Multichannel and Omnichannel in Brazil: from theory to practice

Since the creation of the ILOS Blog in 2014, we have already posted 8 different texts about Omnichannel. This is a word that has definitely entered the vocabulary of logistics and supply chain professionals in Brazil and around the world.

A Google Trends query clearly shows the increased interest in the Omnichannel theme in Brazil compared to the Multichannel theme, an expression that ten years ago was strongly discussed among executives in the country.

Figure 1: Interest in Multichannel and Omnichannel in the last 10 years (Brazil – November 2007 to October 2017)

Source: Google Trends – consultation carried out in November 2017. ILOS analyses.

The differences between Omnichannel and Multichannel recall the discussions that existed in the past (and still exist) about the concepts of Intermodal and Multimodal transport. In both cases, the big difference is the simultaneity and integration of activities.

A retailer can have physical stores, can sell over the internet, can sell through catalogues: that is what Multichannel is. But, to be Omnichannel, you need to be able to sell over the internet, allow the product to be picked up in the store, accept the exchange in person by the sales consultant who will schedule the delivery of the exchanged product online at the consumer's home address.

Once the concept is clear, operationalization becomes difficult.

I recently attended Natura's lecture at the International Supply Chain Forum (in October 2017). The company squanders investments in technology and automation, but the difficulty of implementing Omnichannel is evident. What has been happening is the growth of an increasingly Multichannel Natura, with physical stores and virtual sales expanding, but with major obstacles to taking the step of integrating the channels, in the words of the company's Director. One of the biggest obstacles encountered is hidden behind accounting/fiscal/tax rules that do not contemplate the possibility of Omnichannel action, as they do not provide the flexibility of interaction between companies with different CNPJs and different social objectives (such as factories, physical stores, franchisees, centers distribution, physical and virtual retailers belonging to the group). This is because each of these links has separate accounting, specific taxes and established inventories, making the integration and single management of product flows between sales channels difficult, increasing the risk of high taxation and even making the operation unfeasible.

From theory to practice, Omnichannel needs to evolve a lot, because while new concepts and ways of operationalization are being discussed, day-to-day processes often leave something to be desired.

It is worth reporting here a real case that happened to me, and that has certainly happened to other consumers: I bought a product in a physical store of a large Brazilian retail chain, but I had to exchange the product. I went back to the same physical store, but they did not allow the exchange because the “system was down”. (Who hasn't heard that?) Okay, what to do? This justification is typically accepted by Brazilian consumers as something that cannot be helped and there is no point in complaining. But a very polite employee took the initiative and told me: “You can exchange it at any store in the chain”. Wow, I thought, how nice that this network is integrated between its physical stores. So I took the subway to the other chain store. But when I tried to exchange the product in this other store, I was also unsuccessful, as the store did not have the product to be exchanged in its assortment. I would need to go to a physical store that sells that exact product. Ah, the assortment…, I thought, yet another difficulty for Omnichannel.

The stores could accept exchanges even with the “system down”, and could also accept the return of products that are not in the assortment of the physical store, but this would all become additional costs. Is it worth increasing costs to make the customer satisfied, thus achieving a perfect Omnichannel service? What is the balance between cost, service level and the possibility of increasing sales with the implementation of Omnichannel? This is the key question to be answered by anyone looking to implement this new channel strategy.

This text of mine is the 9th text of the ILOS Blog on Omnichannel. We will certainly have others, and I hope that, along this trajectory, companies are increasingly gaining maturity in planning and putting into practice this very important concept of managing sales channels.

REFERENCES:

Omnichannel gains new advance with Google – Alexandre Lobo (20/10/2017)

www.ilos.com.br/web/omnichannel-ganha-novo-avanco-com-o-google/

Inventory visibility in omnichannel: the Macys case – Fernanda Monteiro (01/09/2017)

www.ilos.com.br/web/visabilidade-do-estoque-no-omnichannel-o-caso-macys/

The omnichannel race: market perspectives – Fernanda Monteiro (15/04/2016)

www.ilos.com.br/web/a-riedade-omni-channel-perspectivas-do-mercado/

Blu-rays, DVDs, on demand and omnichannel: the logistics behind movies watched at home – Fernando Chalréo (26/02/2016)

www.ilos.com.br/web/blu-rays-dvds-on-demand-e-omni-channel-logistica-por-tras-dos-filmes-assistidos-em-casa-ou-em-anyquer-lugar/

Omnichannel and reverse logistics as key customer loyalty factors – Cesar Lavalle (08/12/2015)

www.ilos.com.br/web/omni-channel-ea-logistica-reversa-como-fatores-chaves-de-fidelizacao-de-clientes/

Omnichannel in Brazil – Fernanda Monteiro (24/11/2015)