Omnichannel vs Multichannel – Addressing the Changing Requirements of Distribution Channel Partners in the Automotive Aftermarket
One of the greatest benefits of attending AAPEX and the SEMA Show during the Automotive Aftermarket Industry Week every year in Las Vegas is the ability to participate in the many informal "off the record" conversations and discussion threads that occur between the participants and attendees of the shows. This year, one of the threads centered on the challenges of implementing and supporting Omnichannel distribution and marketing strategies in the automotive aftermarket. In many of these conversations, several items stood out:
1. First was the challenges of managing the seemingly never-ending changing requirements of each distribution channel a company is using.
2. There also seemed to be an extra level of complexity introduced that typically arises from "reactively" approaching rather than "proactively" approaching potential solutions to these challenges.
3. Lastly, the terms "Omnichannel" and "Multichannel" were being incorrectly used as synonyms, which, while being two unique and different strategies, highlighted the interdependencies of the two in real-world implementations.
Definitions – What's important?
To begin to address these issues, it is essential that we first clearly define our terms. One only has to do Google search on the words "Omnichannel" and "Multichannel" to generate numerous different and sometimes conflicting definitions of these strategies. Thus, for this article, let's define each term as follows:
Multichannel (meaning "many" channels) revolves around your product and enables customers to engage and purchase wherever they shop but often treats channels as silos independent from one another. Each channel in a multichannel strategy exists as a separate purchase opportunity. (1) For example, a manufacturer may sell their products through the following distinct selling channels: Warehouse Distributors; Major Retail Chains; Big Box Stores; Major Internet eTailers; Their Website; etc.
Omnichannel (meaning across "all" channels) revolves around your customer and creates an exceptional customer experience across your brand by unifying sales, marketing, and distribution that accounts for the spillover between channels. (1) A commonly used example of an omnichannel implementation is the Bank of America website.
In the "real world," these unique strategies or different strategies can overlap extensively. Thus, it is essential to remember this one key differentiating item: Who owns the customer experience? If you control the customer experience, then you can create an omnichannel environment. If you don't, you are in a multichannel strategy. By understanding this simple difference, you can develop a simplified hybrid approach, where you can implement a customer-focused omnichannel strategy where appropriate and a multichannel strategy where it is not.
Managing the changing requirements of distribution channel partners
In reality, most of the issues discussed at industry week attributed to Omnichannel distribution were Multichannel distribution issues. While many concerns were raised, much of the conversion was being driven by announcements and rumored requirement and capability changes in the Automotive Aftermarket Internet and social media selling sectors. These included announcements by Amazon that they were looking at moving many of their direct suppliers to their third party market place and media report about rumored changes in Facebook's ability to "micro-target" particular demographics in the ad marketing process.
These changes could have significate implications in both the physical distribution and marketing of your products. They also demonstrate the magnitude of such changes. For example, if Amazon changes your status from a direct supplier to a third party market place partner, this may have a significant impact on your organization. On the other hand, Facebook's "micro-targeting" changes may only change your ad placement strategy.
However, how you manage these changes depends on how you have implemented customers in these distribution channels in the first place and what your channel support plan is. Some considerations:
1. Have you adopted a formal agile, rapid response channel management strategy to manage changes when they occur?
2. Are their processes in place to proactively manage the implementation of new requirements?
3. Are there cross-functional teams in place to ensure all affected departments are included (i.e., Sales, marketing, product distribution & warehousing, production, data management & distribution, systems, etc.)?
4. Is the current process completely automated? What changes in the automated processes need to be made to keep things completely automated (i.e., Order processing, warehouse automation & shipping, quick response manufacturing, etc.)?
5. Are the changes "game changers"? Does it change the relationship with the customer? Are there additional costs that need to be addressed by price changes? Do these changes create an opportunity? Or, do we walk away from the customer?
6. Do any of our current processes need to be fundamental changes, replaced, or improved?
How you answer these questions will provide the bases putting together a plan to implement or address the changes. The key here is to identify everything that needs to be addressed before implementing the changes so that there are no surprises.
Final Notes
I also cannot express strongly enough the need to take the time to establish proactive projects to plan, manage, and implement significant channel partner requirement changes. For every action you do proactively, it eliminates five actions that you will need to take to address each issue that you missed by being reactive.
Footnote:
1. Modified from the following source material: "Omnichannel vs Multichannel: What is the Difference and Why Does It Matter?" by Nick Winkler, Aug 13, 2019. https://www.shopify.com/enterprise/omni-channel-vs-multi-channel
