代写Competing in the Age of Omnichannel Retailing
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代写Competing in the Age of Omnichannel Retailing
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Competing in the Age of
Omnichannel Retailing
By Erik Brynjolfsson, Yu Jeffrey Hu and Mohammad S. Rahman
COURTESY OF REDLASER, SHOPKICK, FOURSQUARE
BRANDON MCDONALD, of Nashville, Tennessee, visited a local Best Buy to purchase a digital
single-lens reflex camera. After browsing through the available products, he decided that he liked the
Nikon D5100. To verify the price, he scanned the barcode with the RedLaser app on his smartphone.
McDonald found that Amazon.com’s price was lower than Best Buy’s, so he purchased the camera from
Amazon using his phone as he stood in the store. Although he and his wife had intended to return home
with a camera that day, to save money they were willing to wait two days for the item to be sent.
Tasmia Kashem, a Burbank, California, resident, went to the Beverly Center mall in Los Angeles to
shop for shoes. After browsing at Nine West, a fashion retail chain store, Kashem didn’t see anything she
liked. As she was leaving the store, an associate offered to show her additional collections on an iPad.
Upon scanning through the online offerings and reading reviews, Kashem decided to preorder a new
style that was arriving at the store the following week.
Examples such as these illustrate how recent technology advances in mobile
computing and augmented reality are blurring the boundaries between
traditional and Internet retailing, enabling retailers to interact with consumers
Competing in the Age of
Omnichannel Retailing
As technology blurs the distinctions between physical and online
retailing, retailers and their supply-chain partners will need to
rethink their competitive strategies.
BY ERIK BRYNJOLFSSON, YU JEFFREY HU AND MOHAMMAD S. RAHMAN
D I G I TAL TRANSFORMATION
THE LEADING
QUESTION
How is
technology
changing
AN MANAGEMENT REVIEW 23
Mobile technology can
help all retailers, both
online and offline, expand
their markets and
reach new customers.
24 MIT SLOAN MANAGEMENT REVIEW SUMMER 2013 SLOANREVIEW.MIT.EDU
D I G I TAL TRANSFORMATION
through multiple touch points and expose them to a
rich blend of offline sensory information and online
content. (See “About the Research.”) In the United
States today, more than 50% of cell phone owners
have smartphones, and more than 70% of these have
used their devices for comparison shopping,1 a habit
that is becoming increasingly common worldwide.
In the past, brick-and-mortar retail stores were
unique in allowing consumers to touch and feel
merchandise and provide instant gratification; Internet
retailers, meanwhile, tried to woo shoppers
with wide product selection, low prices and content
such as product reviews and ratings. As the
retailing industry evolves toward a seamless “omnichannel
retailing” experience, the distinctions
between physical and online will vanish, turning
the world into a showroom without walls. The
retail industry is shifting toward a concierge model
geared toward helping consumers, rather than
focusing only on transactions and deliveries. For
example, physical retail spaces will be augmented
by virtual content accessible from smartphones
and other devices such as Google Glass, Google’s
wearable computer. As the multichannel retailing
experience breaks down old barriers such as geography
and consumer ignorance, it will become
critically important for retailers and their supplychain
partners in other industries to rethink their
competitive strategies. (See “Successful Strategies
for Omnichannel Retailing.”)
Enabling Technologies
The growing prevalence of location-based applications
on mobile devices is a critical enabler of these
changes. According to the Pew Research Center,
74% of U.S. smartphone users used their phones to
obtain location-based information in 2012.2
Retailers are taking advantage of opportunities created
by location-based applications. Walgreens, for
example, has teamed up with Foursquare, a location-
based social networking website, to offer
customers electronic coupons on their phones the
moment they enter a Walgreens store. Saks Fifth
Avenue has also worked with Foursquare to steer
consumers toward physical locations by offering
goodies (such as high-end brand Nars lipstick).
Macy’s offers free Wi-Fi in its stores; consumers can
scan QR codes on products to see online product
reviews, prices and exclusive video content on fashion
trends, advice and tips. In some cases, the
location-based applications aren’t managed by the
retailers but by third parties. For instance, RedLaser,
an eBay company, allows consumers to scan UPC
codes to determine whether specific products are
available nearby and at what price.
Mobile applications themselves are becoming
increasingly advanced. For example, Loopt, of
Mountain View, California, provides real-time location-
based services aimed at specific users and
popular locations. Retailers can use Loopt as a virtual
loyalty card, allowing them to connect directly
with consumers based on their location. Loopt users
can find friends nearby and receive coupons and
rewards for checking into specific locations. Another
app called Doot enables users to leave public or private
messages for friends or family members at
restaurants or stores; the messages are activated
when the designated people reach the sites.
Augmented reality technologies involving smartphones
and devices are merging touch-and-feel
information in the physical world with online content
in the digital world. Google Glass, for instance,
ABOUT THE RESEARCH
This research is part of an ongoing program examining the competition between online
and offline markets and how IT-enabled tools have made it possible for companies to
take advantage of both channels.i To shed light on the impact of geography on the competition
between online and offline, we obtained a data set from a medium-sized retailing
company that sells the same assortment of women’s clothing through a printed catalog
and an Internet website. This data set, which included transaction and location details for
each consumer, was combined with the number of local women’s clothing stores available
to each respective consumer. Consumers in our sample were similar to the overall
U.S. population as measured by the number of local stores nearby. For example, 24% of
the U.S. population has no women’s clothing stores within five miles, compared to 27%
of consumers in our sample; 45% of the U.S. population has access to fewer than seven
stores (the median of the number of stores in our sample) within five miles.
We empirically studied how the level of competition between Internet retailers and
traditional stores varied across products. We found that Internet retailers faced significant
competition from brick-and-mortar retailers when selling mainstream products
but were virtually immune from competition when selling niche products. Furthermore,
because the Internet channel sold proportionately more niche products than the
catalog channel, the competition between the Internet channel and local stores was
less intense than the competition between the catalog channel and local stores.
The methods we introduced can be used to analyze cross-channel competition in
other product categories, and they suggest that managers need to take into account the
types of products they sell when assessing competitive strategies. For example, all else
being equal, demand for popular products on the Internet from a consumer with seven
physical clothing stores nearby (the median number) would be 4.2% less than from a
consumer with no stores nearby. Thus, the amount of local retail competition has a significant
effect on consumer Internet demand for popular products. However, the impact
of local market structures on consumer Internet demand for niche products is negligible.
SLOANREVIEW.MIT.EDU SUMMER 2013 MIT SLOAN MANAGEMENT REVIEW 25
exposes consumers to a blend of offline and online
information and lets them purchase products from
either traditional or online channels. EBay’s Fashion
app and Amazon’s Flow app offer additional examples:
eBay’s Fashion allows consumers to try on
clothing virtually, while Amazon’s Flow app lets
shoppers point a smartphone camera at a book or
DVD to see Amazon’s price and customer reviews.
Opportunities and Challenges
Mobile technology is well on its way to changing
consumer behavior and expectations. Indeed, it can
help retailers, both online and offline, reach new
consumers and expand their markets. As John
Donahoe, CEO of eBay, has observed: “Mobile is
bringing the Internet to you seven days a week, 24
hours a day, on your time, at your convenience,
where you want to be. We’re finding out how people
shop now: They’re standing in a line at Starbucks,
let’s say, and they start browsing on eBay. They see
something they want and they buy it right there.”3
Similarly, apps from retailers such as Wal-Mart,
Target and Macy’s allow consumers to search for
products and prices available locally. By giving consumers
more accurate information about product
availability in local stores, retailers can draw in people
who might otherwise have only looked for
products online. The enhanced search capability is
especially helpful with niche products, which are
not always available in local outlets.4
Apple’s Siri app for the iPhone, for example,
can make recommendations (based on location
and other factors) that consumers may not have
even heard of, directing out-of-town visitors to
local specialty stores or restaurants. Crowd opinion
websites such as Yelp can help spread consumer
reviews broadly. While customer reviews on Yelp
and other sites can have major impacts on independent
stores and restaurants — both positive
and negative — their impact on better-known
chains tends to be less significant.5
Meanwhile, the availability of product price and
availability information, the ability of consumers to
shop online and pick up products in local stores, and
SUCCESSFUL STRATEGIES FOR OMNICHANNEL RETAILING
To succeed in an omnichannel environment, retailers should adopt new strategies in areas such as pricing, designing the shopping experience
and building relationships with customers.
SHORT-TERM STRATEGIES LONG-TERM STRATEGIES
All retailers
• Create switching costs via loyalty programs and
service contracts.
• Use big data and analytics to better understand
customer needs and values.
•Create exclusive products and unique features.
•Create product bundles and product-service bundles.
• Use analytics to guide product design, product
line choices, channel decisions and new product
introductions.
Dual-channel retailers
•Integrate channels.
• Manage CRM and ROI metrics using data from both
channels.
Pure brick-and-mortar
retailers
• Provide store inventory information online to
lower uncertainty of finding products in stores
and to enable “buy online and pick up in stores.”
• Focus on providing information, services and instant
gratification.
• Charge a price premium for products that benefit
greatly from having a nearby physical location due to
product-related services.
•Move toward becoming dual-channel retailers.
Pure online retailers
• Provide everyday low prices and neatly curated
content.
•Convert “experience goods” to “search goods.”
• Enable consumers to use physical channel as
showroom.
•Offer local pickup points.
• Focus on niche products, especially ones that are
not available locally.
• Focus on cost and efficiency for popular,
nonexclusive products.
26 MIT SLOAN MANAGEMENT REVIEW SUMMER 2013 SLOANREVIEW.MIT.EDU
D I G I TAL TRANSFORMATION
the aggregation of offline information and online
content have combined to make the retailing landscape
increasingly competitive. Retailers used to
rely on barriers such as geography and customer
ignorance to advance their positions in traditional
markets. However, technology removes these barriers.
Ski resorts, for example, used to be able to exaggerate
the amount of snowfall and their overall conditions to
attract skiers, but third-party information makes this
difficult. Smartphone apps by Skireport.com and others
allow skiers to report actual snow conditions in
real time, which is pressuring resort operators to be
honest. A recent study found that the amount of exaggeration
by ski resorts has fallen sharply, particularly
at places with good cellular reception, demonstrating
how companies must adapt.6
Location-based apps open up new selling
opportunities. For example, local retailers seeking
to rev up sales activity can send out promotional
messages to consumers within the vicinity or even
to people in a competitor’s store. And just as consumers
are using price scan apps in local stores,
retailers are learning to respond with more focused
promotional offers. Some online retailers, in particular,
are attempting to gain the upper hand by
offering lower prices while effectively letting consumers
use the local retailer as a showroom.
Smartphones enable tracking of consumers that
previously was possible only via fixed connections to
the Internet. Euclid Analytics, an analytics consulting
firm located in Palo Alto, California, has developed a
technology that records the media access control
(MAC) addresses of Wi-Fi-enabled smartphones,
allowing it to track a store’s traffic and repeat customers.
Soon retailers will provide special incentives
aimed at customers as they enter stores (BestBuy
already does this for users of Shopkick, a shopping
rewards smartphone app) or when they leave without
purchasing anything. Such offers will take into
consideration consumers’ previous history and will
be personalized according to their specific data.
Successful Strategies for
Omnichannel Retailing
Although omnichannel retailing has some features
that are related to e-commerce (notably the ability to
compare prices and generate targeted ads), it’s not
yet clear how directly the lessons of e-commerce will
apply or what it will take for companies to be successful.
Retailers should begin by adapting best
practices from both the offline and online worlds in
areas including pricing, designing the shopping experience
and building relationships with customers.
We think that there are several possible success strategies
for the new competitive environment,
代写Competing in the Age of Omnichannel Retailing
content. The success of Amazon versus
other online retailers underlines the importance of
avoiding price wars and becoming a merchandise
“curator.” Consumers come to Amazon for good
prices, but they also expect Amazon to curate merchandise
so they won’t get lost in a sea of products.
Although eBay has a similarly wide array of offerings,
Amazon is known for its neat and systematic
presentation. In addition, Amazon’s well-curated
consumer-generated content and reviews makes it
easy for consumers to interact with Amazon while
going through their purchase decision process.
2Harness the power of data and analytics.
Part of the promise of omnichannel retailing
is an explosion of new data from social, mobile and
local channels. This provides an unprecedented
opportunity to understand not just customer transactions
but also customer interactions such as visits
to the store, likes on Facebook, searches on websites,
and check-ins at nearby establishments. The limitation
is no longer data but the ability to analyze the
data. Companies including Catalina Marketing,
based in St. Petersburg, Florida, have already introduced
tools that use in-store purchase history to
personalize mobile advertising. Increasingly, mash-
Retailers used to rely on barriers such as geography and
customer ignorance to advance their positions in traditional
markets. However, technology removes those barriers.
COURTESY OF GOOGLE SUMMER 2013 MIT SLOAN MANAGEMENT REVIEW 27
ups of data from multiple sources will give savvy
retailers an ability to do predictive analytics to make
location- and time-specific offers and recommendations
to each of their potential and existing customers.
For instance, American Apparel analyzes footage of
store security cameras and intercepted mobile phone
and Wi-Fi signals to understand customer visiting
patterns per store and the movement behaviors of
customers and employees within each store.
3Avoid direct price comparisons. While
consumers benefit from easy search, such
capabilities can be damaging to sellers. Taking steps
to make direct comparisons difficult can protect
retailers from poaching by competitors and mitigate
the effects of price competition. Consider the
following options:
Distinctive features. Retailers offering a distinctive
version of a product will see less price competition.
For example, brand-name mattresses generally are
not directly comparable across retailers. The basic
strategy for manufacturers is to make minor modifications
for each seller and thus have different
SKUs. However, unless the changes add value, the
risk is that the retailer will annoy consumers. With
continually falling search costs and rich information
resources, achieving differentiation can be
difficult.
Exclusivity. Retailers may want to focus on product
development partnerships/innovations to
create exclusive products. This would mean offering
products (values) that are not available at
competitors (for example, The Shops at Target,
Amazon Exclusive). Such exclusive offerings might
include distinctive versions of products, as opposed
to cost-focused store brands.
Bundles. Bundling products can make it difficult
for consumers to do a direct comparison of the
value of your offering with those of competitors as
long as same bundle is not available elsewhere.
A bundling strategy can be quite powerful in generating
additional sales and profits if it is created by
using historical purchase data and finding the
meaningful relationships between products from
past transactions.
For nonexclusive products (in other words,
products that are also offered by competitors),
especially popular ones, cost and efficiency are critical
in determining the winner, because mobile apps
enable consumers to make instant price comparisons
across channels. This will intensify the level of
competition. Since many consumers prefer physical
stores — especially when the price difference is minimal
and products are in stock — because they offer
instant gratification, trust and services,7 local stores
may have advantages as search costs decline.
4Learn to sell niche products. Online retailers
will still have advantages over physical stores
in selling narrowly focused “Long Tail” products that
are not economical for stores to carry.8 In between
the Long Tail products and popular products are
“Middle of Tail” products, which are often available
at local stores but do not enjoy a huge demand. Finding
these products in local stores has traditionally
been unpredictable and time-consuming. But with
inventory information available online, finding the
products in nearby stores has become much easier.
With Google Glass,
Google’s wearable
computer, consumers
are exposed to a blend
of offline and online
information.
28 MIT SLOAN MANAGEMENT REVIEW SUMMER 2013
D I G I TAL TRANSFORMATION
COURTESY OF REDLASER
Therefore, the advantage that online retailers had
with such products is waning, and some of the demand
may shift toward the physical stores, albeit at
lower margins. Dual-channel retailers may have the
upper hand over retailers selling exclusively online
because of the trust factor and the availability of instore
pick up and after-sales service.
5Emphasize product knowledge. The shift
toward omnichannel retailing allows consumers
to accumulate product knowledge (for
example, the name, product size, color, shape, material
content, etc.) in one channel and then purchase
from another channel. Therefore, retailers need to
do a better job of sharing product knowledge across
their entire platform. Doing so will facilitate channel
integration and attract shoppers who prefer shopping
in multiple channels. Features that result in
conflicting and confusing product information
should be minimized to avoid consumer frustration.
At the same time, retailers should be aware that
there is a downside to product knowledge when it
extends across brands. Product knowledge that
translates from one brand to another increases the
likelihood of across-brand search and intensifies
across-brand competition. Consumer loyalty tends
to be higher for “experience goods” (goods whose
value can only be assessed after they are purchased)
than for “search goods” (goods that can be assessed
before purchase based on objective criteria). As a
result, the competition for search goods is apt to be
much greater. To protect themselves, retailers should
develop differentiating features that minimize product
knowledge transferability across brands.
6Establish switching costs. Retailers can reduce
the amount of competition they face by
creating switching costs. Loyalty programs similar to
airline frequent-flyer programs can be important
vehicles for retaining customers and maintaining
margins. Amazon’s Subscribe and Save program,
which offers price discounts to consumers who purchase
from Amazon at preset intervals, or Best Buy’s
partnership with the Shopkick app, which sends
members targeted offers when they enter a Best Buy
store, are early examples of such programs. Another
way for retailers to create switching costs is to
establish privileges and perks for loyal consumers,
such as express or mobile checkout (as airlines have
done with boarding and booking privileges). Ultimately,
the differentiation should be based on user
experience rather than price advantage.
7Embrace competition. Retailers selling
high-quality products or featuring low
prices will do well in a world with lower search costs
and more transparency. Consumers will identify
these retailers quickly and will prefer to do business
with them. Those that attempt to insulate themselves
from competition may only succeed in the
short run. But just as ski resorts are being pressured
by skiers to be honest, exposure to world-class
competition will force retailers to improve their
products, service and prices; retailers selling inferior
products or providing shoddy service will have
nowhere to hide. In an omnichannel world, there is
a premium on learning rapidly from consumers
and catering to their needs. Similarly, there’s a premium
on quality, price and value.
Understanding the Impacts
As retailers adapt their selling strategies to an omnichannel
environment, the changes will be felt by
players both upstream and downstream. First, the
manufacturers who supply products to retailers may
no longer be able to produce large volumes of the
Advances in mobile
technology are blurring
the boundaries
between traditional
and Internet retailing.
SLOANREVIEW.MIT.EDU SUMMER 2013 MIT SLOAN MANAGEMENT REVIEW 29
same product for different retailers; many retailers
will be looking for customized and exclusive
merchandise, which will add complexity for manufacturers.
As a result, manufacturers will need to
become agile at producing smaller and more customized
batches of products. Further, as retailers pursue a
strategy of seeking unique products, the boundaries
between manufacturing and retailing will blur. Retailers
such as Target have already collaborated with
manufacturers to develop exclusive products. Such
collaborations will amplify the importance of target
marketing and market segmentation. In addition, the
quest for distinctive products may reduce the number
and importance of superstar products. Moreover,
retailers may decide to backward-integrate into manufacturing.
Amazon, for example, is aggressively
moving into the publishing domain; it contracts
directly with authors and has released hundreds of
books in both print and e-book formats.9 This trend
is likely to become more widespread in product categories
ranging from music and video to electronics
and clothing. Finally, omnichannel retailing, along
with smartphone usage, gives consumers more
channels from which they can obtain information
during the purchase decision process. Decisions can
be shaped by information from the store channel,
store websites, mobile apps or social media. Marketing
firms and advertising agencies working for
retailers will need to become more data-driven and
analytics-oriented so they can design campaigns
that deliver advertising messages to consumers with
surgical accuracy.
Technology is making omnichannel retailing inevitable
and is reducing the ability of geography and
ignorance to shield retailers from competition. It is
breaking down the barriers between different retail
channels as well as the divisions that separate retailers
and their suppliers. At the same time, omnichannel
retailing expands the overall pie by extending market
reach and introducing consumers to products they
may not have known about. Supply chains that generate
increased consumer value are likely to win in
the long run. More transparency is likely to speed up
this process, leading to more of a “winner-take-all”
effect. As a result, retailers and manufacturers will
need to find an area where they are truly the world’s
best, as opposed to just working harder to hide
from competition. With omnichannel retailing,
competition will increase on many fronts, but so will
the opportunities for savvy retailers and supply-chain
partners to gain competitive advantage.
Erik Brynjolfsson is the Schussel Family Professor at
MIT Sloan School of Management and the director of
the MIT Center for Digital Business. Yu Jeffrey Hu is
an associate professor at Georgia Institute of Technology’s
Scheller College of Business in Atlanta,
Georgia. Mohammad S. Rahman is an associate professor
at University of Calgary’s Haskayne School of
Business in Calgary, Alberta. Comment on this article
at http://sloanreview.mit.edu/x/54412, or contact the
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代写Competing in the Age of Omnichannel Retailing
