Reality hits omnichannel retail with a hard truth

Discussion
Photo: Kohl’s
Jan 11, 2022

Does a customer really care who handles their purchases, customer service questions or returns so long as it’s fast and convenient? Is a unified back-end process managed by a single entity the key determinant of loyalty in 2022?

Having recently purchased an item from Walmart.com and returning it to a FedEx office closer to my home than the nearest Walmart store, I’d say no to each of these questions. Walmart’s willingness to “farm out” this aspect of product returns points to an opportunity that goes beyond traditional operating models.

The same could be said of department stores spinning off their e-commerce businesses. Many retail experts express horror at what looks like a regressive step in the pursuit of a unified customer experience.

Some fear competition for customers between formerly unified store and e-commerce operations. Others see stores becoming simple distribution centers optimized to support digital sales and returns.

Retail’s omnichannel problem has been characterized as operational silos preventing a seamless customer journey across channels. That was true in the past, but there are factors redefining omnichannel now.

A software engineering team focused on customer experience is concerned with the in-store experience to the extent it helps customers find, buy and collect their purchases most efficiently. Nothing in that statement suggests stores must be owned and operated by the same entity. It’s a research exercise, not a required business model.

Shopping behaviors have been forever changed by the pandemic, with consumers buying more online. Successful digital operations are a necessity, not an option. These need funding and focus given the rapid pace of innovation and competition.

Speaking of innovation, Industry Clouds from AWS, Google, Microsoft and others are driving massive growth in these technology businesses. These are bringing best practices, lower costs and agility to retailers struggling to adapt to constant change, given decades of legacy IT acting as an anchor on digital transformation.

The cloud offers easy access to analytic methods like AI and external data to power differentiated experiences across any touchpoint — be it digital or physical. Greater intra-industry partnering, technology integration strategy and Cloud will define omnichannel success in 2022 more so than intertwining store and e-commerce operations under a single banner.

DISCUSSION QUESTIONS: Do customers care who handles their purchases, customer service questions or returns? Can retailers maintain seamless customer experiences via separate physical and digital operations?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Activist investors are pushing stores like Macy’s and Kohl’s to separate their brick-and-mortar and digital operations, but this is totally counterintuitive."
"... as far as the customer is concerned, there should be just one relationship with the retailer irrespective of shopping online or in-store. "
"At some point, this becomes an issue of theory vs practice."

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39 Comments on "Reality hits omnichannel retail with a hard truth"


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David Naumann
BrainTrust

Customers don’t care what company handles their purchases, fulfillment, customer service or returns with one caveat – as long as it doesn’t impact a seamless, frictionless, and fast service. Separating physical and digital operations into two different entities can exacerbate potential issues, such as seamless fulfillment, a focus on customer service and revenue attribution. If the order is placed via an online entity and it is fulfilled in the store (another entity), does the store get compensated in any way for servicing the customer?

Richard Hernandez
BrainTrust

Yes – seamless, frictionless and fast service indeed. I had to buy a washer and dryer this past weekend and the whole process took over two hours.

David Slavick
BrainTrust

Good thing you didn’t have to apply for a credit card to get 0 percent interest, it may have taken longer!

Richard Hernandez
BrainTrust

You are correct — I did!

Neil Saunders
BrainTrust

Separate physical and digital businesses can create seamless experiences but it is more difficult to engineer – hence the reason Saks has a bazillion operational agreements and protocols between its two entities. That isn’t efficient and doesn’t bode well in the longer term when the different businesses may wish to diverge. This whole article also ignores the elephant in the room: why is it necessary to split the businesses? This isn’t about creating more value for the customer or a better experience or allowing more investment to flow to digital. This is a financial move that allows Wall Street to over-inflate digital valuations and profit from it while devaluing stores that play a critical role in supporting the brand. Long term it is a recipe for disaster.

David Slavick
BrainTrust

Spot on, see my comments!

Doug Garnett
BrainTrust

As long as I’m satisfied that my concerns are heard, it doesn’t matter where I return the product. But there is a huge possible issue there: for example: FedEx purely takes a return – they don’t hear concerns. The lack of a company who works out a problem has frustrated me considerably with Amazon and most retailers today.

If customers are to stick with you for the long run, they must not only be able to toss product back at you, but be satisfied that someone worked with them. We must not believe that it is sufficient to offer an arms length, impersonal opportunity to toss products back to someone.

Dick Seesel
BrainTrust

Activist investors are pushing stores like Macy’s and Kohl’s to separate their brick-and-mortar and digital operations, but this is totally counterintuitive. Customers want “seamless,” and the best omnichannel retailers have figured out how to deliver that experience. To create two competing entities — both named “Macy’s” — makes no sense from a customer-centric point of view.

Chuck Ehredt
BrainTrust

I agree that customers don’t care which entity is involved in delivering each touchpoint in a customer journey, but brands should. That does not mean the brand has to control/employ the personnel delivering the service, but brands need to make sure the right framework is in place so they can retain control of what really matters. That means the customer relationship is to the brand and does not end up being with the outsourced service providers. The CRM makes sure the brand is capturing the rich customer insight that comes from each touchpoint so they can improve personalization over time. And there is a focus on revenue/EBITDA so the brand is maximizing its business potential via economies of scale.

After all, you can get very different customer experiences from different employees in the same company, so standardizing around best practices (possibly provided by third parties) should lead to improvement as long as the right framework is in place.

Dion Kenney
BrainTrust
7 months 5 days ago

There is no single model that will adequately serve all retailers, products and shoppers. Do I care how and where my Tide Scent-Free Pods laundry detergent comes from? Probably not. Do I care about my suits? YES! (Brooks Brothers, measured and tailored to fit, ready by Tuesday, with final fitting in store!) Ultimately, the shopping experience is part of the relationship and experience with the customer, and there is no “one size fits all” solution. Tech should augment the store and shopper’s experience, not eliminate the need for a relationship between them.

Georganne Bender
BrainTrust

Consumers want a seamless transaction. As long as it is hassle-free they don’t care how each leg of the journey is handled or who handles it. They just want it to be easy.

As long as we are talking seamless, they do care about transparency. Retailers who charge one price online and another in-store are not consumer favorites. Standing in a store but doing a BOPIS transaction on their phones to get a better deal is more common that you might think.

Jeff Sward
BrainTrust
In this omnichannel market we now live in, efficiencies have to be explored and embraced where ever they can be found. I was one of those expressing horror at the spinning off of e-commerce businesses. But that was totally from a merchandising and brand management point of view. The execution of the delivery and return functions can absolutely be handled by third parties. Yes, Amazon owns a lot of its own planes and trucks and can be largely vertical in that regard. But UPS and FedEx work for a great many, many more retailers. My wife recently bought a pair of new reading glasses that had to be returned. The brand offered “package-less” returns and supplied a QR code. I took the unpackaged glasses to a UPS store where the code was scanned, I was handed my receipt and on my way in less than 60 seconds. That’s about as friction free as a return can get. It’s a credit to UPS but it’s a huge credit to the brand that put that process together.… Read more »
Shep Hyken
BrainTrust

Omnichannel — What does it mean? If you are reading this, you probably know. But your customers might not know, and they don’t care. What they do care about is how easy you make it for them to do business with you. Whether they are online, in-store, or a combination of both, they simply want the experience they want. If you give it to them, they just might come back for more!

Dave Wendland
BrainTrust

The simple answer is YES. Retailers can wisely join forces with a best-in-breed partner that offers certain aspects of customers service or returns.

The difficult part is ensuring a seamless experience for consumers. If there is a hint of disconnection or if the customer has to jump through additional hoops to interact with the retailer, the partnership is doomed.

Brian Cluster
BrainTrust

Returning products can be some of the most painful experiences at retail. Customers don’t care who handles the return as long it is done fairly, efficiently and they are treated well. We’ve been talking about omnichannel in retail for 10+ years now and with all of the digital acceleration in the past two years, customers have come to expect a seamless experience and flexibility. Moving to distinct brick-and-mortar vs. online experiences and processes will be a step back and a competitive disadvantage.

Bob Amster
BrainTrust

Customers inevitably care about not by whom but how all of their interactions with providers of goods and services are handled. (If they don’t, they should.)

Liza Amlani
BrainTrust

Customers want a seamless experience, delightful product choices, and great customer service. That’s it.

They don’t differentiate between channels or who handles their customer service questions or product inquiries.

I am not convinced separating physical and digital channels is a good idea as the intent is for investors to free up cash and the customer is not in the center of the decision. The customer loses as retailing becomes much more complicated. It’s financially motivated and the physical store, merchants/planners, and store staff seems to lose in the physical/digital war. We should be unifying commerce, creating seamless engagement across channels and this is the exact opposite.

Jeff Weidauer
BrainTrust

From a customer perspective, anything that makes returns easier is better. There is a business opportunity for a single solution for all online purchase returns.

Zel Bianco
BrainTrust

Unfortunately retailers, or restaurants for that matter, are generally on the losing side when trying to keep up with consumer demand for a seamless experience, whether ordering groceries or dinner. It has not been successful and the industry must find a way to make each side profit fairly. If not, the only ones making money will be the cloud services we all use — AWS, Azure and Google.

Gary Sankary
BrainTrust

Customers have different expectations for service. These are based on category, brand and retailer. What I would expect from Nordstrom is really different from what I expect from Walmart, and there is a difference between my expectations of buying toothpaste and a video game console.

Customers want seamless experiences, from purchase to return. Retailers need to consider what their customers expectations are for their brand when they make decisions about splitting off their digital businesses. Can they insure that the model they go with can the continue to deliver their customers expected experiences?

Bob Phibbs
BrainTrust

This line that shopping behaviors have forever been changed just doesn’t hold water. Yes there are many options but that’s not why cleaving off online is popular. It is Wall Street. Shoppers go where they feel they matter. If they don’t feel anything, they might as well shop online. If it is just a replacement, they might as well shop online. But looking at stores as mere waypoints to delivery is a big misstep.