Omnichannel Distribution - Definition, Trends and Best Practices

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You can view an item on the website, order it in a mobile app, and pick it up in a brick-and-mortar store. You can try it in an offline shop, pay online and have it delivered to your home.

You can buy online and return to the store. Today, customers expect retailers to deliver such an experience.

What is Omnichannel Distribution?

Omnichannel distribution is the process of making a product or service available for purchase on any channel that consumers find convenient and then delivering it after the order is placed over the selected channel. Moreover, the customer experience must be seamless. Omnichannel distribution also covers the processes connected with the return of the product. Using omnichannel distribution, customers can shop for items from a desktop or mobile device, in a brick-and-mortar store, or via phone and get the product conveniently delivered without even realizing that they are using different channels.

All processes related to shipping, inventory visibility, in-store customer pick-ups, network speed, and agility should be adjusted to ensure a positive experience for consumers. The tools that make it easier for the companies to implement their omnichannel strategy include WMS (Warehouse Management System), OMS (Order Management System), package optimization system and shipping rate shopping tools, e.g. such as a special transportation management system. All these systems must be optimized for omnichannel distribution.

In the old days, traditional brick and mortar distribution was the only way to make a product available to customers. Since e-commerce has appeared, Internet distribution has grown dynamically. E-commerce channels have created new connections between manufacturers or vendors and end-users. These include direct online sales, third party e-retailers, and online marketplaces. It has become possible to sell on the Internet only, though many companies have just added online distribution to their offline sales channels.

Omnichannel distribution vs Multichannel distribution

In multichannel distribution products are distributed via multiple channels, such as physical stores and e-commerce platforms, the company’s website, its partners’ websites, the company’s app, etc. But the channels are not connected, customers use them independently, and delivery is not integrated.

Omnichannel distribution takes place when the channels are seamlessly integrated and delivery is organized centrally. Under this scenario, a customer can choose from a wide variety of options:

  • Buy online, pick-up at the physical store
  • Buy online, return to the physical store
  • Buy online, have it delivered (including with same-day delivery)
  • Buy in-store, have it delivered to a chosen location.

There are also several return options available.

Why Omnichannel Distribution is important?

Every business that has both brick-and-mortar and e-commerce components and wants to earn more profit needs an omnichannel marketing.

  • Customers take it for granted that a distributor will provide them with a seamless experience and the ability to make purchases in any way they want. If you can’t give them such an experience they will get the product from your competitors.
  • Consistent sales efforts across multiple channels increase brand awareness and allow the brand to reach new audiences. Customers become better acquainted with the product gaining the trust they need to buy it.
  • It increases profit. According to the BI research, omnichannel customers spend more money. Flexibility increases buying opportunities and provides a wider means to access and purchase the products. All data is analyzed centrally, so you don't have to engage personnel for each distribution channel separately. Thus, revenues increase and costs may decrease when compared to a multichannel strategy.

To meet customer expectations when it comes to omnichannel purchasing you have to make omnichannel distribution possible and continuously optimize it.

Challenges in omnichannel distribution

Lack of inventory visibility

It is not easy, to ensure your customers always have up-to-date information on the availability and delivery time of each product. But they need this information to choose the most suitable channel to make a purchase. It’s especially important for retailers who order from a manufacturer or distributor and need to know the status and quantity of the product in a warehouse. A proper Inventory Management System will help to keep this information up to date.

Optimizing delivery speed

You have to process orders taking into consideration the location of your stores and warehouses if you are to deliver each order as quickly as possible. To do so, you need a system that will analyze the locations of the sites and calculate the shortest route to deliver the necessary quantity of the product.

Synchronizing the channels

Just because you sell through multiple channels does not mean that you can call your strategy multichannel. You have to ensure a seamless experience. While maintaining channel-specific processes, you have to synchronize all the data across channels without loss of data. The price, product description, available quantity, etc. must be transparent and consistent across all the channels. A distributor has to prevent channel conflicts.

Channel specific processes

Every channel may have its own specific processes to enable the placement of orders on that channel. These processes must be adopted and optimized to the manner in which customers are used to operating on this channel. Nevertheless, they should be integrated with the omnichannel marketing strategy to make the customer journey easy and effective.

Driving your reverse logistics omnichannel

If you are implementing an omnichannel strategy, you should allow your customers not only to buy but also to make returns in a convenient way. For now, people mostly send items back via mail but making returns via an Amazon drop off or a brick-and-mortar store is becoming more and more popular. The good news is that if people have the option of returning an item to a store, they can linger there to choose a replacement, or buy something else.

Trends in omnichannel distribution 2020-2025

Easy checkout

Checkout is one of the most important parts of the shopping experience. And a complicated or long checkout process is often the reason why people abandon their carts. That’s why the optimization of the checkout process across channels is a relevant task. Companies try to shorten forms and offer convenient payment options including Apple Pay, mobile wallet, financing options and a “buy now, pay later” service.

Higher flexibility

Omnichannel customers have different options they can choose from to purchase. It is easier to return the product, even in a different location. The flexibility improves customer satisfaction, so they are more likely to buy new products from the same company, and become loyal customers.

AI-driven personalization

This trend is not new but there is always place for improvement. Especially, since younger generations don’t object to sharing their personal data as much as, say, Baby Boomers. On the other hand, various artificial intelligence and big-data processing tools have become more and more accessible. And many more companies can afford to use them to analyze their prospects’ browsing and purchasing behavior and deliver on-site product recommendations.

Growing the variety of order fulfillment options

Omnichannel distributors offer online shoppers shipping from a local store, in-store pickup, very cheap or even free shipping. For sellers, this means more moving parts in the fulfillment process and a doubling of efforts in cross-channel inventory management.

Physical shops should deliver a great experience

Today, customers don’t have to visit your brick-and-mortar shop. But if they do, you should find out why and use this knowledge. Maybe they like the social aspect, or perhaps it fulfills their need to try on an item before buying it. You may then make your physical stores even more attractive by, for example, offering special related services or promotions, or even workshops related to your product, in your brick-and-mortar shops only.

Augmented Reality usage

More and more AR apps that facilitate multi-channel distribution have been developed. These include, for example, virtual fitting rooms or the apps visualizing furniture items in your apartment, or even customized cars.

Best practices for omnichannel distribution strategy

Centralize and unify data

Customers spend more time and money using omnichannel services. Many of the channels are online channels, so it’s easier to gather information about potential customers. For efficient marketing, order taking and processing, you need to keep your data synchronized, centralized, and unified over all your channels.

Select the right technology solutions

Technology that supports your omnichannel retail strategy is essential. Your inventory management system, order management system, and all the software you use must be well-integrated, satisfying your company’s current needs as well as possible future requirements. All possible processes should be automated.

Train your shop assistants

The omnichannel distribution strategy will do no good if only upper management cares about providing it. Shop assistants have to support omnichannel practices. Physical store assistants may, for example, have to pick, pack and ship online orders, or they could help to gather information about customers.

To make it more convenient and efficient, provide them with corresponding mobile technologies. They should be able to connect to your e-commerce platform and access product information, customer data (like preferences and purchase histories), and inventory information. In this way, shop assistants can provide better assistance and an improved customer experience to drive sales.

Conclusion

Omnichannel distribution is considered the future of retail. Brands and suppliers who plan their omnichannel strategy now can take advantage of the competition. It’s important to deliver a consistent and pleasant experience through all the channels and make the interaction seamless so that a customer doesn’t even notice that they are switching channels. Using the right technological solutions will help to overcome the acute challenges in implementing this strategy.


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