Are You Ready for Omni-Channel Version 2.0?

Omni-channel just became a teenager.  Some trace the origins of omni-channel to the birth of the iPhone in 2007, but most observers set omni-channel’s birth in 2003 when Best Buy shifted its marketing strategy to put its customers at the heart of the buying process in a bid to survive the onslaught from WalMart.

Wikipedia agrees with this timeline, and defines omni-channel as “the integration of all physical channels (offline) and digital channels (online) to offer a seamless and unified customer experience”.  

Retail Systems Research provides a history of omni-channel at: (http://www.rsrresearch.com/research/the-history-of-omni-channel-part-one). The author, Nikki Baird, states:  “At the heart of omni-channel is customer centricity.  You can’t do one without the other.”   He goes on to say: “Much of the current struggle to implement omni-channel initiatives comes from retailers trying to preserve their current product- and channel-centric business models.”  

If customer centricity is critical to omni-channel success - and I am convinced this is the case - this might be an appropriate time to step back and listen to what customers are saying.  A good starting point is Accenture’s recently published “2016 North American Digital Banking Survey” available at www.accenture.com.                     

Accenture’s survey concludes that “banks must provide value to customers – or risk losing them – and deliver banking customer experiences that blur the lines between physical and digital so banking is easy, seamless and relevant.”

The survey reports four key findings:

  • Value is hot – customers want deals and discounts and are willing to exchange data for convenience and relevance.

  • Switching is on the rise – consumers will switch banks if they don’t get the experience they want.

  • Robo-advice is welcome – consumers are intrigued with automation and digital banking.

  • Branch interest is up – consumers expressed renewed interest in the branch where they can connect with human advisors.

Despite the fact the preferred channel for the survey respondents was online banking, 87% “anticipate using a branch in the future”.  The response from Millennials to this question was almost identical at 86%.  The Accenture report is well worth reading in full, but this particular finding is critical to note.  

If this response pattern holds true for your financial institution – and you should test this by surveying your members – the implication is clear that branches will continue to play a vital role in a true omni-channel distribution network.  Even though members may select online or mobile banking as their preferred choice for convenience and personal efficiency, they still want to have access to a physical branch for a variety of specific purposes.  

However, it is equally true that the role of the branch is shifting, with major implications for branch design, staff training, and overall resource allocation.  

This shift is by no means limited to financial services. Consider, for example, what has happened to independent bookstores.  Five years ago many experts predicted the demise of bookstores. While that did indeed happen to a number of national chains (e.g. Borders, Waldenbooks, B. Dalton); surprisingly, independent bookstores are experiencing a revival. Independent bookstore sales in 2016 are up 10% over two years ago, but the leaders in this revival are learning to adapt to the realities of an omni-channel world.

Publishing Perspectives analyzed this shift: “Though the media described the rise of e-books as the death knell for independent bookstores, the lower cost of technology on all ends has enhanced the efficiency and reach of stores.”

In the same article, Lori Beach who opened the Astoria Bookshop in Queens in 2013, commented: “It is easier to be a small store now.  It was easier for me to establish credit with accounts than it was for those who came before me.  It’s easier now to keep your inventory tight and know that you can restock quickly as needed.  It’s easier to have a website where customers can place orders and learn about events, without requiring a programmer on staff.”

And, of course, let’s not forget that Amazon itself is now opening physical bookstores.  Some commentators have questioned why Amazon would do this after driving the major chains out of business.  But they’ve missed an essential point - Amazon is pursuing a very different business model than that followed by Borders and B.Dalton.

Amazon is drawing upon the massive scale and data achieved via its online and mobile business to enable it to offer in its physical stores a highly curated selection of books that are guaranteed to sell.  Plus, Amazon utilizes print-on-demand so as to carry only the minimal amount of inventory necessary to optimize sales.  

This is a far cry from how Borders or the other chains ran their businesses.  When the Borders store in Madison, Wisconsin – where I was living at the time - was about to close, the store offered a series of price reductions, with the discount off normal prices increasing every week.  My wife and I love books and so we visited the store with each new reduction – first 20% off, then 40% and so on.  What amazed us was that even when the store offered 80% discounts the racks were still about half full.  That told us that Borders was carrying inventory that no one would buy at any price.  

Amazon’s model reflects the competitive advantages a true omni-channel strategy can provide. What are the lessons we can learn from Amazon’s foray into brick and mortar?  First, data is an essential component of the strategy.  A book will never make it into an Amazon store if it won’t sell.  Also, every book has a shelf-talker describing the book’s reader reviews, Amazon sales ranking, and other key information items to encourage a purchase.  Second, operational efficiency is maximized through a relatively modest store footprint.  Third, online and mobile channel access are provided throughout the store.  Amazon is encouraging the customer to freely shift from one channel to the next.

As the omni-channel concept continues to mature, every credit union should consider the following questions:

  • Do we have a clear vision of what our distribution channel usage and configuration will look like five years from now?

  • Are we using data effectively to monitor channel usage trends and patterns?

  • Are we allocating our resources appropriately across the various channels to move us towards the desired vision?

Once viewed as a fad or simply a fancy buzzword, it now seems clear that omni-channel is here to stay.  As a recent 2014 report from MIT stated: “Omni-channel is the central force shaping the future of e-commerce and brick-and-mortar alike.”