Who gets credit for the omni-channel sale?
One of the murkier aspects of omni-channel retailing continues to be "revenue attribution." The challenges assessing proper credit for an omni-channel sale — when it’s partly influenced by offline or online — appear to be leading to under-investments in worthwhile marketing tools in some cases and one channel sabotaging the other’s sales in others.
In a report, Untangling Omni-Channel Retail, Michael Ross, co-founder of software company OrderDynamics (formerly eCommera), summed up the related channel conflicts:
- Research online/buy offline: Do you give credit to online for offline-influence sale?
- Buy online/return to store: Do stores get penalized for online returns?
- Buy on mobile while in store: Is this an online or offline sale?
- Buy online/in-store pickup: Is this a cost for the store or a tool to drive traffic?
- Online order shipping from store: Do stores get credit for sale?
- Offline out-of-stock filled by online shipment: Are stores more incentivized to sell existing inventory in order to get full credit?
Depending on how much credit is given, the role online research plays in physical store purchases may be undervalued, he argues. Vice versa, the role the store may play in supporting online sales, such as in-store pickup and returns, can be undervalued. Perhaps more troubling is the potential "antagonism" between channels that can dis-incent sales across channels. For instance, one side may feel the other is overly-credited when an offline out-of-stock is filled by online shipment.
The myriad of approaches taken to omni-channel sale accounting was evident in a survey conducted last November by Forrester Consulting on behalf of Accenture and Hybris Software.
Cathy Hotka, principal, Cathy Hotka & Associates, said the topic continues to be hotly debated in her conversations with retailers.
"There’s no right way to get to a seamless customer experience, and retailers can’t dismantle what they have and start over … so they’re working on their own hybrid arrangements," Ms. Hotka told RetailWire. "What’s really challenging them is the rise of mobile commerce; they didn’t think they’d have the volume of mobile sales they have."
Dismantling channel silos and implementing a single retail P&L also present challenges.
"People focus on what they get compensated on, and until they compensate stores on ‘overall sales’ I don’t think a single P&L is going to make any difference," said Nikki Baird, managing partner at RSR Research.
Brian Kilcourse, a fellow RSR partner, said not only sales, but how costs of sales are assigned need to be considered. New costs, such as the labor associated with a click ‘n’ collect order, will have to find a way to be calculated.
He added, "Costs (both cost of goods, and operating costs) offset sales in a traditional retail model to deliver operating income (or EBITDA) for each store. When the channels are working together to make a sale, what’s the operating income (revenue less cost-of-goods, less operating expenses) of that sale?"
- Untangling Omni-Channel Retail – OrderDynamics
- Customer Desires Vs. Retailer Capabilities: Minding The Omni-Channel Commerce Gap – Accenture
How do you see the challenges around omni-channel revenue recognition disrupting the traditional retail model? What solutions do you see?