What is Multi-Channel Retailing? The Opportunities and How to Overcome the Operational Struggles

What is Multi-Channel Retailing? The Opportunities and How to Overcome the Operational Struggles

Today, 86% of shoppers use at least two channels when shopping. At the risk of oversimplification, their journey takes one of two courses:

  1. Researching offline and buying online, or
  2. Researching online and buying offline

Multi-channel retailing means selling to customers through both traditional offline outlets — like brick-and-mortar locations, mail order catalogs, and even direct-to-consumer telemarketing — as well as online outlets — namely, ecommerce sites, social media, email marketing, and marketplaces.

Multi-channel retailing places your product at the center of a multi-spoked wheel where your customer is never more than a click or clerk away from buying:

Multi-channel retailing overview diagram

In other words, multi-channel ecommerce and retailing lines up perfectly with how customers already shop.

Except for one thing. Adopting a multi-channel approach internally is disastrous.

You want to centralize operational control so that you can avoid inventory shortages, streamline logistics, and keep margins healthy.

And therein lies the dilemma.

Merchants need to marry operational alignment on the backend with diverse relevance on the front-end.

There are five distinct challenges to doing that, and we’ll show you exactly how to overcome each one in this article.

But first, you need to understand how multi-channel retailing works, along with how you stand to make more money by giving customers exactly what they want when they want it.

Shopify Flow

Are you selling everywhere your customers buy?

For an executive look at the present and future of commerce, download The Enterprise Guide to Multi-Channel Ecommerce.

Inside, you’ll get one-pagers detailing …

  • Comprehensive data on the opportunities and threats
  • Merchant spotlights for insights on top channels
  • A checklist for selecting the right multi-channel platform

Access the guide today

How Multi-Channel Retailing Works

Multi-channel retailing is a hybrid approach that blends the best of several worlds.

On the one hand, it puts the option to purchase where customers are. Traditionally, that’s a literal storefront. Online, you have websites and marketplaces. Offline, you have brick-and-mortar.

But even these lines are blurring lately.

Pinterest offers Buyable Pins that allow consumers to purchase without ever leaving the site. Instagram has only recently unveiling native shopping. And Facebook Messenger has added payments as well.

Multi-channel retailing focuses more on utilizing those distinct distribution channels (as opposed to a fluid, omni-channel strategy).

The reason that’s an important distinction is because the word “marketing” has become conflated with “advertising” over the past decade or so. That wasn’t always the case.

Go back a few decades to the 1960’s and you’ll see that the original “marketing mix” involved the 4P’s. The fourth P — place — comes down to distribution. Your distribution strategy and channels have a direct influence on your marketing and sales results.

The classic definition is more relevant today than it ever has been.

“The process of making a product or service available for the consumer or business user that needs it. This can be done directly by the producer or service provider, or using indirect channels with intermediaries.”

Multi-channel retailing is a blast from the past in that sense. What’s old is new again.

How and where you decide to sell today might have a greater influence on sales than any single ad campaign. Instead, promotion becomes channel-based, too. There’s no sense in driving customers away from Facebook with an ad when they can now purchase faster, easier, and more conveniently through the Messenger.

Multi-channel blends both marketing and retailing strategies. One that might require significant investment and reorganization to make the logistics work.

Here’s why the opportunity is worth pursuing in the first place …

Mirroring the Buyer’s Journey

Multi-channel retailing isn’t a trend so much as it’s an evolution. It mimics how consumers are already behaving.

Consumers today use multiple channels and devices, up to a dozen times, before making a purchasing decision. Google’s research illustrates this shift, in what they’ve dubbed the “consumer journey path to purchase”:

“The path to purchase, from start to finish, is rarely linear—it's more akin to a scavenger hunt. Along the customer journey, one search can spark an entirely new idea or want. And one search can make the difference between your brand and the competition.”

Google analyzed data and interviewed customers to learn more about how they arrive at the decision to purchase.

For example, one customer named Marcus was looking for a gift from a local bookstore. At a certain point, his research led to local queries like “Cincinnati bookstore.”

However, he didn’t start there.

desktop-search-path

Marcus started with Amazon. Performed two Google searches (one location-based, the other branded). He even visited discount and coupon sites before eventually buying.

However, the important point isn’t just that consumers bounce around multiple channels like this. The key is when they use each, and why.

Google has expanded their research to show how each channel lines up with most marketing and sales funnels.

marketing channels shopping industry

Here’s what the graph depicts:

  1. Consumers often find out about new products through social and display ads.
  2. Like Marcus, they’ll start performing generic product, category, or local searches to get a lay of the land. Then, they’ll do brand-related searches when they’ve narrowed down the list.
  3. Customers will then go straight to the site to purchase soon after.

That means the majority of the purchasing process happens before someone hits your site (or even knows you by name). Google dubs this the Zero Moment of Truth, referring to the point before someone evaluates the specific product.

Zero Moment of Truth

How Multi-Channel Retailing Bridges Online and Off

People will even continue using their phone while in-store to augment their decision making.

Retail Dive says 60% of shoppers will look up product information and pricing while in a store. Another study from SessionM puts that number closer to 90% of shoppers.

What exactly are they doing?

Most of the time, it includes researching product information, specs, and reviews. For example, you’re looking at several different products inside a retailer but want some extra context about which one is best.

how consumers use mobile phones in stores

However, in-store price comparisons are common, too. It’s a way of keeping the retailer honest.

A $50 iPhone case sounds high off the top of your head. So, you pull up Amazon to see if the pricing is consistent or if you’re being gouged for all that extra square footage you’re standing in.

(What’s the definition of irony? Amazon getting a patent that won’t allow in-store shoppers to price check their retail locations.)

Shopping behavior also changes based on age group.

For example, baby boomers are the most likely to look for a coupon and the least likely to use a retailer’s mobile app. On the flipside, younger generations are more likely to research product information and price-check the competition.

mobile phone usage in store by age

All of these are legitimate reasons to start using multi-channel marketing. It’s the way customers already expecting to shop around.

However, they’re not the most important reason. Instead, this next point is …

Multi-Channel Retailing Is More Profitable

To put it bluntly, multi-channel is more than just how people shop, it’s how retailers operating in the online-to-offline (O2O) world thrive.

Stitch Labs reports that multi-channel retailing results in more top-line growth:

“Those who sold on two online marketplaces instead of just one (plus their website) averaged 190% more sales revenue than single-marketplace retailers.”

Harvard Business Review and McKinsey teamed up to analyze the buying habits of 46,000 customers. Their study also found that multi-channel customers spend more money. The ones who used over four channels, for instance, spent 9% more on average than those who used less.

Another report from IDC Retail Insights showed similar findings across the board:

  • 15-35% increase in average transaction size
  • 5-10% increase in loyal customers’ profitability
  • 30% higher lifetime value than those who shop using only one channel

What can you deduce from this?

Multi-channel consumers are better informed. They’re taking the time to do more research on the front-end. That means they’re likely to spend more money with you and be less price sensitive in the future.

All of which sounds like a pretty good reason to expand your multi-channel marketing efforts.

Unfortunately, though, it’s not that simple.

Transitioning from one channel to multiple, or going from offline to on presents significant challenges.

Here are five of the biggest, along with how to address each.

Five Multi-Channel Marketing Challenges to Overcome

1. Pricing

When was the last time you booked a hotel room in a new city?

Chances are, you start with a query like “New York City hotels” before moving into a specific brand or neighborhood location. Otherwise, you fired up another third-party aggregator like Expedia or Hotwire.

Travel business prices are based on demand. The more people looking on popular dates, the higher rates will be.

However, there are often pricing discrepancies between these channels, too. For example, many hotel brands will provide a lower price for sites like Expedia and Hotwire than on their own website.

So, guess what customers do? They buy through those sites, instead.

The hotel brand is training customers to buy somewhere else, at a lower price, on a site that forces the hotel to pay out a higher share of revenue, so that they’re left with a lower-margin booking.

That doesn’t make much sense, does it?

But guess what happens on Amazon? The same exact pricing pressure and high revenue share commission that has the potential to drive down margins.

Unless, of course, you’re centrally managing everything through a product information management system (PIM). These allow you to control all product data that eventually gets pushed out to each channel. What could be a massive problem that has the potential to erode future profitability quickly gets resolved with Shopify Plus.

PIM system

PIM-equipped companies report improvements are almost universally positive when compared with companies who don’t use a product management system, including:

  • Lower labor cost
  • Increased employee productivity
  • Fewer returns

Product Information Management

Mattress company Leesa uses this in conjunction with an inventory management system (IMS) to control the look, feel, and price of products on their site:

Leesa PIM IMS

And keeping it consistent with the one on Amazon, too:

Amazon Leesa consistency

2. Tech

Multi-channel marketing doesn’t just mean going from a website to selling products on Facebook.

Going offline to on (or vice versa) often creates a bigger challenge. Especially when many consumers, even millennials, still like purchasing items in person.

Fashion brand Bonobos was recently acquired by Walmart for $310 million. They started exclusively online, before eventually creating offline retail storefronts to help customers see, touch, feel, and try on clothes.

Amazon, too, is creating physical retail stores. And Nordstrom is the latest to test ‘showrooming’ with Nordstrom Local. Instead of the 140,000+ square feet spaces, they’ll be squeezed down into only around 3,000 and won’t include any clothes for sale.

How will they be so compact? Simple: There won’t be any inventory on hand.

Customers can try on products or work with stylists, order online, and the products will be delivered to the store the same-day. Nordstrom’s senior vice president of customer experience, Shea Jensen, elaborated in the Wall Street Journal:

"Shopping today may not always mean going to a store and looking at a vast amount of inventory. It can mean trusting an expert to pick out a selection of items."

The only way to bridge the online to brick-and-mortar divide is to again use a centralized system that organizes product availability, inventory control, point-of-sale purchasing, and shipping or distribution.

Which is exactly what an IMS does:

Inventory Management System

IMSs provide three main benefits:

  1. They smooth out the fulfillment process to procure, organize, ship, and hit the customer’s door (or retail location) faster.
  2. They also help you better prepare for unexpected fluctuations or seasonality.
  3. They can also help you avoid inventory shortages when products are being sold through several different channels at the same time.

For example, MVMT sells some of their watches natively through a Facebook Shop.

MVMT native Facebook Shop

That’s convenient for the customer. But even this one simple store extension would wreak havoc without a tight control over inventory management and logistics.

3. Logistics

Too much of something good can be bad. Take new sales for instance.

What happens when your sales scale from 1,000-100,000 per month? And what happens when those sales are split between your own site, marketplaces, physical location, Facebook, and more?

A mess, that’s what.

Unless you’re combining the best of an IMS with an Order Management System (OMS).

A multi-channel approach is best for your customer’s habits. But in reality, you want the opposite internally. You want to pull all of this data from these various touch-points back to a single destination.

That’s what an OMS does: pulls your sales data from marketplaces and other third-party sites back into Shopify Plus.

For example, you can start to look deeper into which channel produces the most customers, the ones with the highest repurchase rate or lifetime value, and even which cost the least to acquire.

Shopify’s admin panel can break it all down for you at a glance. Otherwise, head down into the reporting section to dive into the details.

Shopify admin panel

4. Promotion

Multi-channel retailing adds complexity. That’s the central theme with all of these challenges. Each additional channel creates a multiplication effect inside your organization. Promotion is no different.

An ad budget of $10,000 for Google Shopping to drive sales through your online store sounds fine. But adding a Facebook native store, Buyable Pins on Pinterest, and Instagram’s upcoming point-of-sale feature means you need to multiply everything by four now.

That’s not always a big issue for mature companies. They can afford to diversify and allocate resources accordingly.

High-growth ones can’t. And worse, slashing that $10,000 into four pieces doesn’t give you enough to scale any one channel.

So you’re stuck in no man’s land; investing just enough to tell yourself there’s a chance but not investing enough to move the needle.

The solution? See if you can make the channels work together.

Don’t divide resources by channel necessarily. Divide them by funnel stage. We already saw how customers tend to use specific channels at specific times:

shopping industry marketing channels

In this case, your social and display ad budgets can work together for a singular goal: create awareness. Then, you can play with resource allocation further down the funnel to squeeze out better results.

For example, AdWords search ads tend to be expensive. So can you retarget previous site visitors with Google Shopping campaigns or Facebook Dynamic Product ads to get similar results for less?

You can create a product feed that works for both, listing out all new product details.

product feed

Then both platforms allow you to create templated ads that will automatically pull in data based on each individual’s experience.

If someone looks a “rainbow colored umbrella” on your site but doesn’t buy before leaving, guess what they’ll see on Facebook?

Jasper's Boutique facebook remarketing ad

The Honest Company has seen a “34% increase in click-through rates and a 38% reduction in cost per purchase” with these ads, according to Facebook.

How is increasing results while decreasing costs possible?

Retargeting campaigns like these also help you stretch labor. Getting them up-and-running takes a lot of work. But then you just need to maintain.

The day-to-day execution is largely automated, without requiring someone to individually hover over.

The only problem with this approach? It’s going to mess with your ability to properly attribute sales.

5. Attribution

Back to the $10k ad spend.

Maybe you can spend at least that much on each channel.

Ok, great. Except, how do you measure the ROI of each one? Especially when there’s a good chance a single customer might hit several of those before buying?

Social tends to assist more conversions at the top of the funnel. It helps people discover new products.

Compare that to how people use Google to look for something specific. They express intent by typing in the exact product they’re looking for. So it’s not a huge leap to say the conversions should be better, too.

And therein lies the problem with multi-channel retailing attribution: one channel will assist a sale that actually happens in another.

It’s not clear-cut. There’s no straightforward, easy answer.

Pull up your own Google Analytics, for instance, and it probably defaults to last-touch attribution. That means it will give 100% of the credit to your PPC or organic search campaign because it was the last channel that drove the customer.

However, that completely neglects all the hard work you’ve done on Facebook to build awareness or Amazon to develop trust.

The other tricky part is that there’s no single, ‘right’ answer when it comes to selecting an attribution model.

attribution models

For example, if your job is to run Facebook ads, you might want a first-touch attribution model that emphasizes how customers find out about you. That way, you could see a direct line between your campaigns and results more clearly.

But if you’re in upper management, you’d probably prefer an attribution model that does a better job ‘blending’ out the performance of all channels together.

The “Assisted Conversions” report inside Google Analytics can help, giving you a better feel for how many conversions (and the overall revenue amounts) were ‘assisted’ by other channels.

Assisted Conversions report

Otherwise, you can also choose an attribution model like like linear which assigns equal weight across all channels, or the position-based one where you can customize the ‘credit’ given to each.

Fortunately, Shopify Plus includes detailed attribution tracking and apps, like the Attribution Connector, which will apply custom algorithms to the data inside your own store to provide more accurate Return on Ad Spend (ROAS) estimates.

Attribution Connector

Shopify Flow

Are you selling everywhere your customers buy?

For an executive look at the present and future of commerce, download The Enterprise Guide to Multi-Channel Ecommerce.

Inside, you’ll get one-pagers detailing …

  • Comprehensive data on the opportunities and threats
  • Merchant spotlights for insights on top channels
  • A checklist for selecting the right multi-channel platform

Access the guide today

Final Thoughts on Multi-Channel Retailing

Multi-channel retailing gives customers a better experience and can make you more money in the long run. Unfortunately, that strategy doesn’t come without its operational struggles.

The answer?

Take the opposite approach internally. Centralize and streamline your multi-channel operations as much as possible, while still remaining flexible enough to support multi-channel retailing.

It might not be an easy transition. But the potential value can far exceed the costs.

Photo of Brad Smith

About the Author

Brad Smith is the founder of Codeless, a SaaS content creation company. Frequent contributor to Kissmetrics, Unbounce, WordStream, AdEspresso, Search Engine Journal, Canva, and more.

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