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Major retailers who adopted the omni-channel model have experienced enhanced economic profit
Omni-channel capabilities allow companies to achieve higher customer retention and conversion ratios which lead to reduction in selling and marketing costs
The influx of devices such as laptops, mobile phones and tablets and the increased penetration of the Internet have spurred many retailers to take the omni-channel route to attract shoppers. The whole objective of an omni-channel model is to provide easy access, and personalized reach and service to customers. This, in turn, leads to enhanced revenue growth and profitability in a saturated market and thereby enhances economic profit (Economic Value Added or EVA).
A study by WNS to determine the EVA of companies which have made great strides toward the omni-channel model shows it is really value accretive. The results show that omni-channel innovators added 2.9 Percentage Points (PPs) of economic value compared to the ~0.65 PPs decline experienced by retailers who were risk-averse to adopting omni-channel strategy.
Advanced omni-channel capabilities allow companies to enhance the brand and buying experience and forge deeper relationships with customers. This helps achieve higher customer retention and conversion ratios and thereby leads to reduction in selling and marketing costs. In such a scenario, is it any wonder that retail giants such as Walmart, Macy’s and Target Corporation have taken to omni-channel retailing?
The results of Target’s omni-channel pursuit have been evident in the last few years. From 2011 to 2015, the company increased its omni-channel capabilities and saw its EVA grow by 3.8 PPs. The company was also able to maintain return on capital levels above 10 percent. And all this was achieved in the face of increased competition from e-commerce companies.
In an age where digitization has created a new breed of shoppers and brick-and-mortar companies are struggling for survival, omni-channel retailing offers a strategy to retain competitive advantage over e-retail players. However, the pertinent question is, ‘How to optimize investments for advanced omni-channel capabilities?’ Connect with the author here.
To know more, visit us at WNS DecisionPointTM | Winning the Omni-Channel Retail Race