By adopting an omnichannel distribution strategy, retailers can connect with customers, provide personalized shopping experiences, and streamline internal operations. In this article, you’ll learn what omnichannel distribution is, how it works, and how your business can start using this strategy.
What is omnichannel distribution?
Omnichannel distribution is a strategy that moves goods through multiple online and offline channels to allow customers to receive their purchased products in the way that best suits their needs. For example, if a customer wants to buy something from a retailer that uses an omnichannel model, they could choose whether to go shopping in person, have the product delivered to their doorstep, or order it online and pick it up at the store.
With true omnichannel distribution, barriers between sales channels are non-existent. For example, when the inventories of ecommerce and brick-and-mortar stores are integrated, omnichannel distribution creates a seamless, convenient shopping experience and maximizes operational efficiency.
The 6 omnichannel distribution sales channels
Products take many different journeys to arrive in a customer’s hands with an omnichannel supply chain.
- Ship from store. Customers order online, and their purchases are shipped directly to them from the nearest store location.
- Drop-shipping. Customers order online, and the company ships the product to them via a third-party vendor.
- Buy online, pick up in-store (BOPIS). Customers order online, then go to the brick-and-mortar to pick up their purchase.
- Reserve online, pick up in-store (ROPIS). Customers reserve an item online. They then go to the store, decide if they want to buy the item, and complete the transaction using the store’s point of sale (POS) system.
- Buy online, return in-store (BORIS). Customers buy something online but change their mind and return it to the store location.
- In-store purchase, home delivery. Customers purchase a product in the store and have it delivered to their homes. This is a popular choice when buying furniture or appliances.
What is the difference between omnichannel and multichannel distribution?
Omnichannel vs. multichannel, what’s the difference? Although the terms are often used interchangeably, they’re not synonymous.
Multichannel distribution uses multiple sales channels, but they’re siloed, meaning that inventory cannot move between channels. This limits the options that customers have for buying and receiving goods. For example, let’s say that Harold orders a pair of shoes online from a multichannel retailer. He doesn’t have the option of picking the shoes up at the nearest store and instead has to wait a week for them to be delivered to his home.
On the other hand, an omnichannel approach breaks down barriers between channels, allowing customers to switch effortlessly between them. Using the previous example, Harold orders a pair of shoes online and chooses to pick them up from the store to save on shipping costs and get the shoes in time for his daughter’s wedding. The added flexibility and convenience of an omnichannel approach encourages Harold to buy from the store again and again.
Why is omnichannel distribution important?
The Retail Industry Leaders Association (RILA) found that two-thirds of retailers believe that the growth of omnichannel and digital shopping is the most significant industry trend. RILA’s advice? “Become omnipotent on omnichannel. Consumers will choose retailers based on ease and richness of end-to-end experience.” Omnichannel is such a critical trend because it creates the best experience for both buyers and sellers.
- Provide a better customer experience. The number one reason that businesses invest in an omnichannel strategy is to reach more customers. Once they’ve reached those customers, it’s critical to retain them; and thankfully, omnichannel distribution helps with that too. Today’s consumers want low-cost, convenient shopping options, and omnichannel distribution provides that.
- Delivery is quick and correct. With multiple different inventories, it quickly becomes tedious to keep track of everything. An omnichannel supply chain relies on a centralized inventory, where everything is integrated. This helps ensure that products go where they need to go and take the most efficient route there. Note that while omnichannel distribution has the potential to maximize delivery speed, a poorly execututed strategy can have the opposite effect.
- Profits increase. 67% of customers use multiple channels to complete a transaction, while 40% won’t even bother making a purchase if they can’t use the channel(s) they prefer. With a majority of shoppers viewing omnichannel distribution as valuable (even non-negotiable), retailers have a major opportunity to increase sales and boost their profits.
The biggest challenges of omnichannel distribution
While 87% of retailers believe that omnichannel distribution is essential, fewer than 10% feel like their business has mastered the strategy. Two of the major challenges they face are inventory visibility and delivery speed.
- Inventory visibility. Since omnichannel distribution is so flexible, inventory can be stored in multiple locations—stores, warehouses, distribution centers, or any combination of the three. With multiple locations for inventory comes an urgent need to keep track of inventory levels, availability, and movement in real time. It’s crucial to maintain inventory visibility across locations to avoid overstocking or stockouts. While developing a strong inventory management system can be a challenge, it’s an essential element of omnichannel distribution and can be simplified with the right technology.
- Delivery speed. If it’s not done right, omnichannel distribution can result in orders getting delayed. When inventory is stored at multiple locations, businesses must perfectly coordinate and optimize inventory allocation, logistics, and transportation to deliver an omnichannel experience that actually works for customers. Failure to do so has hefty consequences: when omnichannel delivery takes too long, nearly half of consumers will shop somewhere else.
How to implement omnichannel distribution
How can retailers overcome the challenges associated with omnichannel distribution? Although it will take time and resources to completely build out an omnichannel model, you can get started by implementing these four best practices.
- Get an inventory management system. A defining characteristic of omnichannel distribution is integrated inventory. When inventory is shared across channels, efficiency soars because buyers can access the products closest to them, regardless of whether they’re picking up their purchases or having them delivered. But without a system for tracking inventory, you’re likely to either overstock or run out of goods. Because of this, it’s essential to invest in the right technology. An inventory management system will help you keep things under control.
- Put the customers’ needs first. The first step in putting your customers’ needs first is to understand those needs. Successful omnichannel distribution models collect data throughout the customer journey to give you insight into how individuals interact with your business. Analyzing this data will help you understand your customer base, personalize each person’s buying experience, and identify pain points. You can also go straight to the source by paying attention to the feedback people leave via surveys and online reviews.
- Focus on the right channels. To reach the right customers, you need to get specific—that means that trying to dive headfirst into ten channels at once isn’t the best idea. Base your choice on customer demographics and preferences, as well as market conditions. The best experience will combine in-person and online channels, as 50% of consumers plan to increase online spending while still frequenting physical stores.
- Optimize logistics and fulfillment. Late deliveries put you at risk of losing customers forever. Since omnichannel logistics can be complicated, it’s important to develop a strong system for processing, fulfilling, and delivering orders. Shipping software like InfoShip can make it easier to optimize your order fulfillment process so that deliveries are on time, every time.
Optimize your omnichannel logistics and fulfillment with InfoShip
We’ve reviewed the fundamentals of omnichannel distribution, but there’s still a lot to learn! Read our next article for a brief history of omnichannel logistics, a few questions that will help you determine if an omnichannel strategy is right for your company, and an introduction to how InfoShip can help with that decision.
Learn more about omnichannel logistics