The omni-channel model: why retailers are paying the price.

A historic illustration of Mark Foy's department store. Experts say that its successors, Myer and David Jones, failed to properly implement an omni-channel model.

Large companies, namely department stores, have failed to keep up with advancements in the retail industry. In 2019, experts predicted the downfall of brands like Myer and David Jones. Of course, these predictions didn’t account for the pandemic, which has since ripped through the global retail landscape. Today, the aftershocks of the COVID-19 disaster are still reverberating across the world. Now, the future of the global department store sector is even more perilous and precarious. It is tempting to say that the sector should save itself by embracing an effective omni-channel model. But many experts say that change was needed years ago. Sadly, it’s a little too late.

The digital age and the department store

The department store sector was thriving before the digital revolution. Mark Foy’s, for example, was a bustling institution on Sydney’s Liverpool street. It even withstood the Great Depression. Similarly, Moore’s department store in Adelaide was one of the grandest in the country.

An old photograph of Charle Moore's department store. Unlike modern department stores today, this institution was extremely popular.
Moore’s department store in its heyday. Credit: State Library of South Australia.

But both ceased trading by the early 80s. This then takes us to the dawn of the digital revolution. Soon, trailblazers were spurring on major advancements. By the early 90s, Charles M. Stack launched an online bookstore that would later become Barnes & Noble. Two years later, Jeff Bezos founded Amazon. Of course, Amazon is now a behemoth in our online retail world. By the late 90s and early 2000s, retailers really began to diversify. The savvy ones offered an online shopping experience to supplement their brick-and-mortar stores. But not everyone jumped on the digital bandwagon. Department stores dug in their heels and clung to their physical outposts. This is a misstep that would be costly, down the track.

An industry stuck in analog

“Digital retailing is quickly morphing into something so different that it requires a new name: omni-channel retailing.” That is what Harvard Business Review journalist Darrell K. Rigby wrote back in 2011. Ten years later, it rings true. The retailers experiencing the most growth are the ones that have effectively implemented the omni-channel model.

David Jones signage
Department stores were hit hard by the COVID-19 pandemic. Credit: AAP, Danny Casey

Unsurprisingly, Rigby also warned that “conventional merchants” who don’t “integrate disparate channels into a single, seamless omni-channel experience” would fail to survive. Companies like David Jones, Myer, Barney’s and Macy’s all have various channels. The brands’ websites, search engine advertising and social media management  is active. But experts argue these brands have failed to integrate each channel effectively, in a way that offers shoppers a seamless and synergistic experience. In March last year, the New York Times explained that several department store management teams were trying to transform into e-commerce players, but COVID-19 quickly dismantled the attempt. The pandemic then “laid bare how dependent department stores remained” on their brick-and-mortar stores.

A lack of innovation

The impact of the pandemic has exposed just how much the department store sector was failing to perfect its omni-channel offerings. Myer and David Jones, once shining jewels of Australian retail, are now crumbling. Even now, the creditors of both companies have lost access to insurance. As the ABC reports, that’s because both are at such high risk of falling into administration.

Omni-channel shopping is vital in today's retail world
Omni-channel shopping is vital in today’s retail world. Credit: Simon Bak

Meanwhile, other retail players experienced growth during 2020. Kmart lifted its annual sales by 40% between 2014 and 2019 and reached $61 billion in sales in 2020. Kmart achieved this by simultaneously improving its supply chain management and omni-channel experience. Similarly, Zara’s parent company Inditex grew its digital sales by 74% in the first half of 2020. Zara presents a great example of digital and physical integration. It recently announced the launch of three more omni-channel features: Click & Go, Click & Find and Click & Try. Zara was the omni-channel poster child of 2020, but it has since been eclipsed by Japanese-owned Uniqlo. Its parent company, Fast Retailing, reached a market value of $130 billion earlier this year. Again, this was made possible by the unification of its digital and physical presence.

The future is now. Embrace it or implode

Brands like Kmart, Zara and Uniqlo prove that retail is a fast-moving game, and constant advancements and updates are mandatory. Their success stories prove that the omni-channel model is not something to just consider: it is a vital part of retail. What’s more, we can now see that digital retail didn’t kill the department store: simply, it was the inability to innovate.

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