5 Stages Of Omnichannel Retailing

The word “omnichannel” is back en vogue. What was once ridiculed, cajoled, and put down in keynote addresses onstage at retail conventions from New York City to Las Vegas is finally back with a vengeance.

Thank god.

Unfortunately, it only took the greatest pandemic of the past 100 years to open the retail industry’s eyes to what the term means and to start using it in the right way, like some nostalgic brand that is cool again. In many ways, “omnichannel” is like the Vans of retail transformation — suddenly everyone wants it.

But, knowing what omnichannel means beyond the word itself is no easy feat. 

Great omnichannel retailing is not what one reads about in press releases or earnings reports — e.g. the latest buy online, pickup in store initiatives or the latest and greatest mobile shopping applications. No, it is a mindset, a belief system that places the consumer at the center of a flexible, almost choose your own adventure style of retailing, whenever and however he or she desires it.

At its core, omnichannel retailing is predicated upon three foundations — 1) Cloud Commerce 2) Real-time Data Capture and Applications 3) Location and Context Analytics (read more here for background). 

Everything a retailer does today, tomorrow, or six months from now should be evaluated within the context of whether this interconnected system of foundational parts is evolving in the manner it should be.

As this article will show, there are five stages to omnichannel enlightenment. Some of the stages are basic and intuitive, while others are more difficult to grasp. In the end, they all show to what degree some of retail’s mighty emperors may have no clothes and also exactly where the industry could be headed next.

Stage 1 — The Solo Operation

This stage is the stage by which nearly every retail business starts, as a fresh idea, usually as either a physical store footprint or as a direct-to-consumer online business. At this stage, nothing is very complex — the backbone for running standalone physical retail and digital operations are well-established and have been around for decades, if not centuries.

Great examples include any mom-and-pop store or any young whippersnapper with an Instagram account, a Shopify subscription, and a dream.

Both are selling things to end customers, but the selling activities in and of themselves are isolated or not coordinated across multiple touchpoints and channels.

Stage 2 — Multichannel Retailing

The next stage in a retailer’s evolution is what is so often seen and done incorrectly. It is when a retailer decides to open up a store or to invest in a new e-commerce experience. 

This stage was quite the rage before the pandemic hit, for example. Every Tom, Dick, or Harry direct-to-consumer brand was buying into the idea of a physical store as media and popping-up stores left and right, which is a decision many likely have begun to regret for a whole host of reasons.

For any Stage 2 move to work, however, some important considerations must be made. 

First, the addition of any new channel touchpoint has to be valuable to the end consumer. Brandless, for example, made this mistake when it tried its hand at pop-up retail. Brandless failed to understand that it was really a CPG and not a retailer and that the addition of a store footprint ultimately only complicated its end consumers’ lives because it necessitated another trip to a second store (a point only driven home further of late by the pandemic).

Second, any additional touchpoint also must be coordinated technologically with all the other touchpoints in existence. Most specifically, retailers’ point-of-sale systems and order management systems need to work in concert. 

This last point is what has held retailers back for many years. Decades ago, people weren’t thinking in the manner about to be described, so retailers stood up e-commerce websites with separate inventory and transaction logs from those they used to run their physical store operations. Whenever this type of disjointedness happens, the systems become difficult to fuse back together. Direct-to-consumer brands, despite starting fresh with their own store initiatives, can oftentimes also make this same mistake in reverse.

Third, if done right, all the systems should operate via the cloud and be built around coordinated microservices. That way, if retailers decide to add any future touchpoints to their operations, they then can still scale these additional points up or down, whenever they want, with an ability to adapt or to flex to any changing needs as they go.

In a manner of speaking, there are quite a few retailers still paying for the sins of their father, as these last two points — POS/OMS coordination and cloud computing — are what have been at the core of the industry’s inability to keep pace with the evolving omnichannel needs of its consumers. 

The retailers that have been succeeding during COVID are the ones who have had the clairvoyance to understand these dynamics in advance. 

Stage 3 —  Coordinated Channel Activity

Stage 3 is the stage much of the retail industry is rushing to achieve right now. The simplest way to describe this stage is as an attempt by retailers to leverage their multiple channel assets to create one plus one equals three experiences that otherwise would lie dormant or not exist.

In other words, this stage is about generating a return on capital higher than if the individual channels exist solely to sell on their own.

Examples include leveraging stores for buy online, pickup in store, curbside pickup, shipping from store, processing online returns, etc. or, in the online world, leveraging Amazon’s
marketplace, selling on Instagram shops, using livestream video, and more.

If a retailer is doing these types of things, they are all steps in the right direction, but they should not also be confused with exceptional omnichannel progress if they are only a few months in the making, either.


Because it takes time to build out all coordination required across the inventory and point-of-sale systems to make these concepts work well and to contribute accretive profit to the bottom line. Any retailer can muscle things during COVID-19, a time in which consumers have given them the greatest hall passes in the history of retail experimentation, but coordinating these activities ubiquitously for years on end takes time and training.  

That’s why any retailers that are only just now, in the last six months, starting to embark on these initiatives may not be as far ahead on things as the market would like to think. The progress on them and the fact that they are doing them is good, but whether they have the real and right end goals in mind (as will be explored further below) are questions still on the table.

Sadly, the segment of the retail industry most stuck in this quagmire is mall-based retail. Not only do the retailers have to set up these systems of coordination internally, but the systems also have to be set up across other retailers and across disconnected mall operators in order to be effective.

Said another way, say someone wants to pick up an order from both the Gap
and Sbarro. Does he or she go to both Gap and to Sbarro to do it? Or, is there someplace in the mall or in the mall parking lot that he or she can go to make it even easier or faster?

This hypothetical question is important because it shows how complicated the necessary coordination likely is and also because it sheds light on many of Amazon’s graduate level omnichannel moves related to the mall industry. 

Put Amazon’s return experimentation with Kohl’s
, its placement of Whole Foods stores within Brookfield Properties’ locations, its decades old online marketplace, and its rumored possible acquisitions of J.C. Penney and/or Macy’s
into this context, and an Amazon reimagination of a mall-based shopping experience suddenly has pretty strong legs.

Stage 4 — Physical Shopping Is Like A Mouse On A Browser

The fourth stage of omnichannel retail is the most fun. In this stage, retailers are actively trying to understand physical movement within their stores (or even the world for that matter) in the same way a mouse moves across an e-commerce browser.

Retailers have never been able to understand these dynamics within physical stores. For most retailers, traffic has always been a default transactions metric. Online statistics inside of physical stores, like true traffic, conversion, session time, etc., have always been elusive.

With advances in computer vision and mobile technology, however, that is no longer the case, and, while not every retailer gets the punchline to this joke, some are getting it loud and clear. 

Intelligent Retail Lab store in New York is designed to capture this exact type of information by way of cameras in its ceilings. It brethren, Sam’s Club, has an entire store called Sam’s Club Now (see below), where the store can only be shopped using one’s mobile phone and where, in essence, every movement and action a person takes with his or her phone can be analyzed in the same manner one would analyze behavior on a website.

Moreover, QSR’s like Chick-fil-a and McDonald’s
, with their ordering kiosks and mobile apps, Nike
with its connected apps and in-store experience, and even Lululemon’s acquisition of Mirror all show an omnichannel bend in a similar Stage 4 direction.

Amazon, though, is still probably the single best example of this stage because of what it has been doing with Amazon Go

Amazon digitally knows who its customers are before, during, and after they visit an Amazon Go store, but it also knows every movement these customers make and every product with which these same customers interact while they are inside of an Amazon Go store as well. This coordination is powerful, and also why retailers like Giant Eagle, Tesco, 7-Eleven, Circle K, and Ahold Delhaize deserve credit for jumping headfirst into the computer vision AI omnichannel pool.

However, as fun as all that experimentation is to name, there are still many top U.S. retailers that are lagging behind on Stage 4 experimentation. 

, for all its pandemic drive-up glory, has done very little publicly on scan-and-go and computer vision implementations nor have the likes of other huge names, like Kroger
, Costco, Walgreens
, Macy’s, and Kohl’s, for example.

And, yet Amazon and Walmart stand side-by-side, ready to duke it out. Amazon is awash in its Go glory, while Walmart is at the same time making scan-and-go a key piece of its new Walmart+ program. 

In essence, Amazon is taking an approach of starting small at 3,000 square feet and working up, while Walmart is starting from 200,000 square feet and working down. Who gets to the next stage first, Stage 5, over the next decade will be the battle of the century. 

Stage 5 — Complete End-to-End Commerce

The final stage is the holy grail, the everest of retailing. No U.S. retailer has summited the mountain at this point. Alibaba
has overseas, but those closest to reaching maximum omnichannelness within the U.S. are still short one important lever — social commerce.

As discussed in this article, the best way to think about omnichannel nirvana is as a connected line. On one end of the line lies a marketplace (a la Amazon or Walmart). On the other end of the line lies a social network (a la Facebook or Instagram). Whoever can connect and control this line end-to-end has a tremendous advantage when it comes to understanding the contextual analytics surrounding one’s customers.

Social networks (e.g. feeds, text streams, content platforms, etc.) know everything consumers like, everything on which they comment, every event they attend, and so on and so on. They know more about consumers than consumers likely know about themselves. Stage 4 retailers may know what their customers explicitly tell them by way of what their customers say and do within their own shopping apps and store environments, but Stage 5 retailers know implicitly what their customers want as well. 

This last point is why Facebook is poised to be one of the most powerful retailers in the world by 2030. Social networks are hard to simulate, and Facebook has been fortifying its commerce position significantly over the past year. 

It is also why Walmart is so gosh darn interested in TikTok and also why Amazon is going to stop at nothing to get Alexa into people’s homes and to secure the live broadcasting rights of sporting events, like the NFL.

Stage 5 omnichannel retailing is about controlling content and commerce as one combined entity, and then being able to serve up whatever a customer wants in real-time and on-demand, wherever he or she wants it in the world and in whatever psychological state of mind he or she happens to be.

Alibaba is there. Amazon is close. Walmart is sprinting to keep up. And, all the while, Facebook is sitting quietly in the corner with possibly the most valuable assets of all — a social network and a burgeoning Instagram marketplace — that could soon plug every Stage 4 retailer and below into its own, very formidable version of a Stage 5 and incredibly asset-lite omnichannel retailing platform.

In the end, these are the five stages of omnichannel retailing.

Knowing them and understanding them will help to predict around what corners the retail world will move next.

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