Drivers for Channel Integration and Omnichannel Strategy
In the past, retailing has been considered as an industry concerned mainly with the sale of consumer goods through shops; however, services became an equally important part of the retail offering (Cox and Brittain 2004). Retailing in the twenty-first century is very different from the twentieth century, just as retailing in the late twentieth century differed from earlier (Peterson and Balasubramanian 2002). Key trends in retailing include changing customer needs, an increasing desire for digital shopping experiences, retailer consolidation, technology driven channel strategies, competition between retail formats, and advances in social media (Krafft and Mantrala 2006).
The field of retailing unifies Business-to-Business (B2B) and Business-to-Customer (B2C) relationships (Dant and Brown 2008). For B2B, retailers perform a number of critical functions for suppliers, manufacturers and wholesalers, including displaying merchandise, providing expertise, working closely with manufacturers to develop promotions and managing operations (Ennis 2016). For B2C, the marketing channels provide products and services for end users, with a special focus on their overall satisfaction (Kozlenkova et al. 2015).
Advances in information technology (IT) have driven retailers to involve consumers in business processes through internet-based tools and interfaces. Rapid economic growth and widespread internet access have greatly changed shopping habits (Narwal and Sachdeva 2013). The consumer considers multichannel shopping as a given, and there is a great effort to provide integrated, customer-focused technology, which transforms the “channel” experience into a total retail experience (PWC 2014). This total retail and “channel” experience, omnichannel retailing, is considered to be an evolutionary aspect of multichannel retailing. It aims to provide consumers with a seamless shopping experience by using advanced and integrated IT in each channel (Verhoef et al. 2015). In addition to competition between retailers, traditional store based retailers also have to compete with pure online players, such as Amazon.
This post aims to discuss and examine the drivers for channel integration and omnichannel strategy by providing evidence from an organized chain retailer. Although internet penetration and advances in technology have spread globally, their impact on channel strategies varies across countries. Therefore, the aim of this study is to provide insights into the factors influencing omnichannel strategy, and to discuss the drivers for channel integration from an emerging country—Turkey.
The post is structured as follows: first, a summary of studies on channel integration and omnichannel strategy is provided, followed by the methodology and findings. The post ends with a critical discussion, comparing findings against the literature, and drawing conclusions both for practitioners and researchers.
There is currently a lack of a long-term perspective in this fast changing sector, in which even a period of 3 months is considered as long-term. The most powerful change is the mobile revolution, and the tendency is for transactions to be mass customized. Shopping activity has become an “experience”, which provides added benefits to the consumer, and mobile/online shopping has led to easy access to information. The participants shared the view that, in the future, retailers will act as personal digital assistants to consumers and digital media strategy blog, through various touchpoints. Among various touchpoints, the mobile application is considered to be the most popular.
Changing Shopping Habits The changing shopping habits of Turkish consumers were considered as one of the main drivers for channel integration. One participant gave an example from his childhood to explain the alterations in the industry, stating that:
Two decades ago we used to go to grocery shopping once a month after salaries were paid. All supplies were bought from a single grocery retailer, and afterwards no further shopping was performed [until the next month] (manager of food marketing department).
As a consumer, the participant classified himself as a dedicated mobile user, and even using the retailer’s application inside the physical store, which was the main driver determining what he would buy. Another participant emphasized the growth in numbers of white collar workers, especially in big cities, which was responsible for a decline in time spent on grocery shopping from physical stores or from open bazaars, which are still very common in Turkey. Thus, mobile/online grocery shopping has increased. Most white-collar workers plan their grocery shopping and shop from online channels, leaving more time available for leisure activities. Nevertheless, despite a notable increase in online shopping, participants believe that physical store shopping will always exist, and remain important in the future. This is mainly due to the preference of consumers with more time (e.g. the retired, housewives) as well as for social reasons. This type of consumer is more likely to visit a physical store and compare prices and products. The customer segment which tends to shop both off and online comprises mainly families with small children. This group of customers represent the emerging middle class, and are generally in the 25 to 35 years old age range.
Increasing Need for Productivity in Logistics and Supply Chain Processes Another driver that enables the sustainability of physical stores is the prevalence of unplanned shopping behaviour. The participants interpreted online grocery shopping as planned, in contrast to physical store shopping, which was more likely to be unplanned, the result of instantaneous consumption needs. Participants believed that, because instantaneous shopping is not likely to disappear in the future, there will always be a need for physical stores. In order to maintain physical stores, support of logistics and supply chain activities in certain locations is necessary. For instance, there will always be a need for on-shelf availability, continuous replenishment, and storage to display merchandise at stores. To achieve such goal, improvements across all business processes and substantial IT investment are required. Therefore, there is a clear need for greater productivity in all operations and processes. The participants perceived the main aims of retailing as being able to place products on the shelf, the efficient management of operations, and integrated logistics and supply chain planning. They considered that the prices of the stock keeping units (SKUs) would remain steady over the next decade and competition would mainly focus on supply chain management capabilities. It was regarded logistics and supply chain processes as the main drivers for channel integration. Apart from efficient supply chain management, other major trends reported were differentiation through branded products, specialty gourmet food, and niche market products.
Due to the rapid growth in online grocery shopping, retailers are facing challenges in operations planning and delivery schedules, especially in mega cities such as Istanbul. The participants emphasized the importance of IT and advances in technology for capturing and analysing real time data. They considered that channel integration would not work without efficient data collection and management. Moreover, all participants agreed that if a retailer was unable to provide the desired products on shelf, it would be impossible to be successful. The logistics and supply chain capability are therefore indispensable to support marketing.
