The Omnichannel Blueprint: Connect Physical Retail with Digital Sales

The majority of retailers bleed money from the obvious places, in slow steady streams. It’s the death of a thousand paper cuts from the dissonance between their POS and their website a few thousand times a week that adds up to a number on their P&L. This is why Omnichannels are important.

The reality of Australian retail today

Consumers no longer make a distinction between channels: they research on the phone on the train, check availability before visiting the store, purchase online and casually return in person. This is the new normal, and businesses that create friction in the process will find themselves increasingly at odds with consumers, who intuitively sense the disconnect.

This is particularly pertinent to Australia, as the combination of low population density and extremely high delivery costs creates a unique set of challenges for Australian retailers. With rising operational costs threatening to swallow two of the three pillars of growth for middle-market retailers identified by the Australian Retailers Association, this represents a particularly acute challenge: one that has a direct impact on the ability to grow profitably and keep customers loyal.

The Harvard Business Review has data showing that omnichannel shoppers spend 4% more per visit in-store and 10% more online than single-channel peers. This isn’t just a nebulous benefit to the bottom line: it represents real dollars and cents walking out the door by retailers with disconnected operations, who would not have converted these transactions if their channels were integrated.

Phantom stock and overselling: the inventory tax

Phantom stock is the scenario where a customer discovers a product in your online store that your website claims to have in stock in your physical store when, in fact, it sold out hours ago.

In other words, your online and in-store inventory software aren’t synced, and there’s no reason for your website to believe that the product it just sold to a customer wouldn’t also be available at your store. As this customer now has a product that you can’t deliver, you’re paying the price of both the refund, and the goodwill damage, and the customer is unlikely to return due to the poor experience.

This is one of the most frequent causes of revenue leakage across disconnected POS and ecom systems, particularly during sale periods. The spike in demand drives inventory through your sales channels faster than your backend systems can update, creating more opportunities for phantom stock situations. What you need during these periods is more information about what you have rather than more inventory.

Another pain point that doesn’t get nearly enough attention is the time investment needed to keep two or more systems in sync after the initial synchronization. Perhaps your store manager does a POS export and reconciles it with the website every Thursday afternoon, wasting two hours of their time on it. Maybe your head office operation’s manager spends half a day each week working on this same task. Or maybe your disorganized technology ecosystem has prevented you from adopting retail innovations, and it’s all fine because your twelve year old niece is good with excel and works cheap.

That time investment scales linearly with the number of stores you have, and it’s entirely predictable: every new store you open will require more auditing and reconciliation headroom. The same goes for warehouses. None of these factors appear as costs in your P&L, because they’re simply features in the spec sheet of a retail technology system. They show up as a need to hire additional staff or the burnout of operations personnel, or inventory discrepancies at quarter end that nobody can explain.

Disconnected customer profiles and loyalty with traditional omnichannel

Disconnected POS and ecom software don’t just create inventory issues: they fracture and dilute your customer relationships. A customer that signs up to your loyalty program online can’t be recognized by your store POS or your other online sales channels, creating a situation where they can’t earn points or access rewards – and your ability to market to them is diminished if you don’t have a 3D view of your clients.

This is a severe understatement in terms of the impact on your ability to do business: it isn’t that your loyalty program is broken, it’s performing consistently below expectations because, in reality, the person that bought $100 of product online isn’t a loyal client. They represent two one-off buyers with no history of repeat purchases or engagement. Your CRM will tell you something different, and the marketing automation emails that follow will appear unrelated to either of their purchases – and therefore less effective – to the customer themselves.

Unified commerce stack architecture with omnichannels

The unified commerce approach is less about buying new software and more about getting your existing tech stack to talk to each other: your ERP, your POS, your CRM, your ecom – they should connect to a shared database ideally through a series of APIs that relay data in both directions instantly rather than daily or weekly.

Practically speaking, this means that your POS sale will update your website stock levels in real time and your customer’s CRM file will update itself when their purchase goes through, whether online or in store. An Order Management System will control the shipping of their purchase, regardless of channel and warehouse of origin.

It’s all about designing the infrastructure around the data, rather than having the data shaped by the capabilities of the software. It requires a conscious decision to consolidate your technology ecosystem around core values, and many growing retailers fall victim to the temptation of adopting an off-the-shelf solution that gets them to market faster and has a lower entry cost.

That option can be disastrous to long-term growth as the cost of disconnects increases exponentially as a function of the number of locations, customers, and SKUs.

Why off-the-shelf integrations fail growing brands with traditional omnichannels

The off-the-shelf option handles 80% of your problems, gets you up and running in an afternoon, and if it doesn’t, your intern can yell at the vendor until they fix it.

It’s the remaining 20% that gets really interesting, as the generic solution fails to address your specific pain points, which grow exponentially in scale and impact as your business grows. 20% is the crossroads between success and failure; the point where your competitors begin to notice the cracks in your operations. It’s also the point where budget conversations around technology investments become infinitely more complicated as the cost difference between a generic off-the-shelf integration and something custom-built begins to reflect the value of the former.

The business cost of growth and the opportunity cost of the next revenue-generating hire are at their peak during this period, and the clock is ticking. There is a very real and immediate pain associated with the status quo as your operations team attempts to keep everything running smoothly.

Three weeks’ worth of unpaid-for stock in a store room is initially a cause for concern, but by year five, you’re ordering items you swear you have in stock, only to discover later that you’ve been overselling your inventory for months. A decade in, customers can return purchased goods with an Excel note attached to the package, hopefully noting the amount that should be refunded, because nobody has the time to update any systems about the refund, let alone the exchange. It is at this point that the value of custom ecommerce website development becomes apparent, as it handles all of the API intricacies, connections, mappings and edge cases that generic solutions aren’t built for. You will continue to run out of loyalty cards to print and mail until you stump up for a better system that lets you calculate bonus points based on central data rather than attempting to reward a spreadsheet for shopping with you.

Turning stores into distribution centers with omnichannels

With all of your software connected, your stores stop being sales floors and start becoming logistics nodes in your distribution chain.

BOPIS – buy online pickup in store – lets your customers avoid shipping costs altogether, and shipping from store lets you fulfill online orders from your nearest store rather than a central warehouse. Given Australia’s low population density, it makes little sense to ship from Sydney to Perth, and not only are shipping costs prohibitive, the delivery window is large and customer dissatisfaction high if the parcel arrives late, an inevitable occurence given the distance.

This only works if you have accurate, real time inventory data, which again, only happens when your POS and website are integrated, and if they aren’t, BOPIS becomes a headache for your customers rather than a convenience. Done correctly, and you have reduced shipping costs, delivery times and accelerated your growth rate by turning your stores into distribution centers.

Future proof your operations

You don’t feel the strain of these disconnections while you feel the pain of the solutions. Fixing these issues takes time – more specifically, it takes the time of your employees – and while everyone has time, few would willingly spend it on software integration as opposed to customer service and sales. It takes money as well, either in the form of increased software costs or internal IT headcount, and it is a distraction to your operations team who could be focusing on initiatives that directly improve the customer experience.

The retailers who get the most out of integrated systems tend to have between two and three times as many integrations as their peers, and the value curves associated with these omnichannel connections explode outward due to Metcalfe’s law. Exponential value curves are powerful growth accelerants, but they also act as excellent moats, as the complexity of a unified, real-time view of operations is difficult for competitors to replicate, particularly at scale. This isn’t always the case in practice, as these moats tend to be theoretical if the technology required is inaccessible to the majority of retailers, who find themselves knee deep in various technology quick fixes that serve to extend the shelf life of their current operations.

The retailers who position themselves to accelerate their omnichannel growth trajectory are ones that realize these benefits ahead of the curve, rather than finding themselves tied up in the same technology quick fixes as the rest of the industry. One of these days, the ability to open a new store without putting additional strain on your existing operations could be the difference between being a market leader and a market disrupter, and the sooner you realize the long term value of a fully integrated omnichannel technology stack, the better. It is considerably less expensive to future proof your operations than it is to retrofit your existing problems with technology bandaids.