Inside IT
Omni-Channel for Smarter Consumption and Distribution Strategies

One of the hottest keywords these days is omni-channel. This is a strategy with numerous technologies combined together, getting lots of attention from diverse industries. Today, we’ll take a look at the characteristics of omni-channel, followed by technologies and its applications.

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Various Channels in the Distribution Industry

In order to understand the concept of what an omni-channel is, it’s crucial to know what channels have led the distribution industry in the past. From single-channel to multi-channel to omni-channel, let’s take a look at what each of them means in turn.

Single-channel

Single channel is the most conventional type of buying and selling products at a single store. This is for a company which has only one store front at which to meet customers.

Multi-channel

Multi-channel means a big company with multiple distribution lines. Stores, department stores, online shopping malls, shopping malls, and home shopping channels are all different distribution channels. The products at these different channels have different promotional benefits even though they’re all produced by the same company.

For example, the price of a piece of clothing may be different at a department store and an online shopping mall. The price may be lower for those shopping at home due to promotional events but higher at other malls. Some shoppers who already knew about these differences now go to department stores to check out the product in person and then buy them more cheaply at online shopping sites.

Cross-channel

Cross-channel is similar to multi channel. The difference is that the cross-channel doesn’t take multiple channels as completely separate. It keeps the prices across different channels somewhat similar by controlling promotional events. For example, a company may run a promotion over all of their channels for a week or two when the product first comes out. This way, consumers can buy the product for similar prices through different channels including department stores, online shopping sites, shopping malls, and home shopping channels. Some say that this is the same as an omni-channel but it’s a little bit different.

Omni-channel

Omni-channel means you can buy the product for the exact same price and promotion regardless of the channel you’re using including the difference between online and offline channels. The price of a product will be exactly the same at department stores, online malls, shopping malls, and home shopping channels. The price on the online shopping site will also be the same as that of the offline store. Omni-channel is special in that consumers can get desired products for exactly the same price regardless of whether the channel is on or offline.

Characteristics of Omni-channel and the Various IT behind It

We have learned how an omni-channel is different from other channels; now let’s take a look in more detail.

Characteristics of omni-channel

The biggest characteristics of omni-channels is that there’s no difference in price between online and offline stores. This means you can look at a product online and then buy it right away at the offline store for the same price. It’s also possible for you to go to a second offline shop when the product isn’t in stock at the first shop you visit and buy it for the same price. They also provide delivery service from the nearest store to your home after you buy the product at any offline store if you don’t feel like carrying it.

One of the biggest merits of omni-channel is that they can save delivery time, because they ship the product from the nearest shop instead of a central storage facility.

IT in omni-channel

What kind of technologies from the IT world needed to construct this omni-channel, then? First of all in order to build an omni-channel, the company must be able to check and analyze the sales situations over multiple channels. They should know everything about which stores have the products, where the customers are, and how many products they have in stock.

What’s necessary for this is big data collection and analysis technology. This technology easily collects and analyzes various forms of data from numerous distribution spots in real time and uses it to figure out where the customers are concentrated. The biggest example of this technology can be found at IBM, applying their big data analysis technology to their distribution companies to build their omni-channel.

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Amazon Dash (left) and Fresh (right)

There are a lot of sensor technologies that enable companies to use the information they provide for their online services at the offline shops. By reading the barcode (one-dimension, including QR code) at a shop using a smartphone or tablet PC, the information about the product is uploaded to the customer’s account. The customer can also pay for the product using a smartphone or tablet PC app instead of paying at the store. Once it’s paid for, the company figures out where the customer lives in order to find the nearest store and make the delivery.

Dash from Amazon currently provides a UX similar to this. By reading the barcode with a Dash terminal, Amazon finds it from their product line that matched to the product and expedites the payment and delivery stage. Many companies are now looking for ways to develop their own apps with this system.

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IKEA catalog app

Other than that, there are services which send advertisements about products in the shop to their customers’ smartphones and tablet PCs based on the high frequency when the customers walk into the store. Some of them also provide apps that show customers what it’d be like to have the products in their homes by showing simulated images of customer’s homes. These apps use augmented reality (AR) technology in order to place products on top of the image of the customers’ homes.

A furniture company has already created their omni-channel with an app that helps customers understand what it’d look like when new furniture is placed at home. A clothing brand also shows how its customers would look in their garments by using AR with an image of desired clothing through a big screen or tablet PC. This type of new services can make shopping much easier and more convenient. Currently, IKEA is using this catalog app for furniture and Burberry is providing the digital screen service for clothing.

Successful Cases of Omni-Channels

Let’s see some of the successful cases of omni-channels, then.

Amazon  

One of the most well-known cases of omni-channel is Amazon. Their Dash service was very successful in sales not only for furniture and clothing, but also for grocery shopping which is all about how fresh it is. Groceries use various packaging methods to keep products as fresh as possible.

It’s still quite difficult to keep food fresh especially when being delivered for over a full day. In order to take care of this problem, Amazon started to work on shortening the time spent on delivery as much as possible. The method they used for this goal was to establish a system by which the closest store from the destination provides the actual delivery service to the customer. The well known drone delivery service and the Prime Now service which delivers products within an hour in the busy city of New York by utilizing bicycles are also examples.

Macy’s 

Macy’s has another successful service using an omni-channel structure. They established a big kiosk called Beauty Spot inside their store and provide a free online information service for product info and reviews. Their company is growing thanks to this service by which customers can get rid of their concerns about trying unfamiliar products. Unlike Amazon, Macy’s has the most successful case of omni-channel built at offline shops.

Best Buy 

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Best Buy started having surplus since adopting omni-channel

Best Buy is another case which succeeded after adopting an omni-channel. When Best Buy was having a very hard time in 2013, the NEW CEO decided to employ the omni-channel believing that the people who make purchases online will turn back to their offline stores. They’ve turned their offline stores into online showrooms. Customers can now visit the offline showrooms and then make purchase online. They’ve placed digital screens and iPads in their offline stores so customers can see the products in person.

As a result, customers can now check out the products at the offline market and buy their products online. As they also use the system where the nearest store delivers the purchased items, they save time on delivery and enhance customer satisfaction at the same time.

Today, we learned about omni-channel, a smart distribution strategy, through which people understand the importance of IT in the distribution industry. These technologies are necessary to construct omni-channels, as they give extensive information on the consumption patterns using big data.

Omni-channel is now going beyond the distribution industry as people have started studying various ways to utilize it. I look forward to seeing how omni-channel will change our world in the near future.

Written by Hakjoon Lee (http://poem23.com/ Pen Name: ‘Hakjoony’)

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