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Omni-Channel Retailing Keeps Amazon in the Lead

Omni-Channel Retailing Keeps Amazon in the Lead

It's true that Amazon doesn't offer customers the opportunity to touch and feel its products, but with omni-channel retailing, it's easy enough for a customer to become relatively familiar with an actual product after hearing about it on the radio, seeing it on television, or observing it on some other form of electronic media or in an actual store, then go online to order it from Amazon.

By Theodore F. di Stefano
01/09/14 5:00 AM PT

A short while ago, few people had heard of omni-channel commerce, also known as omni-channel retailing. Today, however, if you were to ask most retail executives, you'd no doubt find that they are well-informed about the subject. In fact, our most ubiquitous brick-and-mortar retailer, Walmart, is currently quite immersed in this relatively new phenomenon.

Wikipedia defines omni-channel retailing as "the evolution of multi-channel retailing" but "concentrated more on a seamless approach to the consumer experience through all available shopping channels, i.e. mobile Internet devices, computers, bricks-and-mortar, television, radio, direct mail, catalog and so on.

"Retailers are meeting the new customer demands by deploying specialized supply chain strategy software," Wikipedia adds.

There's no doubt in my mind that you've experienced shoppers in malls standing in front of products while they are looking at their smartphones. Sure, they might be texting a friend or doing something else with their phones, but they might also be comparison shopping, checking out other retailers -- either brick-and-mortar or online -- to determine if the product that they are shopping for is available elsewhere at a better price. Alternatively, they might be trying to determine if a substitute product exists that would better suit their needs. The consumer has played a major role in the evolution of omni-channel retailing.

What's a Retailer to Do?

Not too long ago, retailers became aware of their customers browsing other stores and sites on their smartphones in order to compare their offerings with other brick-and-mortar or online offerings. In fact, around that time, some retailers blocked cellphone usage in their stores in order to sidestep the competition. It soon became apparent to retailers that consumers were not to be stifled by a firewall preventing them from comparative shopping.

Shoppers were going to search for the best deal no matter what barriers were set up against them. So what's a retailer to do?

Many realized that their best bet was to fully engage the customer by offering their products on many diverse shopping channels such as radio, direct mail, television and, of course, mobile Internet devices. The retailers became fully aware that the shoppers' quest for the best available product at the best possible price would not be denied.

The most fruitful approach for the retailer was to reach out to customers in as many modalities as possible and not to hide behind in-store firewalls to protect themselves from competing retailers. In this fashion, a retailer's presence would be extended far beyond its brick-and-mortar structure. It would have a virtual existence on the Internet, on TV and on every other possible modality by which it could reach out to the customer.

Apps Can Subvert the Retailer

I'll give you an example of one of the many apps that are out there that give you the opportunity to rate a product, compare prices on that product and find stores where that product is available: Vivino. Being a wine lover, I often use this fun app when I'm visiting a liquor store -- or even a restaurant, for that matter -- and I'm looking to check the quality, price and availability of a wine.

It's a very simple app to use. Once downloaded, one merely has to use the camera function that is found within the app, take a picture of the wine that you are interested in and the app will automatically and quickly scan the label of the wine and give you ratings, prices and availability. In fact, a friend of mine sort of sheepishly takes out her smartphone at liquor stores, takes a picture of a wine label, then makes a decision on whether or not she wants to buy that particular wine.

Vivino is just one of many hundreds of apps, many of them free, that are available to you, the customer, in order to assist you in making a better-informed retail decision. Retailers are fully aware of the plethora of apps that can assist the buyer in so many ways and that can ultimately drive the customer from their stores.

Retailers must therefore embrace the technology that is available and use it to their advantage.

Amazon's Virtually Insurmountable Lead

One might say that since Amazon is not a brick-and-mortar operation it cannot effectively compete with such retailers. Yes, I fully realize that Walmart presently has a massive lead in in-store retailing and that it is not very likely that this lead will be surpassed by any brick-and-mortar or online operation.

At the same time, though, I note that Walmart is now making a major effort to compete with Amazon on the Internet retailing scene, the virtual retailing scene.

Walmart's Web sales were about US$8 billion in 2012, compared with Amazon's $61 plus billion, so Walmart has quite a way to go to catch up. One reason for this is that Amazon's digital infrastructure is so enormous that it is leasing some of that infrastructure to major corporations, cities, towns and foreign countries. It virtually controls the digital playing field, and I just can't see Walmart doing much about this reality.

It's true that Amazon doesn't offer customers the opportunity to touch and feel its products. But with omni-channel retailing, where products are available to such a diverse audience in every possible media environment, it's easy enough for a customer to become relatively familiar with an actual product after hearing about it on the radio, seeing it on television, or observing it on some other form of electronic media or in an actual store, then go online to order it from Amazon.

I have done this myself after going to major retailers to look at all sorts of goods, perhaps try them on or try them out (such as electronic devices) and then quickly search Amazon to see if that product is available at a cheaper price. It's the equivalent of Amazon having an actual retail presence throughout the world, except many of the products that they are selling are being seen, tried out or tried on at their competitors' actual stores.

Amazon, in other words, has the best of both worlds.


Theodore F. di Stefano is a founder and managing partner at Capital Source Partners, which provides a wide range of investment banking services to the small and medium-sized business. He is also a frequent speaker to business groups on financial and corporate governance matters. He can be contacted at Ted@capitalsourcepartners.com. Follow Theodore F. di Stefano on Twitter.


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