Recently, The Parker Avery Group was asked what new challenges retailers—especially multi-brand retailers—are currently facing in the context of growing omnichannel competition. Associate Partner Josh Pollack provides his insights and recommendations in this week’s blog.

The current retail environment is challenging, to say the least, across just about every category. Multi-brand, multi-channel retailers face a legion of pressures that seem to grow every day with new entrants and technological advances. Even prior to the current business downturn, competitive pressures—driven by an overstored industry, easier consumer access to retail pricing and promotional information, and the ascendance of the web (and more so mobile) as competitive shopping channels—have driven retailers to rethink their traditional business models and value propositions and invest in new ways of doing business…or face real peril.

Leading multi-brand retailers actively position themselves to turn these challenges into advantages. By looking ahead and aggressively addressing these pressures, they position themselves for future success and even dominance. Let’s explore these in a bit more depth.

Carefully Orchestrated Differentiation. In today’s retail landscape, most companies face competition from huge, dominant rivals in the form of Walmart and Amazon (see last week’s blog about how Amazon Prime Day could impact retail and holiday 2017: There are many ways to compete successfully with these behemoths, but most winning strategies hinge on brand and/or product differentiation. If your product offering is commoditized, it will be nearly impossible to match the economies of scale that have been achieved by the likes of “Walmarzon.”

Brand definition and brand identity are crucial in these circumstances. Fortunately, advances in computing and advanced analytics have made it possible to take advantage of huge amounts of customer and shopping behavior data to improve marketing effectiveness and brand awareness.

However, multi-brand, multi-channel retailers run the risk of compromising the distinct character of their captive brands if they take advantage of the economies and cross-brand traffic from ecommerce platforms shared across brands. Increasingly, multi-brand retailers add links to sister brands on their homepages and product pages, as well as adopt shared shopping carts. The shorter-term benefits of these tactics are improved sales and smoother customer transactions. Yet, this practice has the tendency to muddy the perception of the individual brands and dilute their differences, which may harm long-term performance.

The challenges are similar when addressing organizational design. An eCommerce and marketing team that is shared across brands may produce system and process efficiencies and require less manpower. This model also makes it easier to control the volume and nature of direct customer contacts, to help ensure that shoppers aren’t deluged with overlapping and competing messages. On the other hand, individual brand differences may become lost as day-to-day management chugs along. Rigorous thought and analysis must go into decisions about which roles and functions should be shared.

Effective Channel Integration. Other opportunities are driven more by operating as an omnichannel presence. Increasingly, customers are expecting a seamless integration across channels. Web orders are picked up in store or shipped from stores directly to consumers. Conversely, items that are out of stock in the local outlet can be shipped directly from the DC to the shopper. These capabilities require real-time visibility to inventory availability as well as to supply chain lead times. Associate incentives also need to be adjusted to make sure that all parties are being rewarded for successfully executing customer-centric behavior.

Omnichannel merchandising also creates challenges with pricing, particularly in a dynamic pricing environment. Retailers can greatly increase margins by adopting price differentiation strategies. At the same time, customers dislike discovering pricing difference across sales outlets. This challenge is exacerbated in a multi-brand environment, where part of the brand positioning may depend on maintaining certain perceived price tiers. A clear, brand-by-brand pricing strategy is necessary to avoid bad customer experiences.

Focus on Experience. In concert with the shift to the digital channels, innovations in offline retailing are continuing to develop (e.g. Amazon Go, a grocery store without cashiers, registers, and lines, as well as Best Buy Express™ kiosks that have been in airports for several years). Many retailers are refocusing on reinventing their brick-and-mortar stores, pulling the consumer away from their screens for the personal, physical experience that also feeds the socially-driven and instant-gratifier nature of today’s consumer. Further, many retailers are empowering, educating, and developing store associates to take these crucial roles far beyond simply processing transactions and managing merchandise—new store roles are becoming much more engaged in the overall customer experience, and successfully blending a brand’s offline and online channels. A new entrant into retail has the advantage of being able to design their brick-and-mortar presence to accommodate these new shopping concepts essentially “from scratch,” as Apple has been able to do quite successfully.

Leading multi-brand, multi-channel retailers are actively working to address these challenges. Traditional retailers must carefully differentiate their brands, yet be very mindful of areas where leveraging or combining support structures, customer-facing processes, and data makes sense as opposed to diluting value propositions. They also need to keep pushing the envelope in creating seamless and unique customer experiences across all channels. When initiatives that support these themes are strategically planned and effectively executed, retailers can develop competitive advantages that promise to drive their business for years to come.