Omni-channel is the new shopper reality. And while manufacturers are adapting their shopper marketing to it, the next big challenge is the route-to-market (RTM).
Route-to-market can be defined as the path of goods from manufacturer to shopper and the flow of money from the shopper to the manufacturer.
According to a 2018 study by National Public Radio (NPR) and Marist, 69% of U.S. adults made an online purchase at least a few times during the last year, and 43% made an online purchase at least once a month. When starting the shopper journey for online purchases, e-retailers like Amazon have a clear lead. Forty-four percent of online shoppers start their journey with Amazon, and 33% start on search engines such as Google. Large retailers (such as Walmart or Target), brand websites and online marketplaces (eBay or Etsy) have significantly less importance as a shopper journey starting point; just 10%, 6% and 5% of shoppers begin their journeys there, respectively.
Groceries are purchased online far less than other categories of goods, such as electronics or books, with important differences between countries, as revealed by PwC’s Global Consumer Insights Survey of 2018. In the U.S. and Canada, the probability that respondents would buy groceries online in the next year was found to be 15% and 8%, respectively, according to the report. In the U.K., this probability is 32%, and in China, it’s 59%.
The purchase process has become more complex. In the year 2000, 82% of shoppers used one or two touch points when purchasing. In 2015, 67% of shoppers used three or more touch points, according to Marketing Week. A 2018 study by Ipsos shows that 60% of shoppers do research online before they buy in store while 27% do research in store before buying online. This is often referred to as webrooming and showrooming. The importance of this omni-channel shopper experience is accentuated by the fact that omni-channel shoppers spend 3.5 times more money than shoppers who use just one channel.
There are many route-to-market challenges that need to be managed in this omni-channel environment. In this article, we will focus on six of them.
As shopper journeys become more complex, there is a shift in focus from channels to shoppers. The omni-channel concept depicts an always-connected shopper who uses multiple channels for information and purchase. These purchases can take place both online and offline in different channels. Connecting the route to purchase with the route to market means delivering on shopper expectations at the different points of purchase. It implies understanding the shopping missions, and thereby the roles of the different touch points and points of purchase. The aim is to activate each of these points in the most effective and efficient manner.
Developing a seamless shopping experience starts with mapping and understanding the shopper journey, also referred to as the path to purchase. Dependent on the role and importance of each touch point along the shopper journey, the resource allocation in terms of investment and content can be prioritized to optimize the conversion of the shoppers.
Convenience is becoming more important to shoppers. Originally convenience in marketing was attributed to products that needed only little cognitive decision-making; later, it expanded to include convenience channels. Convenience channels, such as 7-Eleven, are defined by their proximity and speed of purchase. Convenience has also entered the purchase process. Solutions such as Uber, cashless stores as tested by Starbucks, or voice ordering through digital assistants like Alexa, offer increasing convenience to shoppers.
Commercial customers are looking for convenience, too. In Vietnam, MuaCoke, a self-ordering app for retailers, where the type and service of the delivery can be chosen, has been introduced. In Sweden, mobile payment methods like Swish are expanding, simplifying the payment process not only for shoppers, but also between suppliers and retailers.
Manufacturers need to be sure to offer relevant services to support convenience needs and manage the touch points concerned.
As the concept of convenience develops and goes beyond just products or sales channel proximity, companies need to understand the specific significance it has for shoppers in different categories or for commercial customers. It involves mapping, understanding the job to be done and where the key barriers are. Understanding the task at hand can give convenience a new meaning. Examples include convenience shopping at discounters, end-to-end services for the purchase of men’s toiletries (e.g. Harry’s), or the usage of apps in the management of deliveries and warehousing of commercial customers.
A more complex shopper journey and increasing expectations on shopping convenience are impacting sales channel structures. The internet is now an established and important sales channel, which naturally differs by category and country. As convenience becomes a more important factor, channel roles are blurring. Discount grocer Lidl now offers convenience shopping in its stores in Germany and the U.K. With continuous urbanization, rising disposable incomes and smaller families, away-from-home or immediate consumption (i.e. consumption at the outlet or on-the-go) is growing. In parallel, chains are consolidating the retail market, looking for growth in the changing channel landscape.
The route-to-market systems of manufacturers must be adaptive to changing channel structures to meet shopper needs in a cost-efficient manner.
The sales channels are the point of conversion of the shopper journey. As shopper journeys have become more complex and the importance of convenience has increased, the role of channels is also changing. To understand the role of sales channels, the reason why shoppers buy at them needs to be mapped. The shopping missions determine the type of sales channels shoppers are looking for and gives an idea about the current and potential future role of these channels. It also provides an understanding of the ongoing channel blurring and the emergence of new channel formats (e.g. pop-up stores), or the interplay between online and offline channels and omni-channel solutions.
Shoppers expect a seamless omni-channel shopping experience where they can order and buy from anywhere, anytime. This puts the route-to-market under pressure to fulfill from anywhere, anytime as well. Customers want to buy online and pick up in a store or at lockers, place orders on mobile phones and have purchases delivered at home with the ability to return them. The challenge of omni-channel fulfillment has made logistics a part of marketing, as spearheaded by Amazon.
Manufacturers and retailers are facing the challenge to ensure a seamless shopping experience and manage the complexity of omni-channel fulfillment while minimizing the cost to serve.
According to a study conducted by Brightpearl in 2017, 87% of retailers agree that omni-channel is critical to their business, but only 8% say they have mastered it.
The increasing expectations for seamlessness and convenience implies that purchase decisions could be taken across the shopper journey through the internet, mobile devices or in-store with a variety of fulfillment options. These include click and collect, buy online and return in-store, home delivery, showrooming, or just buying in-store while receiving offers and promotions through a mobile device. This implies rethinking the supply chain and the role of existing and new players, as well as the usage of existing assets, as the store.
Analysis of customer data plays a vital role to better understand needs and flows of goods to be able to optimize these. Examples include how brick-and-mortar retailers use their stores for fulfillment of online orders, the usage of CEP (courier, express, parcel) companies for last-mile delivery, and connecting wholesalers or food delivery agents through ordering apps for a more flexible fulfillment in terms of timing and service. Lately, drones as a fulfillment alternative have gained increased attention.
In a 2016 study by Paul Lapoule and Enrico Colla published in the International Journal of Retail & Distribution Management, the authors write that the omni-channel strategy implies shifting the emphasis from selling in to the store to focusing on supporting the store to sell to the shoppers. The development of an omni-channel context encourages salespeople to focus less on sales and order-taking and more on advising clients on how best to develop their businesses, transitioning the role of salespeople from selling to giving advice on developing business.
To stay ahead in the new omni-channel reality, manufacturers must reevaluate the role of their sales force. The goal is to not focus on sell-in, but to partner with retail to activate shoppers and focus on the sell-out. This implies not seeing the retail as the end customer, but as part of the system to reach the shopper. By understanding the role of retail within the shopper journey and how to activate the shopper, clear plans can be developed to trigger conversion. Companies such as spirits manufacturer Diageo are talking about route to consumer, integrating sales and marketing to better activate the retail in line with their brand strategies. The sales force of the future will be closer integrated with marketing and trade marketing internally, and partner with commercial customers to better serve the common shopper.
One of the key drivers of these changes and resulting challenges is technological development. Markets are moving from connected to hyper-connected via artificial intelligence for automatic ordering or voice-activated purchase. Automatization will increase, such as Kellogg’s introduction of VoiceMan, an automated picking system. Further in the future lies the development of driverless trucks and delivery drones.
Digitalization and automation will continuously influence the route-to-market value chain. On-demand last-mile delivery through meal delivery solutions, like UberEats, have already entered the route-to-market sphere, as have sharing-economy solutions, like FLEXE for warehouse spaces.
Technological development is both an opportunity and a challenge. Not keeping up with the development could mean losing competitive edge, as many brands already have to leaders like Amazon.
About the author:
Georg Krentzel is partner at Globalpraxis.
American Marketing Association, Marketing News (5 March 2019).