Competing in the Age of Omnichannel Retailing by Brynjolfsson Erik

Author:Brynjolfsson, Erik...
Language: eng
Format: epub
Published: 2015-04-14T00:02:50.867000+00:00

Understanding the Impacts

As retailers adapt their selling strategies to an omnichannel environment, the changes will be felt by players both upstream and downstream. First, the manufacturers who supply products to retailers may no longer be able to produce large volumes of the same product for different retailers; many retailers will be looking for customized and exclusive merchandise, which will add complexity for manufacturers. As a result, manufacturers will need to become agile at producing smaller and more customized batches of products.

Further, as retailers pursue a strategy of seeking unique products, the boundaries between manufacturing and retailing will blur. Retailers such as Target have already collaborated with manufacturers to develop exclusive products. Such collaborations will amplify the importance of target marketing and market segmentation.

In addition, the quest for distinctive products may reduce the number and importance of superstar products. Moreover, retailers may decide to backward-integrate into manufacturing. Amazon, for example, is aggressively moving into the publishing domain; it contracts directly with authors and has released hundreds of books in both print and e-book formats.9 This trend is likely to become more widespread in product categories ranging from music and video to electronics and clothing.

Finally, omnichannel retailing, along with smartphone usage, gives consumers more channels from which they can obtain information during the purchase decision process. Decisions can be shaped by information from the store channel, store websites, mobile apps or social media. Marketing firms and advertising agencies working for retailers will need to become more data-driven and analytics-oriented so they can design campaigns that deliver advertising messages to consumers with surgical accuracy.

Technology is making omnichannel retailing inevitable and is reducing the ability of geography and ignorance to shield retailers from competition. It is breaking down the barriers between different retail channels as well as the divisions that separate retailers and their suppliers. At the same time, omnichannel retailing expands the overall pie by extending market reach and introducing consumers to products they may not have known about. Supply chains that generate increased consumer value are likely to win in the long run. More transparency is likely to speed up this process, leading to more of a “winner-take-all” effect. As a result, retailers and manufacturers will need to find an area where they are truly the world’s best, as opposed to just working harder to hide from competition. With omnichannel retailing, competition will increase on many fronts, but so will the opportunities for savvy retailers and supply-chain partners to gain competitive advantage.

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