Retail Management – Term Paper

Omni-Channel Retailing

Submitted to:
Prof. Smitu Malhotra

By:
Section-C, Group 7
B19141 – K Sai Chandra
B19142 – Keesara Nagadeep Reddy
B19147 – Marichetty Venkata Teja Vaibhav
B19149 – Nallamilli Sandeep Reddy

September 30, 2020

Introduction: Why Omni-Channel Retailing?
The 2000s saw the growth of e-commerce companies internationally. While initially their
impact on organized retail was not significant, towards the end of the decade, the scale of e-
commerce made it a serious threat to traditional retail, and had the latter worried about their
future. Overtime, the consensus in the industry has been that the future of retail is a blend of
online and offline, and companies need to be strong in both these spaces to survive and grow in
the market. 

Over the past decade, large retailers have increasingly invested in the digital side of their
business to help them achieve the shift towards this omni-channel future. At the same time,
brands that started online are now entering the physical world by opening stores that are in many
instances redefining what we have traditionally expected from stores. This change that started in
the 2010s, was expected to be completed only well into the 2020s. 

The CoVID-19 pandemic has changed all of this. It has upended the companies’ timelines
and has accelerated the shift towards an omni-channel future. From March/April onwards, when
most of the world came under restrictions that were enforced to battle the pandemic, there has
been a significant shift in the consumers’ behavior and the fortunes of major retailers. Businesses
have had to adopt to sudden regulations by the governments that have put curbs on their
operations and on the movement of people. 

Various companies have fared differently in the months following March of this year. In
the April to June quarter, Amazon reported 43% YoY growth in revenue in the North American
market. This growth was supported by a 3x YoY growth in its online grocery business enabled
by the company’s purchase of Whole Foods retail locations and the corresponding changes to its
fresh grocery supply chain. Retailers like Walmart and Target which had been investing in their
online operations and in options like in-store/curb-side pickup saw their online sales grow 97%
and 197% respectively. Closer home in India, where the organized retail and online grocery
businesses aren’t well developed, we saw companies scramble to meet customer demands.
Companies tied p with delivery services and online commerce sites to ensure that their brands
could reach consumers. Delivery services like Zomato and Swiggy tied up with local stores to
add online grocery delivery. The launch of JioMart was also helped local mom and pop stores go
online. Historically, for many consumers, online shopping had been restricted to a limited
number of product categories. The curbs imposed by the pandemic forced both consumers and
companies to rethink these old habits. 

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Objective
The Objective of this paper is to look at how the shift towards an omni-channel future has
been happening over the past decade, and how the events of this year have accelerated that
change. We will look at it from: 

 The consumer behavior angle - The changes in customer behavior over the past decade
and more importantly over the past six months. How many of these changes might
be here for the long term, and How will businesses have to respond to these changes? 
 From the perspective of the businesses - Which Businesses can make the change and
what areas will they have to invest? Online has been capital intensive and so will this
shift mean that only large retailers will survive? How can small and medium retail chains
manage the shift to omni-channel? and finally, what is the future of small mom and pop
stores? Will they need partners to survive or is there no place for them in the omni-
channel future? 

Literature Review
The retail network has evolved significantly over the years, from a single channel
network where the use of technology was minimal to multi-channel network which primarily
began with the advent of technology in service sector and leveraging it to meet consumer needs
through various channels and which finally culminated to omni channel or the hybrid
network. Omni-channel network has been picking up pace since the channels in multi-channel
network often detached where the communication to the customer is incoherent irrespective of
the channel they use.  
This shift towards the omni-channel model can be attributed to changing consumer
behavior who are looking for alternatives which saves time, have offline experience and how the
retailers are responding towards this changing need. To understand the change in consumer
needs, it is essential to evaluate the customer journey map since it is no longer the conventional
linear approach of product purchase rather it has changed to multiple
interconnected variables. From the retailer side, we would be analyzing the change in business
strategy, change in organizational structure required to venture into new territory or upgrade their
existing resources. 

The current COVID-19 pandemic has further pushed the changes in consumer behavior,
and the recent studies show that there is a tectonic shift in the consumer spending & shopping
behavior which are going to retain as long –term habits of consumers.  We have researched
online regarding the retail chain disruption & consumer behavior shifts with effect of
the pandemic and the findings tell us that the traditional retail channels have been disrupted
and there is a growth of e-commerce and Omni – channel platforms. Our findings further

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revealed that there is a sudden need for Direct-to-Consumer (D2C) channels for all traditional
retailers since the pandemic with the consumer have grown averse to visit retail outlets for
certain product categories in order to avoid populated & dense areas. 

Data Collection Methodology

The data collection methodology can be divided into two parts. We want to track the
change in the consumer behavior in different product categories due to the current external
conditions. We also want to track the recent investments by retailers (especially smaller
players) in building the omni-channel space and their impact in improving overall revenue and
customer experience. 

Consumer Behavior 

Due to the current external conditions many customers are reluctant to step outdoors and
intend to buy low-involvement goods like groceries online while some digital-first brands are
being launched in modern trade to increase penetration and brand awareness 
We plan to collect these metrics through a consumer survey 

1) Frequency of store visits, online orders in a week 

2) Average bill value in both the channels 
3) Willingness to shop in both channels for different product categories like groceries, apparel,
consumer goods food and beverages.  

Retailer Investments

The proliferation of online platforms like Shopify providing the end-to-end

infrastructure has made it easier for smaller retailers to build online channels. Based on the
secondary data available from the financial statements we want to determine the impact of these
initiatives on the overall performance and growth of the company. 

The metrics would be collected through company disclosures, financial statements, and

syndicated reports like Nielsen on the category performance 

1) Investments in the respective channels 

2) Growth of sales in a channel 
3) Improvement in customer experience/Delivery time 
4) Touchpoints affected in a customer journey 

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Change in Consumer Journey:
There has been a considerable shift in the customers’ purchase pattern and purchase
journey in the past few years as technology has become more prevalent which has enabled
consumers to explore different options before making a purchase. Traditionally, a customer
journey involved visiting a store after watching an ad and doing initial research, then comparing
the options within the store before making the purchase. Here, a consumer is primarily reliant on
the in-store staff about the functionality and usage of the product. So, customer bargaining power
would be slightly on the lower side and a retailer providing good customer service would not
find it difficult to retain the customer.

In the past few years, the dependence on retail stores for product information and
comparisons has reduced since a customer is targeted through various channels (telephone, social
media etc.) of competing brands and each of them are willing to provide comprehensive
information and best price for the product. The consumer can take a more informed decision in
this case before finalizing on the purchase. Again, the place utility would vary for different
products and different consumers. He/ she may be willing to visit a physical store or get a
discount coupon and purchase on an online platform or can compare those two options and go
for the better one.

Consumers have reduced the frequency of visiting a store for choosing assortment or
product information but those visiting are demanding better in-store experiences with
personalized sales recommendations and self-service checkouts. Omnichannel retailing would
satisfy these needs of customers as they offer flexible and convenient options for different
consumer preferences. In the survey conducted to gauge the consumer preferences, more than
60% of the respondents are looking for flexibility and price as key factors while visiting a store.
Improving on these factors could attract customers using primarily online channels for shopping
as well.

Consumer Behaviour:

Our primary survey results from over 50 people have given us results about the shift in the
consumer behaviour during this pandemic. We will have look at some of the striking insights
from the survey

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 a) Shift to Online purchases in Apparel & Electronics: We have observed the shift of
purchase to Online channels especially in Apparel & Electronics category. Majority of
the respondents from Tier 1,2, &3 cites said that their purchases shifted to online
channels during the pandemic in Apparel & electronics category.

b) Online shift in Groceries & Medicines is observed in Tier-1 cities only: Online
purchase shift in groceries & Medicines is predominantly observed in Tier-1 cities and
this effect is not significant when we observe in Tier-2 & 3 cities. 

c) Service & Convenience of stores overcome the price tag: Consumers preferred the
hygiene facilities of physical stores and Convenience of the payment methods over the
price of the goods being purchased. This trend is significant for Apparel & Electronics
category purchases.
d) E-commerce sites like Amazon & Flipkart are the winners: Amazon & Flipkart are
the most searched online channels and people purchased from Amazon & Flipkart
predominantly over the Exclusive store Online sites (Ex: Lifestyle, Raymond, etc. have
their own online sites) 

e) Online shopping habits are going to stay: More than 60% of the respondents have said
that they will explore more online channels in the future, even after the things come
normal again as they feel it is providing great flexibility and convenience.

Initiatives by Retailers:

Consumers now no longer visit the store for choosing assortment or product information
but are demanding better service based in-store experiences with personalized sales
recommendations and self-service checkouts. Here are some initiatives taken by retailers to
improve product availability and sales recommendations.

Brands and Brand Stores:

Product Availability:
Consumer Problem: Many consumers are not able to find the right size of clothing and the
fitting that best suits them in the store

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 i) Endless Aisle:
Brands like Adidas, Reebok are revamping their stores and equipping them with iPads to
ensure that shoppers can browse through and order their products online which are not available
in the store.

ii) Fit scanner: 

Van Heusen has an infrared device installed in their store which scans the customer to
generate the respective body measurements, identify the right fit for shirt, trouser, dresses etc and
recommend products.

Expert Guidance:
Consumer Problem: Consumers are not sure about their style preferences/taste or about the
products that complement their style preferences.

i) Style Bar & Virtual Trial Room:

By answering a short questionnaire, the brand helps consumers in determining their style
personality and recommending products which complement that style. Van Huesen has also
installed a digital screen where consumers can virtually preview their shirts, trousers without
going to a physical trial room.

ii) Design Studio:

The consumers may not be willing to purchase all product categories online as mentioned
above in the consumer behaviour. Furniture is one such category where customers would prefer
having touch & feel of the product before purchase. Pepperfry, an online furniture retailer has set
up “Studio Pepperfry” where consumers can look at the products and consult experts for
guidance.

National Multi-Brand Retailers:

Retailers like Lifestyle, Shoppers Stop, Pantaloons, etc. have also started their own online
stores. However, the experience here cannot be termed as truly omni-channel with all the
retailers.

Flexibility:
i. Returns:
The ability to order as well as return/get a refund should be seamless in an omni-channel
experience. However, this is not the case with all retailers. Pantaloons for example, operates its
online and offline stores as separate entities. Order brought online can’t even be returned in

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stores. Reliance Trends - Ajio and Lifestyle on the other hand allow customers to return online
orders in store. But customers can't return orders brought in-store via mail. In this regard,
Shoppers Stop is the only large national retailer that offers complete flexibility. This shows how
for most retailers, the shift to omni-channel has been piecemeal.

ii. Integration of Stores and Website:

Most retailers do not offer a click and collect facility. The stock at local store is not
updated with the website. As a result, the customer can’t check if what he/she is looking for is
available at the nearest physical location. As a result, these national retailers are not able to take
advantage of their stores to meet such express orders.

Improving In-Store experience:

Most retailers have introduced online ordering kiosks within stores, where customers can
order sizes that are not currently in-stock and have those delivered to their home. Most stores
haven’t gone beyond this to improve in-store experience. Some retailers like Shoppers Stop have
introduced personal shopper services that cater to high paying customers. However, as discussed
previously, a good omni-channel strategy requires seamless customer experience both online and
offline. So, Shoppers Stop will have to find a way to augment the personal shopper experience
for these high value customers such that they can get the service online as well.

Large Regional Retailers:

These are retailers who have large modern locations that sell branded as well as
unbranded clothing. Their stores are limited to a city or a region within the country. For them,
the impact of the shift towards online shopping is playing out differently.

Stores offering mostly Branded Clothing:

These retailers have seen increased competition from online retailers. As the clothes they
offer are standard products by national and international brands, these retailers do not have
enough room to differentiate themselves. So, these retailers have started focusing more on their
Indian ethic wear and wedding collections.
An example of retailers taking this route is Tipsy Topsy. They are a regional retailer with
modern stores located in more than 6 cities in Andhra Pradesh. They started more than 15 years
ago and mostly sell branded men’s apparel from companies like Levi’s, Pepe Jeans, Lee,
Wrangler, etc. Of late, rather than trying to adopt online or omni-channel, they have started
allocating more space within their store to sell Indian ethic wear and wedding collections.

Stores offering both branded and unbranded clothing:

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 These are retailers who have modern stores but sell mostly unbranded clothing along with
some branded products. An example of this is the Chandana Brothers chain of stores in Andhra
Pradesh. Though it started out as a saree retailer, over the past two decades it has positioned
itself as a family department store by expanding its offerings to include menswear, kidswear,
jewellery etc. However, in the recent years, competition from national chains and online retailers
has seen them move back to mostly jewellery and women’s clothing which reaim largely
unbranded categories.

As seen in both cases, modern regional retailers, rather than competing by going omni-
channel, have started tweaking their offerings to favour products that still haven’t caught on in
online channels.

Small Local Stores and Boutiques:

Small scale local independent businesses mainly in women’s apparel and low-cost
jewelry have started adopting social-media and consumer technology tools to reach their
customers. They upload pictures of their merchandise along with a unique item identification
number and the contact details of the store overlayed at the bottom of the image. These images
then get re-shared by people among their social groups. Finally, when someone likes an item,
the details in the photo help them reach the store. The store can then take their payment online
and ship it to the desired address. This has helped them bring down marketing costs and helped
them reach new customers by taking advantage of people’s online connections.
Adoption of such methods has increased even further during the lockdown as more
small and local businesses have started exploring these new options through the digital
channels. These tools have also helped boutiques which depend on high value customers to
find new ones in different cities by piggybacking on the social connections of their local
customers.

Implications for Managers

Optimizing Multichannel with Omnichannel:

The transition to omnichannel retailing can be achieved by connecting existing channels

to offer an enhanced shopping experience. For instance, a manager can co-ordinate with the
warehouse team and connect it with stock of subsidiaries. When a consumer check for a product
in a retail store the chances for his purchase online are increases so with this synchronization no
additional warehouse is required for online store.

Managing the Supply Chain:

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 The physical processing becomes slightly different depending on the delivery to store or
directly to a consumer in an omnichannel retailing. The online orders are volatile so the company
must broaden the portfolio of items to maximize the customer demand. The delivery of the
product should be decided based on the trade-off between costs of delivering at the store or
directly from a warehouse/ distribution center. The supply chain must be efficient to deliver the
product on time at optimal cost.

Warehouses and IT:

New warehouses need to be set up for packing and consolidation or the distribution
centres will need to be shifted to different location to cater to wider portfolio. Offline retailer
transitioning into online channel would require extensive IT infrastructure to co-ordinate
between various stakeholders. Manager’s role become key in maintaining these aspects of
transition.

References:

1) https://www.pwc.in/assets/pdfs/publications/2016/building-retail-businesses-for-
tomorrow-today.pdf
2) https://blog.beaconstac.com/2016/03/omnichannel-retail-in-india-5-brands-that-are-
doing-it-right/
3) https://brandequity.economictimes.indiatimes.com/news/advertising/adidas-bets-big-on-
omni-channel-play-in-india-rolls-out-strategy/48851363
4) https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/retail/pdfs/mind
%20the%20gap%20what%20really%20matters%20for%20apparel%20retailers%20in
%20omnichannel_final.pdf

Exhibits:
1. Tipsy Topsy

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2. Chandana Grand

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