Four Myths of Post-Omnichannel Retailing

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Four Myths of Post-Omnichannel Retailing

By Joe Skorupa - 05/26/2016

It's been five-plus years since omnichannel retailing became a defining strategy. It got off to a slow start, but ultimately won numerous converts. Today, we are fast approaching the post-omnichannel era, and it is time to reassess and bust some well-established myths.

The myths examined here and the busting insights offered are based on findings in the recently published 2016 RIS/Gartner Retail Technology Study, now in its 26th year as a must-read report.

Omnichannel expansion occurred at a rapid pace in the 2000s and included the addition of such sales channels as e-commerce, mobile commerce, social media, flash sales, membership groups, subscription sales, affiliate partner platforms, click-and-collect, and mashups of the above.

The motivation for this complex expansion was simple: every channel a retailer did not appear in meant it was invisible to shoppers who were using that channel. Retailers felt pressure to be present in everywhere the shopper was going—to be omnipresent.

At its best, omnichannel retailing meant doubling down on improving the shopper experience by delivering new and better services for convenience, product selection and fulfillment.

At its worst, it meant chasing bright shiny objects down rabbit holes that proved to be unproductive based on erroneous assumptions. Here are four objects that have lost their shine:

1. Omnichannel is consultant-speak unconnected to reality: Proven wrong. Channel expansion was a reality in the last decade and it is likely to continue. Retailers that wanted to survive invested in it. Naysayers, and there were many, held back and are now rushing to catch up. Admittedly, the early adopters encountered problems, such as bolting on each new channel as quickly as they could and then trying to get them all to work together harmoniously, an effort that is still under way.

2. Retailers spend less than 2 percent of annual revenue on IT: Not really. While it is true that this figure fluctuates from year to year around the 2 percent mark, it is important to understand that this is an average; some segments of retail spend more and some, less. Super-tier-one retailers, for example, spend closer to 1 percent of revenue on IT. Tier-one retailers spend less than 2 percent on IT. Retailers with revenue of less than $1 billion spend more than 2 percent and SMB retailers (with revenue less than $500 million) spend more than 2 percent. Smaller SMBs (revenue less than $250 million) spend much more, as do retailers that have a high percentage of online sales and category-leading retailers.

3. 90 percent of retail sales occur in brick-and-mortar stores: Not a true picture. The problem with this widely accepted number is that it is a government-supplied figure and it typically includes auto sales. Auto sales are a completely different animal than retail sales. While it is true that online grocery sales are low, it is also true that they are compensated for by such big online segments as department stores, jewelry, apparel and electronics.

4. Brick-and-mortar is dead: Just plain dumb. Despite the infamous pronouncement by Marc Andreessen, a Silicon Valley venture capitalist among other things, brick-and-mortar is here to stay. In fact, one of the major trends today is online retailers opening brick-and-mortar stores. A short list includes: Athleta, Warby Parker, Bonobos, Rent the Runway, Birchbox, ModCloth and the big kahuna, Amazon.

These points and many more are featured in the 2016 RIS/Gartner Retail Technology Study along with several more omnichannel myths that need busting. Access it at http://risnews.edgl.com/retail-research/Retail-Technology-Study-2016--Personalization-Means-It-s-All-about-Me!104814.

Joe Skorupa is editorial director of RIS News, a sister publication of Retail Leader.