A number of brick-and-mortar retailers are seeking strategies to keep up with their e-commerce counterparts. Although vendors existing mainly in the physical realm are still seeing success, their revenues are falling behind that of e-commerce firms. As a result, many companies - in both the online and physical spaces - are turning to omni-channel commerce strategies to boost their profits and better serve their customers.
Wal-Mart vs. Amazon: A real world example
Just one example of this shift can be seen with Wal-Mart and Amazon. According to Forbes contributor Steve Banker, Wal-Mart has been maintaining an online presence for over a decade now. However, its Web-based sales pale in comparison to that of e-commerce giant Amazon.
Although Wal-Mart saw total revenues of $469 billion last year, its online sales only accounted for $7.7 billion. During the same time, Amazon made more than $61 billion solely through Web-based purchases.
As a result, Wal-Mart has plans in place to shift its service and distribution models, which would create a "next generation fulfillment network," according to The Wall Street Journal. In this way, the retailer isn't mirroring Amazon's structure, but will instead better combine existing stores, distribution centers and new facilities. This could include the establishment of new warehouses as the business grows, noted Walmart.com president Joel Anderson.
As a result of this change to an omni-channel commerce strategy, the company hopes its online sales will reach $10 billion by the end of 2014.
The shift toward an omni-channel business model
Banker noted that Wal-Mart isn't alone in its shift toward an omni-channel structure. Other popular retailers are following this model as well, including Macy's, Best Buy and Home Depot. When it comes to brick-and-mortar retailers, omni-channel processes include leveraging the companies' strategic locations to provide consumers with the products they are demanding.
"Instead of fulfilling Web orders from warehouses hundreds of miles from shoppers' homes, companies including Wal-Mart, Best Buy and Gap are routing orders to stores nearby," noted USA Today contributor Alistair Barr. "Store employees pick products from shelves, pack them into boxes and drop them into waiting FedEx and UPS trucks that zip off to homes a few miles away."
This provides them with a competitive edge over Amazon, where orders might be filled halfway across the world from the customer's location. The shift toward an omni-channel business model is one of the most pivotal changes to take place with physical retailers over the next five years, predicted Matt Nemer, Wells Fargo Securities' retail industry analyst.
Tips to make a successful shift to omni-channel
However, an omni-channel model is about much more than shipping items from locations closer to consumers. There are several best practices businesses should observe to help ensure success with the change, including the following:
- Include all stakeholders: A shift of this kind will require insight and input from all essential parties within the company, including administrative leaders and shipping supervisors. However, one of the most critical departments to have on board is the IT team. Proper IT support will help guarantee that the change to an omni-channel structure goes off without a hitch. Some firms may want to consider bringing in a third-party IT consulting service to provide added support for their in-house teams.
- Re-examine the brand's online presence: Marketing Land contributor James Green advised that companies also take another look at their current online presence, ensuring that it is optimized to provide the best experience for end users. In particular, businesses should test conversion paths and reshape landing pages for both Web and mobile.
- Leverage ad campaigns to lead customers: The Future of Commerce also suggested using ad campaigns to draw customers into the different channels the brand supports. For instance, mailing campaigns can direct consumers to the business's website. Furthermore, Web pages can encourage shoppers to utilize the different shipping options available to them. Overall, the goal here is to create an integration of both online and offline channels.