Individual Critique Essay

  • Category:
    Business
  • Document type:
    Essay
  • Level:
    Masters
  • Page:
    4
  • Words:
    2275

Competing in the Age of Omnichannel Retailing: A Critical Review

Competing in the Age of Omnichannel Retailing: A Critical Review

Introduction

Advances in mobile computing and the Internet are some of the recent technological advances that have had a huge impact on the retail industry. Mobile computing and the Internet have revolutionized the retail industry by changing how retailers interact with customers, as well as how people shop today. Brown et al. (2014) reveals that, unlike in the past, where people relied on the bricks and mortar shopping platform, presently, there is a growing trend towards Omnichannel retailing that is increasingly becoming common. In the article, Competing in the Age of Omnichannel Retailing, Erik Brynjolfsson, Yu Hu and Mohammad S. Rahman reveal that Omnichannel retailing is a buzz in today’s retail industry. They note that omnichannel retailing is increasingly becoming a retail operating model facilitating retail service delivery and customer engagement operations that augment offline and online channels. Pawar and Sarmah (2015, p. 101) notes that, at the moment, Omnichannel retailing is still young but the model is projected to be more advanced. Despite the many opportunities that come with the adoption of Omnichannel as a retail model, its adoption is also characterized by challenges that a retail chain must address to ensure success. This critical review is based on the MITSloan Management Review, Competing in the Age of Omnichannel Retailing with a focus on the Omnichannel retailing enabling technologies, opportunities and challenges, and success strategies for Omnichannel retailing.

Overview of Omnichannel Retailing

In the article, Competing in the Age of Omnichannel Retailing, Brynjolfsson et al. (2013, p. 22) notes that Omnichannel is increasingly becoming a popular retailing operation model. The authors reveal that Omnichannel is increasingly become adopted as a retailing model by most large retail chains. Although this is still a young business model, the authors project that retailing chains are recognizing that the only way to remain competitive is to adopt Omnichannel retailing as a business model because it is a concept that most customers have embraced. Omnichannel retailing is a business model that involves providing shopping experience, anytime and anywhere. According to Brynjolfsson et al. (2013, p. 22), as consumers move between physical and digital channels, the differences between in-store and online shopping become minimal and that reaching out to target customers in a market through all possible shopping points becomes very critical. This view is supported by Kit Yarrow, a Marketing Professor at Golden State University who argues that when businesses look at the world through the consumer’s eyes, it is then that businesses make better marketing decisions (Mehra 201). The professor proceeds to state that shoppers no longer look at the world through the lens of in-store versus online shopping. Instead, the two are currently integrated in the minds of consumers (Mehra 201). This is indicated by the fact that shoppers throughout the globe are no longer limited to just a single channel, thus the need for retailers to integrate various operations and this is made possible through Omnichannel.

Gajanan and Basuroy (2007, p. 6) state that most executives at traditional retailers no longer try to attract customers to their brands using multi-channel approach. Instead, most retails currently adopt Omnichannel retail operation approach to luring customers to their brands. Shoppers Stop, Spencer, Future Group and Croma are just few examples of retailers that have adopted Omnichannel retailing through the integration of in-stores and websites (Neslin et al. 2006, p. 96; Sauter 2016, p. 31).

Omnichannel Retailing Enabling Technologies

Brynjolfsson, Hu and Rahman (2013) argue that Omnichannel retiling model that is becoming a buzz in the retail industry today is made possible by the increased availability of location-based mobile applications. The authors cite Pew Research Center 2012 study that found that about 74% of American smartphone holders use their phones to gain location-based information (Brynjolfsson et al. 2013, p. 24). In response, retailing chains are increasingly taking advantage of the business opportunities created by location-based mobile applications to build Omnichannel retailing operations. Walgreens is an example of a company that has taken advantage of the opportunities created by location-based applications to create an Omnichannel retailing operations. Westenberg et al. (2012) notes that the retail chain has partnered with location-based social networking website giant Foursquare to provide its customers Omnichannel retailing experience that involves giving customers electronic coupons in their smartphone gadgets any time they visit Walgreens store.

Macy’s is the other examples of a retailer that has embraced Omnichannel as a business model as the retailer reportedly provides free internet services in its stores that allows consumers that visit its stores to scan QR codes on products that are available on the stores, check out the prices and online review, as well as videos of the fashion trends. Pawar and Sarmah (2015, p. 104) states that, this way, customers are able to make a well-informed decision about the products before proceeding to buy. Other retailers that have used the power of location-based applications to create an Omnichannel retailing platform include Saks Fifth and eBay’s RedLaser just to name but a few.

Opportunities and Challenges

In the article, Brynjolfsson et al. (2013, p. 25) states that opportunities are abound with the adoption of Omnichannel retailing operation. According to the authors, the emergence of mobile technologies has greatly transformed consumer behavior and expectations. They proceed to state that mobile technologies allow both online and offline retailers to reach out to new customers and grow their markets. According to Sauter (2016, p. 9), mobile has enabled people to have the Internet within their reach all the time and this allows customers to browse for the products they need wherever they are. At the same time, retailer apps, such as those developed by Wal-Mart, Macy’s and Target among other retailers allow customers to look for products and prices that the retailers have to offer in their stores locally. This way, the mobile apps are able to provide customers with accurate information regarding products that are available in their stores, thus enabling the retailers to attract customers, including those who could otherwise have searched for products online to their stores. Brynjolfsson et al. (2013, p. 25) cites Apple’s Siri app an example of a mobile app that provides customers with accurate information about the products and make even recommendations that a customer might not have been knowledgeable about and directs visitors of a city to the local specialty stores, where they can buy the products of their choice based on the information gathered in their mobile app Siri. Additionally, the availability of information about prices on the mobile apps increases the ability of a customer to shop online and collect products in local stores. Besides, Neslin and Shankar (2009, p. 71) argue that location-based apps creates opportunity for new selling experiences in the sense that it allows local retailers that intends to increase their sales activities to deliver promotional messages to customers, including those in rival stores. Moreover, smartphones allow retailers to track consumers that they could not track in the olden days through fixed connections to the internet.

Additionally, Omnichannel provides retailers with opportunity considering that the adoption of multi-channel ensures improved revenue generation and customer loyalty. A study conducted by Verde Group and the J.H. Baker Retailing Centre in 2011 found that customers that shop through multi-channels tend to be more loyal and spend more on shopping than those that use a single-channel (Brown et al. 2014). The same study also found that the loyalty that a customer has with a brand is directly related to the retail channel usage. In this respect, it was found that the more channels a retailer offers for usage by customers, the more channels a customer buy a product. At the same time, it was found that the more channels a consumer shops, the more the consumer becomes loyal to a brand. This study confirms Brynjolfsson et al. (2013, p. 26) assertion that Omnichannel is beneficial and offers immense opportunity for retailers that adopt it as a business model.

Despite the numerous opportunities that come with the adoption of Omnichannel retail operations, Brynjolfsson et al. (2013, p. 26) argues that this retail has its share of challenges that retailers must understand. The authors particularly cite that the adoption of Omnichannel retail platforms have resulted in increased intensity of the competitive landscape. According to the authors, the fact that there are abundant information about prices and product information coupled with the ability of customers to shop online and get products on the local store, as well as integration of online and offline contents have made the retail landscape more competitive than before. For instance, Pawar and Sarmah (2015, p. 105) reveals that, unlike in the past where retailers relied heavily on geographic and customer ignorance barriers to advance their positions in the old markets, technological advancements have eliminated these barriers. Thus, a company now must deal with customers with honesty since customers are now able to get information about a market from multiple sources, such as third parties. This, therefore, indicates that the days where retailers used to deceive customers are gone and they must become honest in their dealings with customers to ensure success.

Successful Strategies for Omnichannel Retailing

Although Omnichannel retailing model has certain features similar to e-commerce business model, such as price comparison ability and the ability to generate ads, it is not yet clear what is required to successfully implement this retailing model. Therefore, in this article, Brynjolfsson et al. (2013, p. 26) proposed a number of strategies that they believe retailing businesses should adopt to ensure successful adoption and implementation of Omnichannel retailing. The first strategy involves the adoption of attractive pricing and curated content. In this respect, the authors suggest that to succeed in adopting Omnichannel retailing, retailing businesses should ensure that they avoid price wars with rivals companies, as well as ensure that consumers are provided curated merchandisers the same way Amazon has done it with its e-commerce business. According to Brynjolfsson et al. (2013, p. 26), Amazon not only charge affordable prices for its products, but has also ensured that its products are neatly and systematically presented, and are well-curated, which makes it easy for customers to interact with Amazon easily when making their purchasing decisions. Second, the authors recommend that retailers should consider harnessing data and analytics power to ensure successful adoption of Omnichannel retailing. According to Bell et al. (2014, p. 2), harnessing data and analytics powers, such as data from mobile, social networks and local channels allows the retailers to be able to understand their customer behaviors, as well as their interactions and how best to serve them. Third, the authors suggest that retailers must avoid making direct price comparisons by making it difficult for customers to make direct price comparisons as this will protect the retailers from their customers being poached by retailers. To achieve this, Neslin and Shankar (2009, p. 72) advise that retailers should consider offering distinct products, creating exclusive products, as well as bundling the products. Forth strategy involves focusing on the niche products. Other strategies recommend for successful Omnichannel retailing include emphasizing more on product knowledge, establishing switching cost.

Conclusion

The analysis has shown that Omnichannel is becoming a popular retailing operation model. A significant number of retail businesses have embraced this model, which is still at its early stages. As indicated in the review, Omnichannel has enabling mainly by location-based applications that allows retailing business to offer an integrated online and offline retailing channels, which comprises of digital and in-store purchasing experience. However, competition happens to be the greatest challenge associated with this business model. Nevertheless, the review has also indicated that as much as Omnichannel retailing shares some similarities with e-commerce platforms, it takes a lot to successfully operate with Omnichannel retailing model. As such, the authors of the article have recommended a number of strategies that retailing adopting this retailing operation model should factor in to ensure success. These include adopting attractive pricing and curated contents, harnessing data and analytics power, avoiding direct price comparisons, dealing with niche products, product knowledge emphasis, establishing switching costs, as well as embracing competition.

References

Bell R.D., Gallino S., & Moreno S. (2014). How to win in an Omni-channel world. MIT Sloan Management Review, vol. 56, no. 1, pp. 1-12.

Brown M., Moriarty, M., & Mendonza-Pena A 2014, on solid ground: brick and mortar is the foundation for Omni-channel retailing, viewed 11 October 2016 http://www.atkearney.com/documents/10192/4683364/On+Solid+Ground.pdf/f96d82ce-e40c-450d-97bb-884b017f4cd7

Brynjolfsson, B., Hu, Y. J., & Rahman, M. S 2013, “Competing in the age of omnichannel retailing,” MIT Sloan Management Review, vol. 54, no. 4, pp. 22-29.

Gajanan, S., & Basuroy, S 2007, “Multi-channel retailing and its implications on consumer shopping behaviour,” Journal of Shopping Centre Research, vol. 14, no. 2, pp. 1-28.

Mehra, G 2012, Omni-channel retailing: If you build it, they will shop, Deloitte, WSJ, May 17, 2012, viewed 11 October 2016 http://deloitte.wsj.com/cio/2012/05/17/omnichannel-retailing-supporting-multiple-consumer-touchpoints/

Neslin, S. A., & Shankar, V 2009, “Key issues in multi-channel customer management: Current knowledge and future directions,” Journal of Interactive Marketing, vol. 23, pp. 70-81.

Neslin, S. A., Grewal, D., Leghorn, R., Shankar, V., Teerling, M. L., Thomas, J. S., Verhoef, P. C 2006, “Challenges and opportunities in multichannel management,” Journal of Service Research vol. 9, no. 2, pp. 95-113.

Pawar, S., & Sarmah, T 2015, “Omni-channel retailing: The Opulent Blend moving towards a customer driven approach,” International Refereed Research Journal, vol. VI, no. 3, pp. 101-110.

Sauter, C 2016, Omni-channel retailing and its requirements in the supply chain. GRIN Verlag, Berlin.

Westenberg E., Popat B., & Stine J 2012, The operational implications of omnichannel retailing. CISCO, viewed 11 October 2016 https://www.cisco.com/web/about/ac79/docs/retail/Omnichannel-Retail-POV.pdf