Omni-Channel or Multi-Channel: Which is Right for Growing Your Business?

Omni-Channel or Multi-Channel: Which is Right for Growing Your Business?

You’ve decided to expand your business beyond an ecommerce site. 

Pop-up shops, Buyable Pins, retargeted ads coupled with a native Facebook Shop, Amazon, Instagram, YouTube, direct mail, or some combination of other channels. 

You’ve seen the future. Rather, you’ve seen the present.

You plan to move either to growing into an omni-channel retailer or multi-channel, but you’re not sure which quite yet.

Put simply, omni-channel merges every part of your business into one complete whole. You have one product inventory system that can integrate with all of your supply chains and each of your stores.

Likewise, your shoppers go through a consistent ecommerce experience, no matter what they’re buying and where from:

omnichannel retailer

In contrast, multi-channel means making your products available for purchase through different channels and media. A robust multi-channel ecommerce management strategy optimizes each one and maintains consistency, but they don’t overlap and interlock:

multichannel retailer

If you’re keen to go deeper on the topic, my colleague Aaron wrote an entire piece on the difference between omni-channel versus multi-channel — complete with much more comprehensive examples than I would do justice summarizing. In any case, it’s time for us to move forward with this piece.

When unpacking the headline and the decision, really, the question is…

“What do you have the capacity for in the short-term?”

Choosing Between Omni-Channel or Multi-Channel — Which One Is Right for Your Store?

On paper, it might sound like the omni-channel experience is the right choice to move towards for your store. After all, it creates a much smoother shopping experience, which is what really matters in the long-run.

However, the answer is more complicated than that. Shrewd readers would already have started mentally taking stock of their resources and ongoing initiatives, and wonder if this is the best time for their business to go omni-channel. And they’re right…

Making your retail business omni-channel will take a lot of resources. Worse yet, there’s no stopping halfway. “Half-complete,” non-functioning, omni-channel technology will create the same experience as absolutely no omni-channel technology (unless you can figure out how to build it in a modular way).

So while omni-channel would be the textbook answer, some businesses might be better served starting off with a multi-channel experience before tying them all together into an omni-channel one. Here are some questions to guide your thought process:

Do You Have the War Chest to Go Omni-channel?

Making your store an omni-channel experience means investing in your organization’s technology capabilities. Even if you have an in-house IT team, you might not yet have this technical infrastructure, skillset, or vision in order to kick off an omni-channel transition and see it through to completion. For example, a product information management (PIM) system is the backbone of any robust multi-channel or omni-channel store — does your business have one of these yet?

If not (or if this is the first time you’ve heard of a PIM), you might need to hire ecommerce technology experts. You can gradually build your technology competency in-house, but expert guidance can help set up a strong foundation for future expansion (and might be able to help you recruit and hire).

In case you do hire experts, heed former ecommerce consultant Bill Davis’s advice to “do far more due diligence than is usually done today. Contracts need to be structured to hold vendors more accountable. Clear and measurable objectives need to be set at the start of the project, and results should be measured against those. For example, consulting firms that provide talent should be rewarded when projects come in on/ahead of time and at/under budget, same way they should be docked when expectations based on the objectives set aren’t met.”

A study conducted by RIS News in 2013 projected that 31% of an average retailer’s IT budget will be spent on omni-channel projects by 2016.

Of course, that time was before an ecommerce platform like Shopify Plus came around, and could integrate with technology to make omni-channel a reality much faster and cheaper than before. Nonetheless…

Even if it’s not 31% of your IT budget, what chunk of your IT budget are you prepared to spend in a single year (and following ones) in order to make your omni-channel or multi-channel experience a reality?

Image via RIS 2013 Cross-channel Tech Trends Study

In addition to hiring an expert team, you’ll likely invest more in your own team. RSR writes in their 2016 report that 73% of stores exceeding the industry growth rate of 4.5 percent (which they call “Retail Winners”) have actually invested more in their team in their past three years. Their payroll costs as a percentage of sales have increased — more of every dollar they earn gets invested in their team. Are you prepared to make such an investment?

Image via The Retail Store In 2016: Poised For Transformation

Moreover, you still have to have the cashflow to keep your core business and operations moving forward for a few years. Davis says, “...even the most well run retailers, this is a 4+ year journey to really establish oneself as an omni-channel retailer. Having had some visibility into where retailers are, and the maturity of current solutions, I would say the majority of retailers are looking at more like 7+ years before they can refer to themselves as well down the omni-channel path.”

Although Davis thought it might take you the better half of a decade to make omni-channel work, retailers like L’Occitane used Shopify Plus to build the infrastructure and launch on a completely new channel within a mere 42 days. The journey to omni-channel gets drastically accelerated, and much less risky, without the heavy investment and timelines required just a few years ago.

Even though it’s easier than before, it’s still no walk in the park. It’ll take commitment, bold decisions, and resources to sustain the transition. Does your business have the cashflow required to make the transition, keep operations moving forward, and occasionally to buy time?

Do You Have the Flexibility to Go Omni-channel or Multi-Channel?

While omni-channel requires a lot of technical expertise, a large part of making the transition successfully is about people. It’s important not to overemphasize the role of technology. There are a lot of differences that may make your team push back against the change:

For example, many companies faced conflicting incentives as they introduced new channels throughout the years as separate organizations. Each separate channel team was expected to optimize its own performance service models and show results individually, and would be rewarded individually as well.

McKinsey writes:“Incentives ostensibly designed to encourage performance unintentionally reinforce the channels’ isolation—such as revenue-generation targets that push each channel to increase its own sales volume regardless of any impact on sister channels. Competition becomes even more brutal internally than with the outside world.”

“Incentives ostensibly designed to encourage performance unintentionally reinforce the channels’ isolation—such as revenue-generation targets that push each channel to increase its own sales volume regardless of any impact on sister channels. Competition becomes even more brutal internally than with the outside world.”

Be wary of the incentives you set for your team, and make sure they work out in the long run. Do not let your ecommerce empire fall from inside.

The potentially steep learning curve and ensuing uncertainty of omni-channel require that your team work in spite of uncertainty. They must be confident in technology and human innovation. Is your team prepared for that? Or will they inhibit the organization from moving forward and slow things down?

Image via The Retail Store In 2016: Poised For Transformation

Your leadership team also needs to take the reins of this omni-channel transition — meaning they need to train and understand the vision and priorities to make things happen. The CMO and CIO need to spend a lot more time together in order to understand each others’ expertise and develop a shared vision.

Organizations like Amazon have enough technical sophistication in their higher ranks to keep from having to make this transition — they started with technology from day one.

Davis explainss: “[Amazon uses] technology to create advantages, and they are willing to accept mistakes rather than shy away from taking risks, knowing that the lessons learned will make them stronger. A retail executive who has a deep technical background is more the exception than the rule and management

“[Amazon uses] technology to create advantages, and they are willing to accept mistakes rather than shy away from taking risks, knowing that the lessons learned will make them stronger. A retail executive who has a deep technical background is more the exception than the rule and management tends to stick to what it knows.”

Can You Think Big, and Start Small?

The transition to omni-channel or multi-channel will be a process.

I’d used the surfing analogy to describe global expansion markets for ecommerce, but I think it applies to omni-channel or multi-channel as well. In this case, most merchants haven’t taken their first omni-channel or multi-channel lesson yet, and see large retailers like Nike surfing big waves. In fact, some of them haven’t even bought or rented their board yet!

Running an ecommerce store is learning how to swim. Learning omni-channel or multi-channel and making the transition into that is learning to surf.

Not to worry, though… Amidst all that is learning to pedal, steer, and many other little steps that make the process feel second nature.

In this case, you can start studying your shoppers’ consumer behavior and executing at a very small scale. You can create personas for your most common types of visitors, buyers, and loyal customers, segment accordingly, and profiles for your customers to start gaining the ability to track their journeys.

On the inventory side, you can set up a cloud-based PIM in months and start to manage inventory across your stores with it. Even as you expand into multi-channel, this will be useful. But eventually, it will become the crucial nerve center of your operations once your store is omni-channel or multi-channel.

organizational behaviors for omni-channel

Image via The Retail Store In 2016: Poised For Transformation

Not only will these small experiments pay off in increased loyalty and retention, as well as a more efficient supply chain, it will also set your team up with the confidence and momentum it takes to build an omni-channel business.

Final Thoughts

As you read this, you might think to yourself that all of these boxes are checked off — and that your team is well-positioned to go omni-channel. If that’s the case, make a plan and pull the trigger. There’s no time like today to kick things off. It’s never been easier, and the resources required are a fraction of what they were even just a few years ago. The journey can also be much faster.

However, there might also be a chance when you read this you want to think twice about the finances and cashflow, and your organizational flexibility and momentum. You might not be able to move forward with a full omni-channel plan quite yet. That’s okay.

You can execute on it in phases — starting with developing a more concrete multi-channel strategy and investing in the assets it takes to build an omni-channel business, while stocking up on resources and earning organizational stakeholder buy-in to make it happen.

Remember, it used to take even the most forward-thinking retailers years to go omni-channel. There is no shortcut, and you don’t want to be stuck without gas in the middle of this trip.

About the Author

Herbert Lui is the creative director of Wonder Shuttle. He was a staff writer for Lifehacker, and his writing has appeared in The Globe and Mail, the New York Observer, and Fast Company.