How to Build an Effective Multi-Channel Retailing Strategy

How to Build an Effective Multi-Channel Retailing Strategy

Selling on more than one channel is a wise investment for fast-growing businesses. A 2018 National Retail Federation holiday study revealed that 54% of consumers shopped for gifts both online and in store during the busiest shopping season of the year, up 40% year over year.

Multi-channel shoppers also spent $93 more on average than those who only used one channel to buy gifts.

But if your business isn’t set up to efficiently sell to customers along their buying journey, integrating back-end operations and front-end user experiences, you could be spreading your resources and budget too thin.

In this post, you’ll learn the benefits of adopting a multi-channel retailing and marketing strategy, and discover tips for executing both effectively. We’ll also look at online merchants and retailers who are succeeding in this space.

What Is Multi-Channel Retailing?

Multi-channel retailing involves selling to customers through offline outlets, like brick-and-mortar stores and pop-up shops, and online channels, like direct-to-consumer (DTC) ecommerce sites, mobile apps, and Amazon. Even those lines are beginning to blur, as more retail stores allow you to buy online while shopping in person.

The channels available for multi-channel retailing have broadened significantly in recent years. In the social space, sites like Pinterest now offer “Buyable Pins” that allow consumers to purchase without ever leaving the site. Instagram powers shopping through stories and posts, and Facebook Messenger has added payments.

Multi-channel retailing gives your target customers the choice of where to buy, optimizing their experience on the most relevant sales channels based on shopping behavior. It also integrates marketing and retailing strategies. To make the logistics work, you might need to invest in and reorganize your business.

Mirroring the Buyer Journey

Customers are using up to 12 channels and devices when shopping for an item before clicking “Add to cart,” according to research done by McKinsey.

Google’s proprietary data and customer interviews reveal how those shoppers arrive at their purchase decisions. Let’s take their example of “Marcus,” who was shopping for a gift from a local bookstore.

Customer buyer journey diagram
Marcus started his research with Amazon, then conducted two Google searches: one by location, and one by brand. He also visited discount and coupon sites before buying online.

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

Illustration of different channels shoppers use online

This graph illustrates that:

  1. Shoppers often discover new products through social and display ads
  2. They start with generic product, category, or local searches to compare options
  3. When they’ve narrowed their list, they do brand-related searches, plus seek reviews and referrals from friends
  4. They might even sign up for emails from the brand they’re evaluating to access discounts and promotions
  5. Finally, they make their purchase through your ecommerce site, app, or store

The majority of the buying process happens before someone lands on your site (or even discovers your brand). Google calls this the “Zero Moment of Truth,” which refers to the timeframe when someone researches a product before deciding to buy.

The Profitability of Multi-Channel Retailing

An IDC Retail Insights report revealed that multi-channel consumers spend more money, including:

  • 15–35% higher average transaction
  • 5–10% higher loyal customer profitability
  • 30% higher lifetime value than single-channel shoppers

But not all multi-channel retailing innovation is for profit. In 2018 Lay’s wanted to raise awareness and 1 million dollars for Operation Smile, a charitable organization that provides surgical care for children affected by cleft conditions.

The Smile with Lay’s campaign engaged shoppers through a customized multi-channel experience. At Times Square in New York City, Lay’s opened a funhouse pop-up store that featured a life-size Mr. Potato Head and celebrity ambassador Jordin Sparks.

Specially designed bags of Lay’s were also available for almost two months in stores, with a portion of proceeds going to Operation Smile.

A unique ecommerce storefront was built to take the multi-channel strategy to new heights by allowing shoppers to customize bags of chips with their photo on the front.

Front of personalized Lays bag

And a personalized message on the back.

Back of personalized Lays bag

Even though the chips came with a much higher price point ($10.99), the campaign was a huge hit, proving that consumers are often willing to pay extra for a feel-good, personalized ecommerce experience. The campaign also reached its 1-million-dollar fundraising target and created an invaluable DTC brand relationship.

How Mobile Shopping Bridges Online to Offline (and Vice Versa)

A recent Forbes article revealed that 82% of shoppers use their phones to research products online before making a purchase in store. Those mobile shoppers often seek product information, specs, and reviews while evaluating several options inside your store, as seen in these charts from a recent Retail Dive survey.

How shoppers use their phones in-store

They also conduct in-store price comparisons, possibly through Amazon or competitor sites, to get the best deal possible.

Shopping behavior also differs by age group. Baby boomers frequently look for coupons but are less likely to use a retailer’s mobile app. Younger generations are more likely to research product information and price-check your competition.

Shopping by age group

The following example is an excellent reason to develop a multi-channel marketing and sales strategy.

Magnolia Market: Offline to Online with Mobile AR

In 2015 Magnolia Market debuted its famous Silos retail experience in Waco, Texas, which now attracts more annual tourist visits than the Alamo. The home decor and furnishings company was also looking for a way to take its iconic in-store shopping experience online.

Photo of Magnolia Market Texas Retail Location

Magnolia Market’s solution was to use augmented reality (AR) to render its products in 3D. This strategy allows mobile app users to virtually place products inside their homes to see how they fit with their decor. Augmented reality also enables ecommerce customers to experience the same feeling of shopping with Magnolia Market in store.

Magnolia Market AR animation

“It’s so important for us that, whether you’re physically here in Waco or visiting us online, we’re able to capture the finer details of the overall experience to reflect the true spirit of Magnolia,” says Stone Crandall, Magnolia Market’s digital experience director.

To achieve a shopping experience as elegant as Magnolia Market’s offline-to-online strategy, these next few points are critical.

Tips for Overcoming Five Multi-Channel Marketing Challenges

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

Multichannel versus omnichannel diagrams

 

Left: Multi-channel retailing brings native buying options to where your target customers spend their time.
Right: Omni-channel retailing harmonizes those touchpoints to create a unified commerce experience across your brand. Data from each channel is synced on the back end for a holistic view of customer behavior, giving businesses deeper insight into how to retain and upsell to them in the future.

If not managed well, though, adopting a multi-channel marketing strategy internally can cause major operational headaches. You need to centralize back-end operational control to avoid inventory shortages, to streamline logistics, and to keep margins healthy. Doing so also means that your front end must remain easy to use and relevant to the shopping journey.

If you don’t have the funds or resources to do it effectively, you could end up wasting resources. The key is to focus on the channels that provide the best customer experience and the highest likelihood to convert sales based on your internal data.

There are five challenges to achieving these goals.

1. Pricing

Have you ever researched prices for a hotel room or flight one day, then you go back the next day to find the cost had skyrocketed? Travel bookings are based on demand, so the more people shop on popular dates, the higher the price.

There are pricing discrepancies between channels too. Many hotel brands will promote a lower price on sites like Expedia and Hotwire than on their website. In doing so, they teach their customers to buy from those sites, leaving the hotel with a lower margin booking.

The same scenario happens on Amazon for many DTC brands, causing pricing pressure and a higher revenue-share deal that can drive down your profit margins.

Hot Tip: Use a Product Information Management System

To control these discrepancies, you should manage everything centrally through a product information management system (PIM). This strategy allows you to control which product data gets distributed to your sales channels.

Companies equipped with a PIM achieve a myriad of positive results, including:

  • Lower labor costs
  • Increased employee productivity
  • Fewer returns

PIM diagram

Together with an inventory management system (IMS—more on that in the next section), Leesa uses this strategy to control the look, feel, and price of mattresses on its site.

Leesa ecommerce site

And to manage consistency on Amazon.

Leesa Amazon Presence

2. Tech

Going from offline to online, or vice versa, often creates a significant challenge because many consumers, even millennials, still prefer to buy products in store.

Fashion brand Bonobos, which Walmart recently acquired for $310 million, was originally a pure-play ecommerce store before creating offline retail storefronts for customers to see, touch, and try on clothes.

Amazon is also now creating retail stores, and Nordstrom recently tested and is now expanding its “showrooming” presence with Nordstrom Local, without selling any clothes directly to in-store shoppers. Customers can try on products, work with stylists, and order online for same-day, in-store delivery.

How can smaller DTC businesses do the same with fewer funds or resources?

Hot Tip: Use an Inventory Management System

The best way to connect online and brick-and-mortar stores is through a centralized IMS platform that tracks and manages product availability, inventory control, point-of-sale purchasing, and shipping or distribution.

IMS diagram

An IMS offers three key benefits:

  1. Streamlining the fulfillment process to procure, organize, ship, and arrive quickly at a customer’s door (or retail location)
  2. Helping you prepare for unexpected sales spikes or seasonality
  3. Avoiding inventory shortages when products are sold simultaneously through multiple channels

To illustrate, MVMT has been extremely successful in selling its watches natively through a Facebook store over the past few years.

MVMT Facebook shop

It’s convenient for shoppers, but without control over inventory management and logistics, the customer experience could suffer if Facebook orders aren’t synced with online store orders on the back end.

Another great example of smooth back-end and front-end tech integration comes from Nike’s Jordan Brand.

More than 15 years after Michael Jordan retired from the NBA, Jordan Brand continues to flourish, thanks to innovation. The company recently experimented with social commerce at the 2018 NBA All-Star Weekend. As part of the iconic Air Jordan III’s 30th anniversary, Jordan Brand dropped a new sneaker, the Air Jordan Tinker III, through an AR and social shopping event.

At a pop-up location in Los Angeles, Snapcodes (powered by Snap) were displayed for shoppers to scan with Snapchat cameras. The codes unlocked an in-app commerce experience that allowed the brand’s latest sneakers, not in stores for another month, to be immediately purchased through Snapchat.

Jordan Tinker III multi-channel retailing sneaker drop demo video

Air Jordan Tinker III inventory sold out in only 23 minutes, delighting customers with almost instant delivery on their doorstep, thanks to local fulfillment centers operated by Darkstore. Buying the shoes also unlocked an exclusive Snapchat filter for customers to boast about their new kicks on social media.

3. Logistics

Serving your customers’ buying habits better is possible through a multi-channel sales and marketing approach. But internal systems don’t always integrate data from various channels back to a single source.

If this is the case and your sales rapidly scale from 1,000 to 100,000 per month, or those sales are split between your site, a physical location, and Facebook, you might find yourself in a messy situation.

Hot Tip: Combine Your IMS with an Order Management System

One way to protect your business from an unexpected cross-channel sales spikes is to combine the best of an IMS with an order management system (OMS). An OMS pulls your sales data from marketplaces and other third-party sites into your enterprise ecommerce platform. That way, you can investigate which channel produces the highest value customers, like those with the highest repeat purchases or lifetime value.

Order Management System screenshot

Your ecommerce platform admin panel should break it down for you at a glance. Otherwise, try drilling down into your reporting section to analyze the details.

4. Promotion

It’s also important to think of your marketing and promotional strategies from a channel perspective. It might be counter-productive to drive customers from Facebook to your website with an ad, when they can often purchase faster and more conveniently through Messenger.

An ad budget of, say, $15,000 allocated to Google Shopping to drive sales through your online store sounds logical. But if you decide to add a Facebook store, Buyable Pins on Pinterest, and shopping through Instagram Stories, then you’ll need to divide your ad spend by four.

That’s not a big issue for mature companies that can afford to diversify and allocate resources accordingly. But high-growth businesses might struggle to achieve the same goals.

Hot Tip: Divide Resources by Funnel Stage, Rather than Channel

A good solution is to allocate your budget and resources by funnel stage, rather than channel. For example, your social and display ad budgets can work together to build brand awareness. Then, you can retarget previous site visitors of your Google Shopping campaigns or Facebook Dynamic Product ads to get similar results for less money than investing in general campaigns farther down the funnel. You can also create a product feed that works by listing all new product details.

Product feed example
Together, those platforms allow you to create templated ads that will automatically pull in product data based on each shopper’s experience. For example, if someone browses a “rainbow colored umbrella” on your site but doesn’t buy before leaving, you can retarget ads to them on Facebook.

Facebook retargeted ad example

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

Retargeting campaigns like these also help you stretch resources and increase your results by decreasing costs. Once you’ve done the upfront work to get the ads up and running, you only need to maintain them going forward because the day-to-day execution is mostly automated.

The only challenge with this approach is that it’s going to interfere with your ability to attribute sales properly.

5. Attribution

Let’s go back to the $15,000 ad-spend example. Assume you have the budget to spend at least that much on each channel you’ve identified to grow your business. You still have to figure out how to measure the return on investment for each.

The challenge with multi-channel retailing attribution is that one channel will assist a sale that happens through another channel. In your store’s Google Analytics, you’ll see that it probably defaults to last-touch attribution. That means it will give 100% of the credit to your pay-per-click or organic-search campaign because it was the last channel that drove the customer to your site.

Unfortunately, that sales attribution model ignores all your efforts and budget allocated to Facebook to build awareness, or to Amazon to develop trust.

There’s no right answer when it comes to selecting an attribution model. If your job is to run Facebook ads, you might prefer a first-touch attribution model that emphasizes how customers discover your products, so you can connect a direct line between your campaigns and results.

Multi-channel marketing attribution model options

If you’re in upper management, you might want an attribution model that does a better job of blending the performance of all channels. The Assisted Conversions report in Google Analytics indicates how many conversions (and the overall revenue amounts) were assisted by other channels.

Analytics screenshot
You can also choose a linear attribution model that assigns equal weight across all channels, or a position-based option that lets you customize the credit given to each.

Hot Tip: Use Detailed Attribution Tracking and Apps

Fortunately, some enterprise ecommerce solutions offer detailed attribution tracking and apps, like Shopify’s Attribution Connector, which will apply custom algorithms to the data inside your store. As a result, you’ll get an accurate estimate of return on ad spend.

Shopify Plus attribution tracking app screenshot

A Centralized Approach

Multi-channel retailing offers your customers a better overall experience as you mirror how they already shop. Even better, that strategy increases your profitability.

Though it has some marketing and operational challenges, the solution is to centralize and streamline your multi-channel back-end operations as much as possible while supporting your front-end user experience.

Photo of Andrea Wahbe

About the Author

Andrea Wahbe is a freelance B2B marketing strategist and corporate storyteller who writes about Canadian SMEs, marketing, and digital media trends. Follow her on Twitter.

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