The rise of online shopping sparked years of debate about whether physical stores had a future. The answer turned out to be neither “stores” nor “online,” but both.

Online retail offers convenience and endless choice, but customers still value being able to see, touch and try products, get expert help and take items home immediately. Rather than choosing between the two, successful retailers combine them.

There are two ways to do this. Multichannel retailing means selling through several channels that operate largely separately. Omnichannel retailing means joining those channels together so that customers get one seamless experience, wherever and however they shop.

This article explains what omnichannel retailing is, how it differs from multichannel retailing, and the main benefits and disadvantages for retailers.

What Is Omnichannel Retailing?

A retailer with a store, a website and an app is a multichannel retailer. It becomes an omnichannel retailer only when those channels are fully integrated.

In omnichannel retailing:

• Inventory is shared. The retailer can see stock in every store and warehouse, and sell it through any channel.
• Customer data is shared. The retailer recognizes the same customer whether they shop in a store, on the website or in the app.
• The experience is consistent. Product information, prices, promotions, payment options and return policies match across channels.
• Journeys can cross channels. A customer can browse in the app, check stock at a nearby store, buy online, pick up in store and return by mail.

In multichannel retailing, by contrast, channels often run as separate businesses, with different prices, separate stock and little shared customer information. Customers effectively choose their experience by choosing a channel.

Common Omnichannel Services

1. Buy online, pick up in store (BOPIS, also called click and collect).
2. Ship from store, using store stock to fulfill online orders.
3. Endless aisle, letting store staff order items for home delivery when they are out of stock in the store.
4. Return anywhere, accepting online purchases back in stores.
5. Unified loyalty programs that recognize customers and rewards across all channels.

Benefits of Omnichannel Retailing

1. Higher Customer Satisfaction and Loyalty

   Customers trust a retailer that treats them the same way in every channel. They no longer need to check whether the price online matches the store, or worry about where they can return an item. This saves time and hassle, which raises satisfaction, loyalty and customer lifetime value.

2. Higher Conversion and Fewer Lost Sales

   Omnichannel tools keep customers with the retailer throughout their decision. In a store, a shopper can scan a QR code to read reviews or check other sizes online, instead of leaving to search elsewhere. If an item is out of stock, staff can order it for home delivery on the spot. Each of these turns a potential lost sale into a completed one.

3. A More Efficient Organization

   Without integration, many retailers run separate online and store teams for marketing, merchandising and customer service, which often duplicate work and fail to coordinate. Omnichannel retailing encourages retailers to combine these functions into one leaner organization.

4. Better Use of Inventory

   With a single view of stock, a retailer can sell an item from whichever location has it. Stock that is slow to sell in one store can fulfill an online order, reducing markdowns and missed sales.

5. Richer Customer Data

   Omnichannel retailers can combine data from store purchases, website visits, app use and loyalty programs into one picture of each customer. Used well, and with proper respect for privacy, this data helps retailers personalize offers and plan better.

Disadvantages and Challenges of Omnichannel Retailing

1. Operational Complexity

   Traditional retail supply chains are built around predictable flows: goods move from warehouses to stores, or from warehouses to customers’ homes. Omnichannel retailing breaks this pattern. Customers can order online and collect in store, or buy in store and return by mail. Keeping track of stock across all these flows is far harder, and supply chains must become more flexible and responsive.

2. High Costs

   Integrating channels requires significant investment in technology, such as order management systems, inventory tracking and data platforms. Online-only retailers may need to open physical locations. Conversion rates and customer satisfaction usually improve, but the costs can outweigh the gains, especially for smaller retailers.

3. Fragmented and Costly Fulfillment

   When orders can be fulfilled from any location, the same product may be shipped more than once, or from a store far from the customer. Transport and handling costs can eat into thin retail margins.

4. Difficulty Connecting Data

   Bringing together data from point-of-sale systems, websites, apps and loyalty programs is technically difficult and expensive. Many retailers find that their systems were never designed to work together, and that turning combined data into useful insight takes skills and investment that only larger retailers can afford.

5. Inconsistent Order Fulfillment

   Because stock moves constantly between channels, retailers can end up with excess inventory in some places and stockouts in others. An item shown as available online may already have been sold in a store. This is often called “phantom inventory”: the systems show stock that is not really there, because store tills and the website do not update each other quickly enough. The result is cancelled orders, delays and frustrated customers.

6. Complex Returns

   Allowing customers to return items anywhere creates difficult reverse logistics. A store may receive returns of products it does not normally stock, which must be sent elsewhere. Stores also need processes, and sometimes cash, to handle refunds for purchases made online.

Benefits and Challenges at a Glance

Getting Started with Omnichannel Retailing

Retailers moving toward omnichannel usually follow a sequence like this:

1. Get accurate, real-time inventory data across all stores and warehouses. Nothing else works without it.
2. Align prices, promotions and policies across channels.
3. Introduce simple cross-channel services, such as click and collect and in-store returns of online orders.
4. Connect customer data through a single loyalty program or customer account.
5. Reorganize teams and incentives, so store staff are rewarded for online sales they help create.
6. Measure the economics of each service, such as the cost of ship-from-store orders, and adjust.

Practical Tips: Making Cross-Channel Services Work

The steps above set the order of work. These tips cover the details that decide whether each service actually pleases customers and pays its way.

1. Fix inventory accuracy before launching click and collect: Item-level tracking, for example with RFID tags, and real-time links between store tills and the website reduce phantom inventory. As a rule of thumb, many retailers aim for store stock records that are about 98% accurate before offering in-store pickup, because every cancelled pickup order loses a customer’s trust.
2. Make pickup fast and easy: Set aside a pickup counter, lockers or curbside spaces, and promise a clear ready time, such as within a few hours, that staff can reliably meet.
3. Use stores as small warehouses: Ship-from-store lets the retailer fill online orders from the store nearest the customer. Deliveries arrive sooner, and slow-moving store stock sells before it needs a markdown.
4. Let customers return anything anywhere: Accept online returns in any store, with an instant refund or credit. Train staff to help returning customers find a replacement, which can turn a refund into a new sale.

Conclusion

Omnichannel retailing combines the strengths of physical stores and online shopping into one connected experience. Done well, it raises customer satisfaction and loyalty, increases sales, makes better use of inventory and gives retailers richer insight into their customers.

It is also demanding. It requires major investment in technology, flexible supply chains, connected data and new ways of working. Many large retailers now offer omnichannel services, but the gap between offering them and delivering them profitably remains wide. Retailers that combine smart technology with strong operations are the ones most likely to succeed.

Frequently Asked Questions

What is omnichannel retailing?

It is a retail strategy that connects all of a retailer’s channels, such as stores, website, app and social media, so customers get a consistent, seamless experience and can move freely between channels.

What is the difference between multichannel and omnichannel retailing?

Multichannel retailers sell through several channels that operate largely separately. Omnichannel retailers integrate those channels, sharing inventory, customer data and policies.

What are the benefits of omnichannel retailing?

Higher customer satisfaction and loyalty, more sales and fewer lost sales, better use of inventory, a more efficient organization and richer customer data.

What are the disadvantages of omnichannel retailing?

Operational complexity, high technology costs, costly fulfillment, difficulty connecting data, inventory inaccuracies and complex returns.

What is click and collect?

Click and collect, or buy online, pick up in store, lets customers order online and collect their purchase from a nearby store, often on the same day.