For new product or category introductions, the financial and marketing logic for an online launch can be too compelling to ignore Photo: Phil Carrick
"Omnichannel" has become perhaps the biggest buzzword in the retail industry during the past few years; omnichannel is what "multichannel" became when it grew up, when retailers moved beyond the simple concept of having a store and a website.
An omnichannel retailer is a multichannel retailer that has integrated its shopping channels – primarily physical stores, e-commerce and m-commerce sites – for purposes of fulfilment, service and branding.
he products that turn out to be successful online can then later be transplanted to your stores.
This has fooled many into thinking that omnichannel retailing also means you have to sell the same merchandise online as you do in your stores, or your customers will get confused and irritated, and dump you.
Sure that can happen, particularly when a customer has already bought from your store and just wants to replenish the same item – having to revisit the store again because the retailer doesn't offer the product on its e-commerce site can be fatally alienating.
However, the same is not necessarily true in reverse – as a retailer, you don't have to sell in your physical store everything you sell online. There are times when it can be a good strategic move to use the online store as a showroom and laboratory for merchandise that the physical store doesn't offer – or doesn't offer yet.
If you are a small retailer with a store and an e-commerce site, you could find that one of the most valuable uses for your online channel is to try out products, brands or whole categories that may be too costly to commit to in stores in the first instance.
It's generally cheaper and carries lower inventory risk to do an online product launch rather than a store launch, and if it doesn't work out you can drop it without fanfare and also without the need to reset your physical store again.
The products that turn out to be successful online can then later be transplanted to your stores.
Those that get a negative reaction need never clutter up your valuable physical store space.
It's also possible that some products are just not going to work in your store at all even if they are successful online. This could apply to products that may appeal to a narrower or otherwise different target market than the one that typically traipses past your storefront.
Your test product may be taking aim at a particular demographic that you know is more inclined to shop online than in stores.
Online-only can also be a good way to go for testing a category that a retailer hasn't sold in the past. For example, a fashion clothing retailer might want to dip his toe in the water with a home or accessories line.
Selling through the online channel first will also provide data on the geographic "sweet spots" for your products that may in time lead to a decision about opening a new physical store.
The sweet spots can be in the same metropolitan area or somewhere completely unexpected. This, after all, is the way that many global retailers have become global – reducing real estate risk in a foreign country by using e-commerce to test the waters first.
There are numerous examples of high-profile retailers using the online channel to try out new businesses. An excellent example is trendy US-based apparel and home retailer Urban Outfitters, which has stores in North America and Europe and does a robust e-commerce business internationally, including in Australia.
Urban Outfitters actively tests new lines on its e-commerce site, which has a separate listing for "online exclusives" under each of its women's, men's and apartment banners. The company had $2.5 billion in sales last year, of which more than 20 per cent came from e-commerce and catalogues.
While logistical or managerial inertia, rather than deliberate strategy, was often a reason retailers did not make all of their store inventory available online, there can be very good reasons for retailers not stocking all of their online wares in limited and precious physical store space.
For new product or category introductions, the financial and marketing logic for an online launch can be too compelling to ignore.
Michael Baker is principal of Baker Consulting and can be reached at email@example.com and www.mbaker-retail.com.