The omnichannel imperative for manufacturers
Our industry has talked so much about omnichannel that it seems only the “aha” gets our attention anymore. Here’s the problem: Our talk is well ahead of our ability to execute. And execution is what matters.
Omnichannel isn’t sexy. It’s not about “Wow.” It’s about making it easier for people accustomed to an anything-anytime-anywhere world to do business with us. That’s primarily a question of organization, commitment and execution, for manufacturers as well as retailers.
Retailers need manufacturers to step up to new, flexible ways of doing business. Otherwise, retailers risk doing everything right and still getting it wrong. The fundamentals of omnichannel retailing will be the norm within another year or two. So far, though, few if any retailers are really there, let alone their manufacturing partners. I know this both from consulting with hundreds of retailers and manufacturers throughout the past 15 years, and from a telling personal experience with Home Depot (one of the most open promoters of omnichannel service) this past summer.
I went to Home Depot to buy a grill. They did not have enough choices in the store, so a rep advised me to go online. I did a bunch of research and price comparison and bought a $700 Broil-Mate model. After prompt delivery, I ended up with 400 pounds of grill parts spread across my three-bay garage for nearly two months — all because a packet of 130 nuts and bolts was missing from the original shipment.
I made multiple trips to the store, talked and exchanged email with HomeDepot.com customer service four times, and at their direction talked with the manufacturers’ customer service three more times before being informed the parts I needed were back-ordered. After six weeks of frustration and waiting, I received my shipment — of the wrong parts. In a last ditch effort for service, I visited my local store again to speak with a manager. Much to my dismay, he told me only HomeDepot.com customer service could help me. So I returned the grill and went directly to Lowes, where I bought another brand (and gladly took advantage of their free assembly offer).
That’s a colossal breakdown in one of the most fundamental omnichannel mandatories — offering service wherever and however the consumer wants, regardless of where they researched and/or purchased. At the core of the issue was the manufacturer, which likely had not properly anticipated the demand that Home Depot was driving. This is often the case when no structure or process is in place for effective real-time communication between a retailer and manufacturer.
What’s the lesson in this? Getting omnichannel right in practice requires a broader view from both parties, and more granular, tactical support than manufacturers are accustomed to providing. Until now, manufacturers have approached the anywhere-anytime desire principally through marketing communications. Now they are being forced to confront it head-on through product delivery and customer support.
To be successful, this must include merchandising at an unprecedented micro level. Manufacturers need to examine the elements of forecasting more broadly and more deeply. That means including more details on promotion and placement into the distribution strategy. For example, in the case of my problematic grill, demand forecasting needed to take into account precisely how Home Depot was going to market the item (it was the top featured natural gas model on HomeDepot.com).
Where is the item featured in TV, print and digital promotion? Is the product featured in marketing spots on the website and how does the product perform in on-site search? How competitive is the price in comparison to other models? What does the social community have to say about the product in reviews and other user generated content? All of these factors have a huge determination of how certain products will sell.
You simply cannot organize a business around functions and channels and somehow execute omnichannel right. Scroll through the list of titles in an organization chart of the 500 largest manufacturers. You’ll find people dedicated to grocery, mass market, specialty, online and mobile. You’ll even find functional specialists — marketing, sales, product, distribution, research, customer service — dedicated to specific channels. Each has a unique set of siloed business objectives, responsibilities and incentives.
Most companies are trying to address omnichannel through committees. They bring silo chiefs together to create common policies and procedures — which amounts to trying lots of mini-initiatives or picking something “easy” to execute.
There are two glaring problems with that approach. For one thing, it is typically not enough. Omnichannel has to be an ethos and a commitment. It has to be the culture. That can’t happen unless the orientation of the company takes a profound turn. For another, the committee members are still being compensated based on their functional and/or channel performance. The line “you get what you pay for” applies to incentive in business. Without an empowered leader and structure for delivery, omnichannel ends up being an empty promise. It’s everyone’s responsibility but no one’s job.
While there is no panacea, there is a simple first step. Top management needs to appoint and empower an omnichannel champion — someone with both the responsibility and the authority to bring product, marketing, sales, fulfillment and customer service in line with each retail customer. That person has to create and manage a central database — so everyone can see the full spectrum of distribution and customer service — and wield the ultimate authority to direct changes in production, distribution and fulfillment. That point person has to work out the performance measurement and reward structure for unit and function leaders, so omnichannel has real implications for individual performance.
Also, that point person will need to adjust the company’s approach to some core disciplines. For example, in marketing, creating loyalty efforts that engage people with content, contests and offers before they even make their first purchase; or in promotion, supplying product videos to retailers’ mobile applications so consumers can research and compare more fully in store. But innovations like these are moot if the foundational support and service are not there yet. And that foundation is a function of organization, alignment and commitment.
You might be tempted to say this is more a retailer’s than a manufacturer’s job. It’s both. But retailers can replace manufacturers much more readily than manufacturers can replace retailers. So manufacturers need to think like retailers and step into the leadership role. My Home Depot experience showed loud and clear that the manufacturer is a critical link in the omnichannel vision.
Paul Elliott (firstname.lastname@example.org) is managing partner at Rosetta, a customer engagement agency and independent brand in the Publicis Groupe.