from their abilities to develop resources that are not easily detected or duplicated by competitors, such as (1) propriety customer information and (2) tacit knowledge for providing a seamless customer interface.  These resources can build customer loyalty and reduce costs.

It is difficult for many store-based retailers to develop extensive customer purchase history databases because of their inability to link customers to transactions when the customers pay in cash or use third-party credit cards.  To address this problem, many store-based retailers encourage the use of loyalty-program cards or ask shoppers for identifying information (e.g. telephone numbers). In contrast, all transactions through the Internet and catalog channels automatically collect customer information in order to bill and ship the product.

Moreover, the Internet channel offers the opportunity to collect data about a consumer’s online search behavior in addition to transaction data. Therefore, multi-channel retailers have a greater opportunity to develop extensive, propriety information about their customers and can use this information to more effectively target their marketing activities.

Another strategic resource possessed by effective multi-channel retailers is the tacit knowledge associated with integrating multiple channels. Consumers desire a seamless experience when interacting with multi-channel retailers. 

For example, they want to be able to buy a product through the retailer’s Internet or catalog channels and pick it up or return it to a local store; find out if a product offered on the Internet channel is available at a local store; and, when unable to find a product in a store, determine if it is available for home delivery through the retailer’s Internet or alternative channels. 

Providing this seamless interface is complex and challenging.  Implicit process knowledge is needed to effectively provide these services, which cannot be readily copied by competitors.

Challenges In Crafting Multi-Channel Strategies

Creating the appropriate organizational structure is arguably the greatest challenge facing all multi-channel retailers. Most retail corporations manage their channels in a decentralized fashion and many of them maintain separate teams of inventory management, merchandising, marketing, finance, analytics and even product development within each channel.

The advantages of a decentralized organizational structure include:

• Greater focus and more flexibility in response to the unique competitive situations in each channel
• Allowing each channel to adjust its retail mix to serve different market segments
• Helping attract and retain executives with experience in a particular channel

Yet the decentralized structure has also caused increasingly structural and operational problems, while retailers strive to create cross-channel synergies and consumers expect a seamless experience in a multi-channel retail environment. 

It creates duplicate teams and thus inefficiencies in the business processes, causes internal conflicts across channels and often leads to inconsistent customer experiences due to lack of coordination in merchandising activities across channels. According to a study by Gartner Inc., 76% of multi-channel retailers do not fully coordinate brand marketing, and 74% of them do not fully coordinate promotions planning across channels. 

Retailers should consider the idea of building informal organizational structures that support a multi-channel environment, such as developing a cross-functional teams and forming internal cross-channel leadership and specialist networks.

The decision on organizational structure is a matter of degree of integration vs. standardization across individual functions. There are no one-size-fits-all solutions. Each multi-channel retailer has to decide for itself what to integrate and what to keep separate.

However, it needs to take into consideration the company’s history and current management structure, branding strategy and compatibility in each channel, existing distribution and underpinning systems and their transferability to new channels.

 M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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