Omnichannel handles the fine line between the real world and the digital world by integrating sales channels, and allowing customers to seamlessly purchase products through means such as physical stores, e-commerce sites, and catalogs.
The name comes from the combination of ‘omni’, which means ‘all’, and ‘channel’, which comes from the distribution channels of goods and services.
In recent years, omnichannel has become an essential part of the retail industry, and a strong component to help elevate the buyer experience through further connecting the buyer and seller.
The practice was born in 2011, when in their annual report, the long-established American department store Macy’s, declared that they would implement a new way of shopping, ‘omnichannel’.
As online shopping had become more prevalent since the late 90s, the department store struggled to keep their sales up, and had been plagued with a business slump. Stores were compared with showrooms where consumers could check products before purchasing online .
As a solution, Macy’s decided to unify their stores and inventory. In addition to displaying the inventory statuses of each store, and adding physical store locations as an option where customers could collect their purchases, customers were also able to return online bought products directly to the physical stores.
The company also built an app called the Macy’s app, where customers were able to check in to stores, and receive various coupons. Programs such as ‘My Stylist’ were released, where after making a reservation online, customers were able to receive tips from pro stylists.
By connecting and integrating the services online and offline, the company’s sales increased by 40% the following year.
10 years since their declaration of omnichannel, Macy’s has become a success case in the field, implementing constant innovative measures to keep up with the buying habits of customers.
As the world's largest retailer headquartered in Arkansas USA, Walmart continues to make great strides by fusing online with the physical world.
Since its founding in 1969, the company has grown significantly through its strategy of opening large stores in the suburbs, streamlining their supply chain, and providing high sales at low profits. However, with the rise of large EC companies such as Amazon, many of their customers were being lured to the online platforms.
Sensing a crisis, Walmart pushed for Omnichannel in the early 2010s. Utilizing their large network (in which their stores ‘captured 90% of Americans within a 10 mile radius), the company decided to focus on improving customer satisfaction and increasing sales at existing stores.
Particularly successful was the ‘online grocery delivery’ system, which delivered food ordered online from the stores directly to the customer’s home. Another initiative was the ‘Online grocery pick up’, which allowed customers to receive products purchased online at the store parking lots. With these initiatives, not only did the company’s performance come back to life, their online sales also showed signs of closing the sales gap with Amazon.
In recent years, Walmart has also been focusing on artificial intelligence, and has aggressively acquired startups that have strengthened their recommendation functions on the EC platform.
‘Omni 7’ is the largest initiative in Japan carried out by Seven & i Holdings.
On top of their independent EC site Omni7; Seven Net Shopping, Seibu Sogo e.Department, Ito-Yokado net mail order, Akachan Honpo net mail order, and LOFT net stores, all participate in Omni7, which functions as a single EC site. All purchased items can be picked up at any 7-Eleven stores.
In addition, in an attempt to retain customers at physical stores, the company introduced the ‘Seven Miles Program’, which allows customers to earn common points and miles while shopping at various stores.
The ‘Muji Passport’ app, developed by Ryohin Keikaku, was developed as an attempt to improve customer satisfaction at both EC and physical stores.
By checking in at physical stores (via GPS tracking), the app allows customers to earn miles that can be used online. This in turn fuels the motivation for customers to visit the physical stores.
In addition, the company developed Muji Delivery, which delivers daily lunch boxes and vegetables to customers living near the stores, and Muji Passport, which maximizes contact points with their customers.
In recent years, Japan’s major interior retailer, Nitori, has focused on opening urban stores, and has put more effort in their show rooms.
Titled ‘empty handed shopping’, customers can create shopping lists through the Nitori app by scanning barcodes attached to the products in the stores. In addition to an increase in customer convenience, this was implemented to make up for the low in-store inventory of urban stores.
The Tsutaya app is the pillar of Tsutaya’s omnichannel initiative, developed by Culture Convenience Club.
In addition to checking the inventory information of nearby stores, payment with the app became possible from November 2020. Recommendation functions for videos and books, as well as recommendations based on past purchases or rental history data has also become available.
Maruzen Junkudo Bookstore is an example of utilizing omnichannel to strengthen the physical stores.
The flagship Junkudo Bookstore located in Ikebukuro is known as the bookstore in Japan with the finest book collection. With over 2 million books on their shelves, Junkudo is able to provide to the vast needs of online shoppers with limited edition books, or even books that are not stocked at publishers. The need for ‘store pick-up service’ is also still prevalent, and by providing these services, the company has succeeded in differentiating itself from Amazon.
Various unique initiatives have also emerged with the prevalence of omnichannel. A global fashion brand operating in Japan is offering a new shopping experience like never before, by having their customers design and purchase original polo shirts, based on their choice of colors, patterns, and designs.
As companies promote omnichannel, the factors and patterns that lead to failure have become more apparent.
The most common reason omnichannel fails is because of a lack of consumer perspective. Macy’s had recovered its sales significantly in 2011 due to their omnichannel strategy, and although the EC business has continued to grow, store sales have gradually declined. As customers have become more EC oriented, Macy’s was forced to close several stores in 2016. In addition, the lack of internal cross-functional unification is also a cited factor for failure. According to an official at the retail store, the process of omnichannelization has created friction over performance between the physical store team and the EC team. This suggests that optimizing and changing the evaluation system of the company has become a must.
Since the birth of omnichannel 10 years ago, trials and errors, successes and failures have shaped omnichannel and have allowed it to evolve into a stronger and more adaptive approach.the evolution and findings has become ever more clear with the various trials and errors omnichannel has gone through.