CHAPTER THREE:

STRATEGIC ADVANTAGES OF ONLINE-OFFLINE INTEGRATION

  1. Strategic Advantages of online-offline channel integration

3.1 Introduction

Today, the online channel has developed characteristics of its own. The relevance of this channel in the retail sector and the pressure from customers that want to interact with the company in a cohesive way have pushed B&M retailers to consider channel integration efforts with varying characteristics. This integration is not always evident to the customer, as is the case when a retailer ships an online purchase from a store rather than the warehouse. In other cases, integration is driven by the need to offer a homogenous and more rewarding online-offline customer experience. Examples include offering customers the possibility to return to a store items that were bought online, place online orders from the store and have the products shipped to the customer address, buy items online and pick them up later at the store in which they are stocked, or buy an item online and pick it up at the store once it has been delivered to the store

3.2 Literature Review

Online-offline integration efforts have always been challenging for companies. The retailer needs to ensure integration of inventory systems, warehouses, marketing campaigns, pricing strategies, etc. Retailers often struggle to distinguish what is really available at their stores or warehouses, as has been studied in previous empirical research documenting substantial inventory record inaccuracy (DeHoratius and Raman 2008). Another challenge faced in the implementation of some of these integration efforts is an increased complexity in store execution (Fisher et al. 2006). Store processes are designed to sell and not necessarily to support the quick delivery or shipment of goods, activities that these integration strategies allocate to physical stores.

Some recent work in marketing and information systems has explored related issues, such as the difference in price elasticity between the online and brick and mortar channels (Chu et al. 2008, Granados et al. 2011), customer channel migration (Ansari et al. 2008), the choice between online and offline channels (Chintagunta et al. 2012), the impact of product returns on a multi-channel retailer (Ofek et al. 2011), or customer behavior in multi-channel customer service (Jerath et al. 2012).

In operations management, some work has examined fulfillment and supply chain choice on the Internet. For example, Netessine and Rudi (2006) study the effects of inventory ownership in online channels, and Randall et al. (2006) empirically study the decision to invest in fulfillment capabilities. These are some of the strategic business issues relevant to the subject.

3.3 Examples of brands applying integration

Kate Berry (2014) of WGSN states that online-only retailers are becoming offline to host pop ups and set up physical stores. On the other hand physical stores are incorporating the best aspects of shopping online in order to build a stronger connection with their customers.

Figure 3.1: Etsy, (an e-commerce craft website) invested in a pop-up Holiday Shop held in New York. Source: WGSN, 2014
Figure 3.1: Etsy, (an e-commerce craft website) invested in a pop-up Holiday Shop held in New York.
Source: WGSN, 2014
Figure 3.2: Fab, (an online retailer for daily design, inspiration and sales) created a physical store in Hamburg, Germany. Source: WGSN, 2014
Figure 3.2: Fab, (an online retailer for daily design, inspiration and sales) created a physical store in Hamburg, Germany.
Source: WGSN, 2014

One of the biggest known online retailers, Amazon is planning to open a brick-and- mortar store. According to a current research Amazon suffers from consumers’ lack of ability to touch and feel products before they buy them even though it is an exemplary competitor through its prices. According to Mintel (2012) Amazon will open a physical store in Seattle, Washington to showcase its wares like the Kindle and Kindle Fire. By doing this Amazon will not be far from positioning itself as an industry leader who offers grander customer service and product knowledge.

Video: Muji’s released a homemade campaign that permitted its customers to experience a craft-led, low-tech project digitally. It consisted of a miniature village crafted out of gingerbread, (their own Gingerbread House product), further accessorized with small cameras for customers to immerse themselves in the display when at home.

Source: WGSN, 2014

Another example of engaging with their customer digitally includes Target’s ‘Falling For You’ campaign. This was broadcasted last year, comprising of three minisodes starring well-known actors and giving their viewers an opportunity to shop directly from the videos as they watched, with their choices being saved for purchase after the show ended thus not interrupting the viewing experience.

Now a days as the consumers are getting more used to ordering online and picking up in store. ‘Deskontalia’ is a shop designed specifically for customers to visit and pick up their orders. Its interiors are filled with cardboard boxes and cardboard seating, so that it looks visually appealing although there is nothing to display.

Figure 3.4: Deskontalia pick-up shop, San Sebastian Source: WGSN
Figure 3.4: Deskontalia pick-up shop, San Sebastian Source: WGSN

There are also retailers who are trying to make the most of the spaces available in their physical retail stores thereby, providing consumers an escape from their digital lives, by designing a soothing sanctuary space as can be seen in the figure below.

Figure 3.5: Selfridges, London Source: WGSN, 2014
Figure 3.5: Selfridges, London Source: WGSN, 2014

 

On the other hand, John Lewis, one of London’s major retailers launched Open House, its first ever pop-up store, in Angel, London to promote its home wares range. The pop-up store also hosted events and workshops such as film screenings, had a cafe and juice bar, and a house party with live DJs. This idea helped, the large-scale department store retailer to bring the brand to customers in other locations across London on a much smaller scale. Also, those of its customers who preferred shopping online on the John Lewis website, were shown a sample of the real-life product.

As far as the key drivers for online retail in U.K are concerned, these include: the more sophisticated online offers from retailers; more retailers making their full offer available online; consumers gaining in confidence with e-retailers and e-retail processes; more retailers offering click & collect services; greater penetration of smartphones; explosive growth of tablets. On the other hand, the key inhibitors for online retail have been: online market is maturing; broadband penetration is peaking; M-commerce cannibalizing desktop and laptop sales (see Appendix ); some consumers still worry about security of payments; some multichannel offers are focused on reserve & collect where the payment is made in store, and therefore is not counted as an e-retail sale and lack of customer advice and service online (Verdict 2012).

Thus to conclude, The ‘Mixed-Mode Buying Behavior’ model (Chaffey et al, 2009) can be used to understand the strategic advantages of having an integrated brand presence. This model lays emphasis on the fact that all channels should support each other, and the” customer should be supported in changing from one channel to the other” (Chaffey et al, 2009:35). Similar to the ‘Consumer Decision Journey’ (Edelman, 2010) where customers pull their information rather than being pushed by marketers, Chaffey et al (2009) believe customers are now in control and are moving away from a ‘lean back’ approach to a ‘lean forward’ approach. Integration of channels is key to the ‘Mixed-Mode Buying Behavior’ model as more customers are engaged in a cross-channel shopping journey.

Continue on next page to read about ‘Showrooming’

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I'm an eCommerce Project Director at an agency in London and a consultant for a number of eCommerce start-ups. I founded Think etc 9 years ago which now lets me share my research and experience with all the interesting brands, people, places and projects that I have been privileged to work with. My work on crowdsourcing was published by Oxford as part of a journal article and I have been obsessing over eCommerce and Magento over the past several years.

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