How omnichannel commerce powered by composable reduces TCO and boosts ROI

Manuela Tchoe
Manuela Tchoe
Senior Content Writer, commercetools
Published 04 July 2023
Estimated reading time minutes

Composable commerce is the game-changer that powers seamless omnichannel experiences, so businesses can finally reap the rewards: Boosting revenue and reducing costs. Here’s how composable-enabled omnichannel commerce can make that happen. 

When done right, omnichannel commerce can bring your business undeniable benefits: Your customers can shop and engage with your brand frictionlessly. Loyalty and repeat sales will follow. Your business will enjoy a tremendous competitive advantage and stay on top of customer trends and expectations. But how can an omnichannel strategy make this happen — increasing revenue while reducing cost? And what’s the role of composable commerce in this equation? 

Instead of disjointed platforms that aren’t in sync, composable commerce provides a modern approach that perfectly fits the needs of customer-centric omnichannel experiences. This is because its modular development approach allows companies to choose the components they need to build and run outstanding shopping experiences. In fact, leading brands like Sephora, Ulta Beauty and Harry Rosen have unlocked tremendous value with omnichannel experiences due to their composable implementations. Read on to learn how composable commerce makes that happen.

How omnichannel commerce increases ROI

There are many aspects at play for omnichannel to augment revenues. Even incremental improvements to customer experiences soon bring returns: When it’s easier for shoppers to navigate the buying journey across multiple touchpoints without friction, brands see improved conversion rates. The numbers confirm it: Omnichannel commerce is proven to increase AOV (average order value) by 10% and LTV (lifetime value) by 30% compared to single-channel commerce. According to McKinsey, omnichannel customers shop 1.7 times more than shoppers who use a single channel.

On top of this, there are various ways omnichannel can create new revenue opportunities:

  • Phygital strategies that seamlessly combine physical and digital experiences, such as self-checkout, digital wallets and using mobile apps in-store, enable customers to find and purchase products faster. British retailer River Island invested in an RFID-enabled self-checkout service for one of its busiest stores, with 70% of in-store transactions processed through this touchpoint.   

  • Implementing omnichannel fulfillment such as BOPIS (buy online, pick up in-store) encourages new engagement opportunities, such as impulse purchases: When the shopper picks up the goods in-store and decides to buy something new on top of what’s already ordered. 

  • Immersive experiences like virtual try-ons with augmented/virtual reality get customers hooked no matter where they are, translating into fewer abandoned carts and more conversions. Ulta Beauty and Sephora have, for instance, leveraged immersive technologies to successfully engage customers interested in makeup products. 

Going a step further, it’s a lot easier to cross-sell and upsell when customer data is effectively leveraged in omnichannel scenarios. When companies gain insights into customer preferences and behaviors in real-time, it’s easier to recommend relevant products or services based on customers' purchase history, browsing patterns and preferences. After all, personalization goes hand-in-hand with omnichannel and is a vital strategy for companies to increase customer engagement, loyalty and revenue. 

Speaking of loyalty, a study by Harvard Business Review revealed that within six months after an omnichannel experience, customers logged 23% more repeat shopping trips to the retailer’s stores. The impact of omnichannel in loyalty programs is indeed massive. For example, America’s leading department store, Target, launched an omnichannel loyalty program Circle, which uses personalization at scale to tailor promotions, services and benefits based on individual needs and preferences.

Long-term, data becomes an even more valuable resource for companies to tap into, feeding omnichannel strategies along the way. Analyzing data to gain insights into customer preferences, behavior patterns and market trends translate into data-driven decisions, such as optimizing product offerings, pricing strategies, marketing campaigns and inventory management, which will positively impact the bottom line.

How omnichannel commerce reduces TCO

When it comes to omnichannel, many people see it only through the ROI lens and disregard the effect on costs (probably because the misconception is that costs will remain high after the initial investment). The good news is that omnichannel not only increases revenues but also brings down total costs of ownership (TCO). 

Before we dive deeper into this, what’s TCO exactly? A crucial measure for organizations looking to make informed decisions about their investments, TCO accounts for all the costs associated with a product or service, providing a comprehensive view of the financial impact of a decision. In today's cost-scrutinized business environment, including TCO in your decision criteria is more important than ever!

The first thing to understand is that, naturally, you have to invest in omnichannel in order to reap the benefits. The cost of technology, data clean-up, resources and maintenance may put some executives off. But don’t be discouraged: Over time, your business will see the rewards, which not only translate into increased revenues but also encompass streamlined operations, fewer redundancies and cost reductions, such as: 

  • Centralized data: Omnichannel success relies on having unified, clean and up-to-date data. Companies can progressively embrace data-driven practices that will reduce the costs of maintaining and cleaning up data, plus optimize processes and reduce silos. A key example of achieving this is centralized inventory information: By allowing streamlined inventory data across all channels, brands can minimize stockouts (aka, out-of-stock products) and overstocks. In addition, they can enable efficient order fulfillment, as inventory can be sourced from multiple locations to fulfill customer orders promptly.

  • Optimal resource allocation: By understanding customers' channel preferences and behaviors, companies can prioritize investments in channels that yield the highest returns, e.g., allocate more resources to enhance its online platform rather than investing heavily in physical stores. 

With a composable implementation, brands can also reduce costs related to omnichannel in the following ways:

  • Companies have the freedom to select and integrate best-of-breed components flexibly, which may include channels, data tools, an orchestration layer, etc. This means companies can invest in products that meet immediate needs. As a result, spending is much more effective. 

  • It’s also more cost-effective to scale resources and performance. You can leverage high-performant channels, plus rely on a cloud-native infrastructure to manage the increased influx of digital traffic, no matter the touchpoint.  

And a very, very important point: The functionalities that your business requires today will be different from the ones your business requires tomorrow. Therefore, “change costs,” which refer to the costs incurred when making ongoing changes to the solution, are a big part of the equation. From the omnichannel perspective, you should consider that channels and customer journeys change and evolve, so taking into account how you can adapt to new circumstances and the costs associated with those changes is critical. 

In other words, your company needs the flexibility and agility of composable commerce to quickly pivot operations to meet changing customer behaviors and demands, which can include everything from offering curbside pickup or investing in livestreaming shopping. That way, managing constant change becomes an everyday task that doesn’t cost an arm and leg, driving down implementation, customization and integration costs over time for your business. 

The result: With composable commerce as the omnichannel-ready engine choreographing customer experiences, your business can unlock tremendous value now and in the future.  

How can your business derive value from omnichannel experiences with composable commerce? Download Omnichannel Playbook: Leveraging Composable Commerce for Omnichannel Experiences to find out. 

Manuela Tchoe
Manuela Tchoe
Senior Content Writer, commercetools

Manuela Marques Tchoe is a Content Writer at commercetools. She was a Content and Product Marketing Director at conversational commerce provider tyntec. She has written content in partnership with Facebook, Rakuten Viber and other social media platforms.

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