The changing face of Omnichannel for SMEs: 5 distribution options you may not have considered

2020 has by all accounts been a big year of change. Whether good or bad, the retail landscape has changed dramatically in the last 12 months, with shifts that had been slowly simmering away now accelerated at an unprecedented rate. Many brands have folded or reduced their retail footprint significantly, department stores that have been struggling for years have finally called it quits, and direct-to-consumer (DTC) brands have overwhelmingly come out on top. So what does that mean for omnichannel distribution models?

You would be forgiven for thinking that a pure ecommerce strategy is the best distribution method. But while an online DTC model may be the way to go for some SMEs, there are still omnichannel options that can prove highly effective for both brand awareness and commercial success. At Metz Consulting we’ve compiled a list of 5 of the most interesting and innovative selling channels that you may not have considered.

1.     Experience-based physical retail

Having a brand-owned and operated physical presence may not be a new sales method, but the ways brands are approaching physical retail is both exciting and innovative. Instead of using stores just as another sales channel, consumers are connecting with brands that create spaces that offer unique or meaningful experiences.

Pros: Business can control every aspect of the customer experience in store, from branding to product curation, customer interaction and service offering. And with an experience-based in-store offering, brands can use physical spaces to foster connection, gain real-time feedback and create memorable brand moments that ultimately lead to greater customer loyalty. And this doesn’t always have to mean a big financial outlay – brands of all sizes are increasingly using temporary Pop Up spaces to test and trial new concepts and reach their customers.

Cons: The most obvious challenges with opening a bricks-and-mortar store usually come in the form of substantial additions to the business expenses, including rent and payroll costs. Also, if back-end processes such as logistics and operations have not been set up adequately it can be difficult for small brands to ensure they have the right products available for customers at all times or that customers receive the same service experience across various sales channels.

2.     Wholesale – B2B

Wholesale doesn’t have to mean selling products to retailers who share your end consumer. Another option that has worked for many brands is selling to other businesses directly, often in adjacent industries. For example, restaurants need everything from napery and cutlery to hand soap and candles.

Pros: Effectively considered another customer, selling B2B can often be a great way to open up a new revenue stream that will not risk cannibalising your existing sales channels. It can also help with brand positioning (e.g. selling hand soap to a luxury hotel chain can solidify your brand position as a luxury product).

Cons: Unfortunately, the same financial risks apply when wholesaling to other industries as to retailers – narrow margins, onerous payment terms and risk of default are all potential challenges. 

3.     Online Marketplaces

An emerging distribution channel, online marketplaces such as Farfetch, Etsy and even Facebook marketplace are becoming more and more popular for both consumers and brands. With some platforms taking a commission of sales and others charging a membership fee, there are multiple platforms available catering to different customer segments.

Pros: Marketplaces allow brands to reach new customers without significant upfront costs, such as inventory production. Often SMEs will make much better margins from a drop-ship model than traditional wholesale, and with no inventory tied up in consignment it gives small brands more control over managing their stock.

Cons: Again, financial risks still exist with this model as some marketplaces have long payment terms and require chasing! 

4.     The Rental Model

Another fairly recent addition to the scene, rental companies are popping up all over the place and are now present across many industries including fashion and furniture.

Pros: Selling your products to a rental service can not only add another revenue stream to the business, but it can help with building brand awareness with new customer segments. For businesses with sustainability as a core value, it can also build credibility with consumers and brand followers, showing them that you support slow retail models.

Cons: Of course, the sales volumes of this method are significantly lower than with traditional retailers but still come with the same financial risks. Also, there may be some cannibalisation to your owned sales channels, as some of your brand fans opt to rent rather than buy.

5.     Social Networking

Other DTC sales channels exist for SMEs and start-ups, facilitated by new technologies and ways of communicating. From Instagram to Whatsapp, TikTok to WeChat, businesses are constantly looking at new ways to talk to potential customers.

Pros: Social Networks are a great way to talk directly to your community and create fast and frictionless transactions for consumers, making them more likely to purchase. It is also a great way to gain feedback from real consumers on all areas of your business and create long lasting relationships with your most loyal customers.

Cons: Similar to managing an e-commerce site, selling on social media can be a full-time job, and you carry the full financial burden of production, marketing and operating costs. Also, as a lot of these platforms are fairly new, there are a lot of unknowns. Security concerns may be a factor to consider, and it may take a period of trial and error before finding the social platform that is right for your business.

For start-ups and SMEs there is no one-size-fits all approach to distribution. With new methods of reaching customers gaining traction the face of Omni will likely continue to change. It is important for start-ups and SMEs to assess all the options available and decide what’s makes the most sense for your business today. Nothing in business is static, and adopting and agile and flexible mindset when approaching distribution will ensure your business comes out on top.

Reach out to Jessie for support with building and managing your business’ omnichannel strategy.