By Sarah Hughes, who is the co-founder and director at Datitude
While ecommerce was once regarded defensively for taking business away from the store, many retailers have come full circle in their thinking. They now see what role the store plays in their total offer as consumers increasingly browse and buy across multiple channels in a single transaction. Stores provide greater convenience and flexibility in an omnichannel world which is why their role is being elevated and more attractive.
Some of the dynamics seem obvious when spelled out; new customers may well discover a retailer online and then want to shop in-store; the reverse of this is also true given physical stores increase brand awareness – 71% of customers are more likely to buy online from brands that have physical stores (source: Uberall); click and collect is now commonplace – attracted by free / lower-cost delivery and/or convenience, it enhances the overall experience, drives footfall, increases store utilisation and incremental sales.
It is no longer a question of one channel hurting another, rather how they co-operate for the greater sum game to meet the needs of consumers that are shopping effortlessly across them.
This was predicted, not least by Harvard Business Review 10 years ago. Whilst some of the more advanced elements have yet to come true, proving most retailers still have some way to go to provide a seamless, cross-channel experience, the general idea is on and offline channels are co-dependent. For instance, clothing retailer, Joules, found that opening a store actually increased its online sales from customers in the store’s catchment area. The store was still the best option for customers wanting to look, touch and feel, explore whole outfits, try on, engage with store teams and immerse themselves in the whole experience; few of which can be offered, or replicated, online.
Next plc is another great example of a retailer who recognises stores are an important part of the online business. They know their online customers collect nearly 50% of their orders from and return over 80% to stores. As such, investment is being made in stores as they are being utilised to ensure customer collections are quick, accurate and efficient, increase the speed and quality of processing online returns to maximise the availability for resale and make returns customer-ready and fit for resale before they leave the store.
Retailers contemplating closing stores need to add more depth to their decision-making based on data that captures how opening stores boosts online sales and customer retention, and how closing them might have the opposite effect. Once, the decision was easier to make because it was so much cheaper to sell online than through a store and many people still think it is. Not only is it not true, but the cost of running a store is rising a lot more slowly than online.
Online, the costs of customer acquisition, conversion, recovery, re-marketing, and retention are all rising – marketing channels charge more in a competitive market and retailers need more and more optimisation tools to keep pace with an ever more demanding customer.
A store under threat of closure can be repurposed for its own benefit, as well as for online sales. Consider mini DCs, click and collect, alternative fulfilment hubs, and curb-side pick-up as just some of the options for store utilisation. Or it may occupy a smaller footprint, acting as a hub for the proportion of customers that will never buy until they have seen and touched the goods, but who are perfectly happy to order online once they have. Made.com, for example, has a handful of stores in the UK for this very reason.
Being able to make the best decision about the right channel mix relies on having access to the best data. Currently, many retailers are only able to access partial views of their performance, not the whole picture. Analysed alone, store performance data may qualify it for immediate closure, particularly on traditional measures like sales per square foot. However, retailers need to look at all the variables to understand the value of the store as a whole.
For example, store rent and rates contrasted with the ongoing threat of levelling up the retail playing field (online sales tax and rateable values of warehouses); click and collect and returns to store, plus the opportunity for incremental sales whilst passing through, compared to the cost of home delivery and postal returns; rate of returns from in-store versus online sales; the value of the merchandise on display in a real store, as opposed to the relatively soulless ‘catalogue’ experience of a marketplace.
The greatest value measure of all is the customer. By looking at channel attribution and spend per visit per channel, what might be revealed is the store is actually the experience hub for the retailer’s most valuable customers, even though they shop primarily online.
Equally, by looking at cross-discipline and cross-departmental data, the growth that e-commerce is seeking may well be found by changing the store offer to enhance the overall brand experience including click and collect, product demos, tutorials, personal shopping and expert advice.
In this scenario, the data that may currently be regarded as precious, and even the private property of one department, is actually a commonwealth for the benefit of the sum as well as the parts.