Tips for getting more out of omnichannel retailing

23rd Jan 2017

A new round of store-closings has been announced after this holiday season. J.C. Penney and Macy’s are closing more locations in the U.S. At first glance, the easy answer is that online shopping has just become too popular, and brick and mortar stores are dying a slow death.

But that answer is too simplistic. If it were true, then we would have to say that the recent moves of retailers like Amazon, ModCloth, Zappos and others to open brick and mortar stores is a stupid business decision. But it is not proving to be so. They are making money from their physical locations. They have found that combining the two venues has brought some great benefits that an online-only store cannot.

An Interesting Study

The Harvard Business Review recently reported the results of a study conducted with a major retailer in China – one that has both physical locations and an online store. The study involved giving customers discount coupons in various ways. Some shoppers who shopped only in physical locations were given coupons for online-only shopping; some customers who had only shopped online were given in-store only coupons; and some customers were given coupons to be used in either location.

The results? Sales increased for two groups, but decreased by 51% for the third group. That third group were the shoppers who had only shopped in physical locations before. They did not use those online-only coupons.

The conclusion reached by the research team was that trying to incentivize a move from physical shopping to online shopping is not very effective in increasing profits. The reasons are this:

  • Physical shopping tends to result in more purchases; customers are more likely to make impulse buys.
  • Physical shoppers like the physical contact with a product before they buy it – they see it, feel it, try it on (if clothing), etc.
  • Physical shoppers tend to less comparison shopping than online shoppers
  • Online shoppers are looking for specific items, add them to their cart, check out and are gone. No browsing around the aisles of stores.

The recommendation of the researchers is that retailers should not encourage their physical shoppers to move online. On the other hand, they should encourage their online shoppers to visit their physical locations. This is the best strategy to increase revenue. Amazon, ModCloth, and others have obviously figured this one out.

Amazon has been opening book stores in several locations since 2015, using those to also push their Kindle and other products which shoppers can experience physically. Other retailers – ModCloth, Warby Parker, Bonobos, and The Arrivals to name a few – have followed suit but with a different model.

Making the Most of Your Omni Channels

Here are ways in which retailers are becoming innovative with their moves to establish physical locations. And, if they already have physical locations, they are using innovative methods to get online customers into their stores.

Buy Online and Pick Up in the Store

Big box stores are using this more and more as a “convenience” to the customer who does not want to pay for shipping and wants a product faster. In reality, the goal is to get the customer into the store where they hope more shopping can occur. This seems reasonable, given that physical shoppers do tend to make impulse purchases.

Temporary and Pop-Up Locations

Amazon did this initially, by having temporary kiosks in malls and in college student centers, especially at specific times of the year. Others have followed suit. Google set up temporary store locations for this past Christmas season, to showcase and sell its Pixel Smartphone, VR headset, and Google Home personal assistant. Many retailers are opening up temporary small shops without carrying large inventories. Instead, customers can come in, see the merchandise, make purchasing decisions, and the item will be shipped to them at their homes. Retailers believe that this model serves to establish stronger connections between their brands and their customers. They can speak face-to-face, ask questions, get feedback, and learn more about their customer demographic as a whole. This can then drive their marketing efforts.

Check the Numbers

Retailers are also checking the numbers to ensure that having physical locations makes sense for them. If they have the right POS system in place, these numbers are easy to get. And, they can also coordinate inventory and distribution between online and brick-and-mortar sales.

Placing Products in Big Retail Stores

This has been a move of lots of online retailers in recent years, in an effort to give customers the tactile experience they want. But this model does little to establish the personal connections between customers and brand staff the can occur with the pop-up/temporary model. Still, if a budget does not allow the leasing of a small shop, this is the next best thing.

Encourage Shoppers to Browse Online

Many retailers are using their websites to push customers to browse there and then providing retail locators, so that they can proceed to a physical location to experience the products first-hand.

What’s Next?

It’s not over yet. Enter AR and VR. This will be the next disruption for retailers. Already retailers are establishing 3D product displays; Wayfair, a home goods retailer, now has its first VR offering, called Patio Playground, using the Oculus Rift. Other are developing VR experiences with clothing, beauty and skin care products, vacation spots, spas, and more. This is a bit down the line yet, but AR and VR will certainly transform the online shopping experience into one that mirrors the physical location more and more. The impact is yet to be known.

Getting the Positioning Right

Here are some important takeaways from the research on consumer behaviors.

  • Spending money trying to get physical shoppers to go online is a waste. Further, it can negatively impact a retailer’s bottom line.
  • There is an important place in retail for brick-and-mortar locations. But retailers are getting smart about it, and changing out the model, to include temporary and pop-up locations and the “buy online, pick up in the store” option.
  • There is much to be learned from the customer demographic when there is personal, face-to-face interaction, if only in a temporary location. This can give retailer important information for their future marketing efforts and product lines.

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