The Omnichannel Term That Got Dentsu Inc. in Trouble

Introduction

The term "omnichannel" has become increasingly common both inside and outside our company. While working as usual, I've found myself frequently asked to "explain omnichannel" or "propose omnichannel strategies to clients I'm handling." This term's widespread popularity stems from its relevance not just to marketing, but to every process involved from product creation to sale.

The omnichannel concept, born in the US, has landed in Japan. It's been quite some time since various retailers established omnichannel departments and numerous case studies emerged. However, omnichannel isn't something that can be perfected overnight. Therefore, this series will delve back to the fundamentals: Is omnichannel even achievable in Japan? If so, how? By when? And why is it necessary in the first place? Our goal is to reexamine the raw reality of omnichannel, moving beyond ideals to clarify practical implementation methods.

First, in this inaugural installment, what exactly is omnichannel? Where do the challenges lie? Maruyama, Uehara, and Watanabe each share experiences and insights gained from their work in omnichannel. This time, Uehara compiles and presents these to you.

Single Channel → Multi-Channel → Omni-Channel

The way people buy things has changed with the times. In the single-channel era, when you wanted to buy something, you went to the store, bought it there, and received it immediately. It was a simple process.

As telephones and the internet became commonplace in homes, and everyone started carrying mobile phones, people could buy things using the phone, internet, or mobile devices. This marked the multi-channel era. New purchasing paths emerged, like TV shopping and e-commerce sites like Amazon and Rakuten. However, multi-channel meant stores were separate from mail order, and e-commerce was separate from mail order... each channel operated independently. Member data was often managed separately by each channel, sometimes requiring consumers to provide their information repeatedly.

Omnichannel refers to an environment enabling consumers to purchase seamlessly across all touchpoints (omni) when buying goods. Items can be bought in-store or online, with pickup possible at the store or at home. Consumers can clip items anytime, anywhere when interested, buy when they want, and receive them when they choose. It represents the ultimate customer relationship management (CRM).

For example, some people order online but get home too late to receive their items. For them, being able to pick up their order at a nearby convenience store at their convenience is ideal. Or consider shoppers who buy too many heavy items at the supermarket and can't carry them home. Carrying purchases on a crowded train is exhausting; same-day home delivery would be a huge relief.

To create an environment where people can buy and receive items anytime, anywhere, as they wish, retailers advocating omnichannel aim to horizontally integrate the systems held by stores, mail-order, and e-commerce sites under the same brand name, and consolidate member information into a single pool. This enables consumers to enjoy seamless shopping.

Why is omnichannel gaining attention?

Why has omnichannel gained such attention?

One reason is the proliferation of smartphones. With smartphones, consumers can buy items anytime without visiting physical stores. Even when visiting a store, many now search online on the spot, find cheaper options, and purchase them online. It's cheaper online, and they avoid carrying heavy items home—delivery comes to them. This is the so-called "showrooming" behavior. One electronics retailer even actively encourages this by placing POP displays that let customers scan barcodes. This implies, "If you find a lower price elsewhere, please let our staff know—we'll beat it." Retailers are forced to compete solely on price. Precisely because they want customers to shop through their own channels, an omnichannel strategy has become essential.

Why is Dentsu Inc. focusing on omnichannel?

Many concepts similar to omnichannel have existed in the advertising industry before: click-and-collect, cross-media, O2O... Among these, omnichannel is the most deeply rooted in the consumer perspective. As mentioned earlier, it represents the "ultimate CRM." An executive from one of our clients stated, "Omnichannel is the ultimate customer service. That's precisely why the entire company must unite and commit to it."

The concept of integrating communication has always been a trend within the advertising industry, and we have repeatedly proposed it to clients. Click-and-collect, cross-media, O2O... yet these felt like concepts championed by outsiders. What most distinguishes omnichannel is that business operators themselves now say, "For the sake of omnichannel..." In retail, we've seen the emergence of departments explicitly named "Omnichannel." Manufacturers now frequently hold teams and workshops dedicated to studying omnichannel. This made me intuitively realize that clients are finally taking communication into their own hands.

For example, Walmart in the US has been acquiring IT companies one after another and established "Walmart Labs," a company specializing in digital marketing development. Clients are starting to bring in-house the very areas where we advertising agencies excel. Frankly, I see this as a threat to advertising agencies.

Reflecting this trend, clients increasingly tell us, "We want you to think from a retailer's perspective, not an advertiser's." We're also getting more requests to consult on their internal system development. Consequently, Dentsu Inc. has gradually started working much closer with clients, driven by a desire to address their deep internal challenges.

The Heavy Burden of Omnichannel

So far, I've discussed general omnichannel concepts and why Dentsu Inc. is involved. Now, I'll introduce the challenges we've encountered while actually working with clients toward omnichannel goals. These are primarily challenges that cannot be solved by system implementation alone.

1. Channels can be created, but there's no one to connect them

"You can pick up items ordered on our e-commerce site at our physical stores."
"Items out of stock at Store A can be purchased at Store B."
"Items purchased in-store will be delivered to your home today."

From the consumer's perspective, imagining omnichannel certainly suggests a convenient life where you can shop "anytime, anywhere, for anything." However, from the business owner's perspective, realizing omnichannel brings significant anxiety, such as "Won't sales from physical stores just flow to e-commerce?" Their first priority is protecting sales for the specific sales channel (channel) they manage. While there may be personnel responsible for each channel, there often seems to be no one capable of coordinating between channels.

(Video) "It's easy to say 'We'll deliver items bought in-store to your home the same day'... but who's actually going to deliver them? Are you going to run out and deliver them yourself? That's why I'm making this proposal, right?"

 

This incident made me keenly aware that "connecting channels" itself is a new challenge with few precedents.

2. Holding Both the "Customer Perspective" and the "Management Perspective" Simultaneously

While it's often emphasized that services supporting omnichannel implementation require a "customer perspective," in reality, it's difficult to provide services that solely pursue consumer convenience and enjoyment. Simultaneously, it's necessary to consider the workload impact on store staff and the contribution to sales.

For example, while tablet-based customer service might increase purchase rates and average transaction values, it could also reduce the number of interactions and ultimately lower overall sales.

Similarly, creating an engaging store environment with digital signage might increase foot traffic and time spent in front of shelves, but it could also reduce sales area, decrease the number of products handled, and ultimately lower sales. When deciding which services to offer, it's crucial to consider both the customer and the company.

(Video) "Do you truly believe the service you're proposing offers enough value to offset the losses from reduced operational efficiency? Will customers be happy just because it seems fun or new?"

 

This experience reaffirmed how crucial it is to repeatedly view things from both the "customer's perspective" and the "management perspective" when implementing omnichannel strategies.

3. Digitize and Systematize Know-How

The store floor holds a wealth of sales know-how—from the exquisite customer service rooted in the customer's perspective to the displays that make you instinctively pick up products. This know-how isn't merely about techniques for selling goods; it embodies the dedication, pride, and merchant spirit of true businesspeople. We certainly want to infuse the services supporting omnichannel with this merchant spirit. However, the reality is that it remains challenging to perfectly replicate the customer service methods performed by real people through systems or to digitize abstract experiences felt by customers. Ultimately, it's not uncommon for services lacking this merchant spirit to emerge.

(Video) "Don't let system constraints dictate service! Omni-channel is about delighting customers! Get your merchant spirit back and try again!"

 

While not quite as intense as that phrase, clients constantly test whether we truly understand that "merchant spirit."

4. Ending the Battle for Customers

"Why are my e-commerce site ID and store membership ID different?"
"Why can't I use points I earned online at the physical store?"

Considering how having a social account like Facebook or Twitter makes online registration almost effortless, or how a single Google account unlocks numerous apps like Gmail and Drive, retail membership services feel unnecessarily complex and confusing.

Why does this happen? It's simply because e-commerce sales and store sales are competing within the same company.

Retailers don't want customers who visit their physical stores to shop on their e-commerce sites, and vice versa. That's why they lock consumers into separate member IDs for each service and channel.

Breaking this lock-in is no easy task. Companies have invested heavily in promotional budgets for each channel to build their member bases from scratch. Yet, under the banner of omnichannel, they must now share member information across channels. In other words, it's like handing over their carefully cultivated customer lists to internal rivals.

(Video) "We've run membership campaigns every year... and now it's all for nothing!?"

 

It was an incident that highlighted the conflict: precisely because they are valuable customers, we don't want to hand them over easily, even within the same company... yet for the sake of customer convenience, it can't be helped.

5. Unify Awareness Across All Channels

"The e-commerce site had such a nice design, but when I went to the store, it was disappointing with cardboard boxes piled everywhere..."
"I downloaded the app and went to the store, but the staff didn't know about it and couldn't assist me..."

This is a challenge from the multi-channel and cross-channel era. Omnichannel allows us to move more freely between channels, making us more sensitive than ever to differences in service levels and gaps with brand image. Some people might even start disliking all channels because they dislike one...

As consumer expectations rise, providing high-level service across all channels and delivering a unified brand experience will become increasingly important. (Disney World's new "MagicBands" service in the US is a great reference point!)

(Video) "Developing new services together is great, but will you handle employee training too? Most people here don't even know what an app is or what a smartphone is!"

 

Omnichannel strategies in retail distribution have made me realize that many players, including our company, need to unify our approach.

We want to confront our clients' challenges head-on

What are the real challenges of omnichannel? As we've seen, most are unique internal issues within the client's organization. We're not saying the client is at fault. We've come to reflect that when our proposals weren't accepted, we might have too easily given up, thinking, "Well, that can't be done unless the client changes." Seriously considering omnichannel from the client's perspective, even if it seems theoretically possible, there are likely mountains of obstacles preventing it due to various circumstances. Perhaps we've been turning a deaf ear to our clients' struggles.

In the upcoming series, we probably won't be introducing flashy solutions. Readers might find a series without clear answers or resolutions frustrating. But first, we sincerely want to listen closely to the client's inner voice and strive to uncover the challenges. We want to possess the minimum qualifications to walk alongside them on this endless journey toward realizing omnichannel.

We are currently seeking individuals who resonate with this vision and wish to share their struggles. This article itself is built upon the real experiences accumulated by our three members. As these voices coalesce, we will report back to you. Stay tuned for the next installment.

P.S.: We've compiled the omnichannel terminology mentioned in the article.
Photo credit: Bit Promotion