Closed sign store closure

How retailers can assess and optimise their channel strategies

5th Apr 2018

A growing number of retailers are closing stores to cut costs. But is this the wrong strategy?

While many digital retailers are investing in new concept stores in order to revolutionise what customer experience is in an omnichannel environment, physical retailers are struggling to find a balance.

Marks & Spencer, Homebase and Sears; all major retailers who are facing the harsh winds of store closures.

Fashion retailers in particular appear to be particularly vulnerable, with almost one in five exhibiting early warning signs of becoming insolvent.

In a challenging economic environment, many retailers neither have the appetite or budget to invest in stores and the experience that these can offer. Instead, they’re looking to shrink their store footprint in a bid to quickly cut costs and balance the books.

So how should retailers struggling to balance their digital-physical estate react?

Rather than narrowing channels and pursuing a siloed strategy of capital asset reduction to close stores, bricks and clicks retailers should assess and optimise their channel strategy to understand how the store fits into their business model. This will ensure efficiency and maximise the return on investment from a correctly balanced online and offline estate.

Doing so will ensure a channel strategy can be developed that is fit for purpose in the current economic and digital age, whilst also providing customers with a compelling cross-channel experience.

A best practice approach to channel strategy optimisation focuses on three categories: rationalisation, differentiation and innovation.

1. Rationalisation

Macy’s is a prime example of rationalising the number of stores to cut costs, but also to provide a better, more consistent experience by focusing on a smaller footprint from which to roll out a connected customer experience across their most profitable stores.

The store should therefore be used strategically, balancing customer convenience with select locations and flagships that will have the most impact and provide the best experience.

2. Differentiation

Differentiation allows rationalised retailers to stand out in a saturated market. Setting up interactive pop-up stores supported by social media campaigns can create a buzz and provide customers with an original experience – whilst keeping overheads down.

Tesla has shown how to turn car dealerships on its head, differentiating itself by bringing showrooms into shopping centres and providing customers with the chance to get hands-on with their cars.

Retailers can also use differentiation to establish and grow a physical presence; Tesla has shown how to turn car dealerships on its head. Differentiating itself by bringing showrooms into shopping centres and providing customers with the chance to get hands-on with their cars, whilst deploying digital displays to allows customers to design their dream car in an interactive and inspirational manner.

3. Innovation

Innovation uncovers new channels and technologies to connect to customers, whilst also augmenting the store experience. Retailers can seek to leverage AI and chatbot technologies to enable customers to engage with brands using conversational UI.

Asking a chatbot which aisle the milk can be found in a sprawling supermarket, where the nearest store is that stocks your size of shoe, where to find your favourite store in a busy shopping centre; all enable the customer to engage in a 1 on 1 experience with a brand and help maintain and drive customer engagement.

Developing technologies such as Apple TV allow retailers to connect with customers on the comfort of their own sofa and provide them with an innovative and immersive shopping experience. Omnichannel baskets enable retailers to deploy the same technology in-store, so customers can view an entire product range (particularly useful as store inventories shrink) in a visually engaging way, saving their favourites in their omni-basket to buy at leisure.

The innovation of new channels doesn’t spell the end for stores, but helps further enhance the omni-channel experience by providing new means to feed into the porous interactions across channels.

Showing that channel strategy optimisation in the digital age should not be the blind pursuit of capital asset reduction, but should focus on finding the best balance between the physical and digital estate, whilst also innovating to stay competitive, offer customers new experiences and drive them into store.


The benefits of a balanced channel strategy optimisation will be the increased recruitment of customers across channels. This ‘omnichannel recruitment’ will be central for bricks and clicks retailers in the digital age.

Store conversion rates can be up to 14x higher in-store than online, highlighting that if retailers are able to develop a channel strategy that drives customers into key stores and retail locations, they can drive sales and growth.

Live and Let Die

Looking at channel strategy in the digital age, retailers need to adopt a pragmatic policy of live and let die. Stores should neither be made extinct or a protected species. But unprofitable and languishing stores should be culled through rationalisation so that new technologies, channels and approaches to retailing can emerge. Providing customers with a compelling and connected omni-channel experience that engages, enables and excites.

The digital age therefore does not herald the end of the store, but by reducing some stores, struggling retailers will be given a new lease of life, and allow those stores which survive, to thrive.


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