Omnichannel distribution is an approach to distribution that enables customers to buy and receive products from multiple sales channels that are seamlessly integrated. This means that a customer can make a purchase through one channel and even choose to receive it through another. Think a customer placing an order online and having it shipped to the store, where they can pick it up.
What is omnichannel distribution?
Omnichannel distribution is a strategy that moves goods through multiple online and offline channels to allow customers to receive their purchased products in the way that best suits their needs. For example, if a customer wants to buy something from a retailer that uses an omnichannel model, they could choose whether to go shopping in person, have the product delivered to their doorstep, or order it online and pick it up at the store.
With true omnichannel distribution, barriers between sales channels are non-existent. For example, when the inventories of ecommerce and brick-and-mortar stores are integrated, omnichannel distribution creates a seamless, convenient shopping experience and maximizes operational efficiency.
Two types of distribution
- Forward distribution system. Characterized by its sources (dispatching locations), destinations (points of reception) and associated links. When building it, you should take into consideration different types of sources and destinations in the physical structure, as well as possible delivery processes and modes.
- Backward distribution system. The mixture of the physical flow of return products, and the locations where products returned. It covers shipment between customers and stores.
The 6 omnichannel distribution sales channels
Products take many different journeys to arrive in a customer’s hands with an omnichannel supply chain.
- Ship from store. Customers order online, and their purchases are shipped directly to them from the nearest store location.
- Drop-shipping. Customers order online, and the company ships the product to them via a third-party vendor.
- Buy online, pick up in-store (BOPIS). Customers order online, then go to the brick-and-mortar to pick up their purchase.
- Reserve online, pick up in-store (ROPIS). Customers reserve an item online. They then go to the store, decide if they want to buy the item, and complete the transaction using the store’s point of sale (POS) system.
- Buy online, return in-store (BORIS). Customers buy something online but change their mind and return it to the store location.
- In-store purchase, home delivery. Customers purchase a product in the store and have it delivered to their homes. This is a popular choice when buying furniture or appliances.
Why Omnichannel Distribution is important?
- Customers take it for granted that a distributor will provide them with a seamless experience and the ability to make purchases in any way they want. If you can’t give them such an experience they will get the product from your competitors.
- Consistent sales efforts across multiple channels increase brand awareness and allow the brand to reach new audiences. Customers become better acquainted with the product gaining the trust they need to buy it.
- It increases profit. omnichannel customers spend more money. Flexibility increases buying opportunities and provides a wider means to access and purchase the products. All data is analyzed centrally, so you don’t have to engage personnel for each distribution channel separately. Thus, revenues increase and costs may decrease when compared to a multichannel strategy.
What is the difference between omnichannel and multichannel distribution?
Multichannel distribution uses multiple sales channels, but they’re siloed, meaning that inventory cannot move between channels. This limits the options that customers have for buying and receiving goods. For example, let’s say that Harold orders a pair of shoes online from a multichannel retailer. He doesn’t have the option of picking the shoes up at the nearest store and instead has to wait a week for them to be delivered to his home.
On the other hand, an omnichannel approach breaks down barriers between channels, allowing customers to switch effortlessly between them. Using the previous example, Harold orders a pair of shoes online and chooses to pick them up from the store to save on shipping costs and get the shoes in time for his daughter’s wedding. The added flexibility and convenience of an omnichannel approach encourages Harold to buy from the store again and again.
The biggest challenges of omnichannel distribution
- Inventory visibility. Since omnichannel distribution is so flexible, inventory can be stored in multiple locations—stores, warehouses, distribution centers, or any combination of the three. With multiple locations for inventory comes an urgent need to keep track of inventory levels, availability, and movement in real time. It’s crucial to maintain inventory visibility across locations to avoid overstocking or stockouts. While developing a strong inventory management system can be a challenge, it’s an essential element of omnichannel distribution and can be simplified with the right technology.
- Delivery speed. If it’s not done right, omnichannel distribution can result in orders getting delayed. When inventory is stored at multiple locations, businesses must perfectly coordinate and optimize inventory allocation, logistics, and transportation to deliver an omnichannel experience that actually works for customers. Failure to do so has hefty consequences: when omnichannel delivery takes too long, nearly half of consumers will shop somewhere else.
How to implement omnichannel distribution
- Get an inventory management system. A defining characteristic of omnichannel distribution is integrated inventory. When inventory is shared across channels, efficiency soars because buyers can access the products closest to them, regardless of whether they’re picking up their purchases or having them delivered. But without a system for tracking inventory, you’re likely to either overstock or run out of goods. Because of this, it’s essential to invest in the right technology. An inventory management system will help you keep things under control.
- Put the customers’ needs first. The first step in putting your customers’ needs first is to understand those needs. Successful omnichannel distribution models collect data throughout the customer journey to give you insight into how individuals interact with your business. Analyzing this data will help you understand your customer base, personalize each person’s buying experience, and identify pain points. You can also go straight to the source by paying attention to the feedback people leave via surveys and online reviews.
- Focus on the right channels. To reach the right customers, you need to get specific—that means that trying to dive headfirst into ten channels at once isn’t the best idea. Base your choice on customer demographics and preferences, as well as market conditions. The best experience will combine in-person and online channels, as 50% of consumers plan to increase online spending while still frequenting physical stores.
- Optimize logistics and fulfillment. Late deliveries put you at risk of losing customers forever. Since omnichannel logistics can be complicated, it’s important to develop a strong system for processing, fulfilling, and delivering orders. Shipping software can make it easier to optimize your order fulfillment process so that deliveries are on time, every time.
FAQs
How does omnichannel distribution impact inventory management?
Omnichannel distribution requires synchronized inventory management across all channels to prevent overselling, stockouts, and discrepancies. Real-time visibility is essential for effective inventory control.
What channels are typically included in an omnichannel distribution strategy?
Omnichannel distribution can encompass various channels, including:
- E-commerce websites
- Brick-and-mortar stores
- Mobile applications
- Social media platforms
- Call centers
- Catalogs or print materials
How can a business implement an omnichannel distribution strategy?
Implementation involves:
- Integrating inventory management systems across channels
- Offering a consistent product catalog and pricing
- Providing a unified customer experience
- Implementing technology for real-time data sharing
- Training staff for seamless customer service
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