Michael Ling Page 1

Omnichannel customer experience

Table of Contents 1. Introduction ............................................................................................................................. 2

2. Background .............................................................................................................................. 2

3. Opportunities ........................................................................................................................... 3

4. Challenges ................................................................................................................................ 4

5. Best practices ........................................................................................................................... 5

6. Online to offline (O2O) ............................................................................................................ 6

7. Implications for B2B industries ................................................................................................ 8

8. Conclusion ................................................................................................................................ 9

Michael Ling Page 2

1. Introduction

With an ever growing population of socially networked and digitally connected

customers, one of the priorities for many organizations is to create an omnichannel

strategy that provides real-time, consistent and personalized customer experiences

across all customer touch points. Omnichannel strategy has so far been primarily

addressed in the B2C or retail industry; nevertheless, its significance in B2B industries

should not be underestimated. This article briefly discusses the opportunities,

challenges, and best practices of omnichannel strategy in the B2C and B2B industries.

2. Background

Omnichannel can be defined as “the evolution of multi-channel retailing, but is

concentrated more on a seamless approach to the consumer experience through all

available shopping channels, i.e. mobile internet devices, computers, brick-and-mortar,

television, radio, direct mail, catalog and so on” [1]. For example, Burberry uses RFID

(radio frequency identification) tags in their merchandise to trigger interactive videos

that “brings our digital world to life in a physical space” for its in-store customers [2]. A

typical example of omnichannel experience is one whereby a customer can browse a

product catalogue online, place and pay for the order via a mobile phone, choose to pick

up the good in a physical store or have it delivered to a location of convenience to the

customer, and have the option of returning the good back to a physical store in case the

customer is not satisfied with it. There are variations to the above example in terms of

customer events, choices and touch points; for example, customers opting to make an

online purchase after trying out a dress in a physical store, or customers asking for a

refund at a physical store for goods purchased online. Nevertheless, the principle of

offering a real-time, consistent, relevant, and personalized customer experience holds.

Michael Ling Page 3

3. Opportunities

By providing seamless customer-centric experiences across customer touch points,

omnichannel strategy is at the core of every customer strategy (B2C and B2B). It is the

capability of an organization to understand customer needs and to respond to these

needs precisely at the point of customer interaction that drives customer satisfaction,

loyalty and commitment, and ultimately, revenue in the business. In the article titled

“Competing in the age of omnichannel retailing” [3], the authors address the move in

retail towards a seamless “omnichannel retailing” experience for customers whereby

technology has blurred the distinction between physical and online stores. The B2C

industry commonly constitutes a combination of online retailers, brick-and-mortar

retailers, and retailers that have both online and physical stores. Marketplaces, such as

Amazon, eBay and Alibaba, provide more channel options to businesses selling their

merchandise via branded marketplaces, online stores, or a combination of both. By

choosing marketplaces as online channels, businesses can save substantial costs in

setting up online stores and also take advantage of the traffic in marketplaces. In the

US, about 24 percent of e-tail business transactions are conducted over marketplaces,

whereas over 90 percent of e-tail business transactions are conducted over

marketplaces, such as Tmall (Business-to-consumer) and Taobao (Consumer-to-

consumer) in China [4]. It is important for businesses to take into consideration the

local market environment and context when designing the framework and processes of

their omnichannel strategy. As a result, marketplaces should be taken into

consideration when considering opportunities for an omnichannel strategy in China. An

Omnichannel strategy typically entails best-in-class capabilities such as search,

navigation, product information retrieval and presentation, personalized

recommendations and integrated customer service; capturing customer demand in

every available channel that would otherwise be lost to competition; and enhancing

brand management and customer loyalty through integrations via social networks,

ratings and reviews. In addition, the real-time insights gained, such as purchase

behaviors and preferences of customers, can be used to enhance the overall business

Michael Ling Page 4

capability, beyond customer engagement, in areas such as products, inventory,

customer segmentation, pricing, marketing, supply chain, fulfillment and channels.

According to a 2012 study by Retail Systems Research, omnichannel strategy is

perceived to be important to an organization in the following aspects [5]:

Consistent customer experience across all channels

Inventory visibility across all channels

Fulfillment

Customer order visibility across all channels

Digital marketing (ecommerce, mobile, social media)

Pricing strategies

Loyalty management

4. Challenges

To provide omnichannel capability, organizations requires accurate, real-time data

analysis pertaining to multiple aspects of their business; ranging from inventory,

manufacturing, sales, pricing, marketing, supply chain, and information on the relevant

stakeholders in the ecosystem. Much of the capability and performance of the

omnichannel implementation depends on gathering and analyzing data to understand

and anticipate what customers’ needs, wants and preferences are. The success of the

omnichannel hinges heavily on a genuine understanding of the context in which each

customer interaction takes place and a capability to leverage the customer insights

gained in delivering a real-time personalized experience to customers. According to IDC,

the challenges of omnichannel are in the “complexity of adapting customer-facing

marketing, selling, and fulfillment strategies and tactics but runs much deeper,

entangled in data and IT structures that were built and augmented over many years” [6].

Other common challenges include: Customer expectations outpace the organization’s

capability to continually enhance customer experiences in the omnichannels; ensuring

sufficient inventory is available in the right locations; enabling personalized interactions

Michael Ling Page 5

with real-time data; developing seamless integrated business processes across channels;

ensuring consistent product information across channels; maintaining a single view of

customers across channels; understanding customer purchase behaviors and

preferences across channels; offering a global multi-site, multi-language and multi-

currency platform; and a scalable e-commerce platform to cope with the rapid growth

of customer interactions and transaction volume. In addition, it is necessary to institute

business change programs to put in place the appropriate organizational structures and

alignments for the omnichannel strategy; creating cross-functional business processes

that deliver integrated customer experiences, and overcoming technical and IT system

challenges and barriers. In the case of China, its cultural, regulatory, market and

technology characteristics have to be taken into account when constructing seamless

omnichannel customer experiences for Chinese customers; such as the customer

purchase behavior, the mobile and computer device usage patterns, the search engines

(Google search engine is not accessible in China), the social networking landscape and

sites (Facebook and Twitter are barred in China), the e-commerce landscape, and the IT

system and software vendors. For example, iBeacon [7], which designs simplified

payments and on-site offers, may be able to gain adoption in the West but it might be

difficult for iBeacon to gain traction in China, because the Chinese market is dominated

by Wechat (one of the largest social networking sites in China, similar to Twitter) and QR

codes in the retail sector. Therefore, for China as for any other country, an effective

omnichannel strategy should take the behavioral, societal, market and technological

factors of the local country into consideration.

5. Best practices

Best practices in omnichannel implementation deliver consistent shopping experiences

and build ongoing relationships with customers [8], such as the ability to engage and

connect intimately with customers via mobile and social channels, availability of

consistent product information and accurate up-to-the minute promotion deals across

Michael Ling Page 6

all channels, and the ability for customers to shop online and pick up the merchandise in

local stores. More importantly, the key to best practice is the provision of an intelligent

data and information platform that collects, manages and analyzes data across all

channels in order to send relevant and personalized messages to customers. In today’s

digital business environment, the best practices are enabled by the current state-of-art

technologies; for example, mobile technologies and applications that provide real-time

anywhere interactive experiences to customers; in-store applications that push

marketing and product recommendations to shoppers, location-based applications that

run on mobile devices sending relevant and contextual marketing and promotional

messages to shoppers in the vicinity; QR codes that provide product reviews, pricing and

coupons on products; mobile payment applications that are convenient and hassle-free;

e-commerce platform that is integrated with inventory and order management systems

across channels. Business analytics and predictive analytics must also be employed, in

conjunction with data warehousing, to deal with the enormous amount of real-time

data generated from social, mobile, local stores and other customer touch points.

6. Online to offline (O2O)

O2O (online to offline) mode can be considered as a subset of omnichannel strategy as

its emphasis is unidirectional – utilizing online channels to drive customers to offline

channels. It is primary deployed in the services sector to attract customers online but

then direct the consumption of those services to the offline channel. For example,

Groupon and Restaurant.com are O2O online sites providing discovery services for local

retail service providers, where customers can research restaurants in their local areas by

cuisine, price, reviews, and other criteria, and then make reservations online. Groupon

provides coupons for local services to customers who have signed up to receive offers or

promotions from stores, restaurants, pubs and other establishments in their local area.

In China, the market of O2O reached 98 billion RMB (or 10 percent of the B2C market) in

2012 and is projected to grow to 418 billion RMB (or 30 percent of the B2Cm market) in

Michael Ling Page 7

2015 [9, 10]. O2O has been deployed mainly in the “life-services” sector in China; i.e.

products and services delivered through physical outlets entailing food, drinks, body

fitness, movies, arts and performance, hairdressing and travel. Companies and group

buying sites, such as Gaopeng (or Groupon China), MeiTuan and Dianping, set up

accounts in social media platforms, such as Wechat, which has over 500 million

subscribers, to establish brand loyalty, build relationships with the customers, and drive

businesses to the service outlets. For example, Lenovo uses its public accounts in

WeChat to send messages to customers about new products and promotions, allowing

customers to browse products at real stores and then to pay for the products using

WeChat. As social networking and mobile terminal technology continue to advance,

they exert significant influence on China’s O2O development. Nevertheless, there are

concerns raised about the feasibility of O2O because of the potential for conflicts with

channel partners. Channel conflict is a problem for brands that have a large network of

channel partners, such as distributors and specialty shops. For example, customers

purchasing goods at the brand’s website may want to pick up the goods at the local

shop which may happen to be a franchise not owned by the brand, and this franchise

may not be willing to cooperate because this is not its sale. In China, channel conflict is

a severe problem for brands implementing O2O initiatives because brands rely on a vast

network of channel partners to distribute their goods across China. Nevertheless, there

are a number of notable Chinese examples in O2O; for example the successful business

transformation of Suning, one of the largest electrical appliance chain store in China,

into an internet-driven omnichannel retail business that incorporates O2O. Another

example is Tmall, one of the largest B2C marketplace platforms. In the lead up to the

double eleven sale (which takes place on the eleventh of November every year), Tmall

teams up with over three hundred brands and thirty-thousand retail outlets in an O2O

initiative during the sale. Another example is Baidu, China’s most popular search

engine, which set up a strategic alliance with the Wanda Group, a commercial

properties group, and with Tencent, one of the largest social networking service

providers, to form an O2O joint venture.

Michael Ling Page 8

7. Implications for B2B industries

According to a Forrester’s report [11], B2B customers have gradually transitioned their

buying from offline channels into online and mobile channels, and B2B buyers are

displaying similar expectations as B2C shoppers, including: Superior customer

experiences via store locators and personalized product recommendations; cross-

channel capabilities such as purchasing products online or from a branch and then

having the products shipped directly to a selected location; fulfillment capabilities such

as next-day delivery, order tracking and tracing; inventory visibility in store or across

channels. B2B buyers expect an omnichannel experience where they can search for

product information, check account history, take delivery, and return and exchange

goods across all channels. With this in mind, B2B businesses can differentiate

themselves by offering omnichannel experiences to their B2B buyers in the industries

they serve. The best practices in B2B omnichannel operation include: an integrated

eCommerce platform with back-end systems, call center system, data analytics,

warehouse, shipping and fulfillment systems and social media applications; a unified

view of inventory across all channels; multiple versions of product catalogs and

individualized pricing for different brands and different countries. In the case of China,

about seventy percent of B2B eCommerce is dominated by marketplaces [12] such as

Alibaba (45 percent), Global Sources (9 percent), Mysteel (6 percent), HC360 (3

percent), and Made-in-China (3 percent). In China, most businesses rely on third-party

B2B marketplaces and some ad hoc combinations of CRM and order management

systems, rather than building their own eCommerce platforms. Like their overseas

counterparts, Chinese B2B businesses expect omnichannel experiences, similar to those

in the B2C markets, and have started building B2B omnichannels. For example, State

Grid and China Unicom, two of China’s largest state-owned enterprises, have built their

own B2B omnichannel platforms. Haier, a large consumer electronics manufacturer, has

built its B2B omnichannel marketplace by implementing a solution from hybris, an

eCommerce software vendor.

Michael Ling Page 9

8. Conclusion

Omnichannel provides businesses, B2B or B2C, with a much deeper, personalized

relationship with their customers. To compete successfully in a digital connected world

organizations are increasingly forced to adopt an omnichannel approach. Though there

are variations in terms of cultural, regulatory, market and technological factors between

the West and China, the trend towards omnichannel operation is universal across

countries. Evidence shows that China has already embraced omnichannel strategies in

its B2C industries and that China has recently started to adopt omnichannels in its B2B

industries.

_____________________________________________________

Note 1: Wikipedia. Retrieved Jan 8, 2014, from http://en.wikipedia.org/wiki/Omni-

channel_Retailing

Note 2: Miller, M. (2012). Burberry turns global flagship into living website ahead of

London fashion week. Brandchannel, September 14.

Note 3: Brynjolfsson, E., Hu, Y., & Rahman, M. (2013). Competing in the age of

omnichannel retailing. MIT Sloan Management Review, 54(4), 1-7.

Note 4: McKinsey Global Institute. (2013). China’s e-tail revolution: Online shopping as a

catalyst for growth.

Note 5: Retail Systems Research, June 2012.

Note 6: IDC. (2014), IDC Retail Insights: Retail IT Infrastructure Strategies, #R1243936.

Note 7: Evans, J. (2014). Apple and the omnichannel: 9 industries already using iBeacon.

Retrieved Jan 8, 2014, from http://www.computerworld.com/article/2476570/retail-

it/apple-and-the-omnichannel--9-industries-already-using-ibeacon.html

Michael Ling Page 10

Note 8: IDC. (2014), IDC Retail Insights: Retail IT Infrastructure Strategies, #R1243936

Note 9: iMedia Research. (2012). China O2O market research report.

Note 10: CECRC. (2013). China E-commerce market data monitoring report.

Note 11: Forrester Research. (2014). Building the B2B omni-channel commerce platform

of the future.

Note 12: McKinsey Global Institute. (2013). China’s e-tail revolution: Online shopping as

a catalyst for growth.