Key Principles of Designing The Omni-Channel Distribution

The consumer product and retail landscape continues to evolve as companies race to catch up with leading e-tailers. Traditional brick-and-mortar retailers such as Macy's, Nordstrom, and Walmart are expanding their online offerings and introducing new models, including in-store fulfillment of online orders. Online players such as Amazon and Zalando are opening their own brick-and-mortar stores. Vertically integrated players such as Bose, Burberry, and Nike1 are strongly pushing their direct-to-consumer business through both online and new physical stores. And players of all kinds are complementing their physical stores and e-commerce offerings with innovative applications and social media to mount a truly omnichannel presence.

With all the difficulties and uncertainties that the COVID-19 pandemic has brought for retailers and consumer product companies, the crisis has also accelerated a preexisting trend toward omnichannel. Online sales have increased significantly across many product categories, and many consumers have tried out new shopping behaviors since the onset of the pandemic. For example, more than one-third of Americans have made omnichannel behaviors---such as buying online for in-store pickup---part of their regular shopping routine, and nearly two-thirds of those individuals plan to continue these behaviors. While some proportion of the online sales boost may be temporary in some categories, online sales will continue to grow in others. Even as shops start to reopen, omnichannel will remain the norm for some product categories. This new normal has already had significant benefits for those who were prepared and could quickly ramp up their online volumes.

However, many players still struggle with omnichannel given its supply chain requirements, particularly in terms of speed, complexity, and efficiency. Consumers expect to be able to receive their products anytime and anywhere---and with a minimal lag between order and delivery, as well as with a high level of convenience. Traditional supply chain networks are often not built for same-day delivery with excellent service. This is an issue in this era of fierce competition; Amazon continually redefines delivery standards, for example.

Companies that can rise to these challenges, however, are already reaping significant benefits: our research shows that consumer experience leaders are more resilient during recessionary periods, experiencing shallower troughs and quicker recoveries.

In this article, we focus on the network and ecosystem of the future, and describe the principles that can guide companies' approaches to omnichannel network design in an increasingly complex environment.