The Retail Challenge Facing Manufacturers

Shopping carts lined up outside a Home Depot outlet Photograph by Daniel Acker/Bloomberg

Omnichannel, the latest retailing model, represents a seismic shift for manufacturers. This form of retailing lets consumers move seamlessly among real and virtual retail environments, as if they were one. If you’ve shopped at Home Depot, you’ve been able to check inventory by store, buy online, and pick up the product at the location of your choice.

This holistic approach is quickly becoming the norm. To support the shift, manufacturers need to rethink the consumer experience, unify the supply chain, and get internal departments to collaborate. In particular, they need to take four steps:

Hear the “why” firsthand.  Omnichannel rewards manufacturers for connecting with consumers early—often before the initial purchase—and maintaining those connections. To hear “why I’ll buy” firsthand, manufacturers need to establish direct, personal relationships with consumers. They can engage consumers through contests, invitations to product testing panels, sponsorship of events, and social media participation.

Value the interaction, not just the transaction. Because loyalty efforts have been focused on post-transaction activities, like warranty registrations, manufacturers typically learn little about buyers and nothing about non-buyers. They need to start earlier in the sales process, making it worthwhile for consumers to share information and engage with their brands through social media. That means access to unique features, content, or events. The more value exchanged before consumers reach retail, the more insulated a brand is from in-store switching to competitive products.

Unify fulfillment. Omnichannel dictates that retailers consolidate inventories, so consumers and salespeople alike can see and order from all that is available throughout the retail ecosystem, whether via a distribution center or store shelf. To speed fulfillment, manufacturers need to become more agile in replenishing retail distribution points. They need systems integration and enhanced communication to keep abreast of rapid changes in product demand.

Embrace showrooming. Research shows that consumers use smartphones in-store principally to confirm a choice or narrow down multiple options, not to make a purchase from an alternative retailer such as Amazon. As more chains make free Wi-Fi available to shoppers, manufacturers need to provide digital content that supports in-store decision-making. For example, John Deere could provide Home Depot with video content that helps shoppers compare various models or understand the setup, maintenance, and accessories that each lawn tractor requires.

Winning in omnichannel calls for new levels of transparency and communication. Manufacturers must get in lockstep with retail partners when it comes to merchandise planning and promotion. While that may sound scary at first, future category leaders will be much more open about their plans. The partners and customer advocates they gain will be more than worth the growing pains.

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