How to Benefit from the Digital and Physical Retail Convergence

Thomas Kaczmarek | April 12, 2018

The Convergence of Digital and Physical RetailThe convergence between digital and physical retail is here. These two halves of the retail ecosystem at one time operated as distinct parts of the enterprise, but no longer. There’s no clearer sign of this unification than Amazon, the poster-child for e-commerce, entering the brick-and-mortar domain with its acquisition of Whole Foods. The online giant is even experimenting with a new retail concept called Amazon Go, where cashiers and checkout counters are replaced with cameras, sensors, and customer information.

The convergence of physical and digital environments is a positive for both retailer and customer. Consumers already engage with retailers in the offline and online spaces – trying on clothes they later buy online, or researching a car online they then walk into a dealership to buy. As these two spaces blend more closely together, brands also gain the ability to more concretely understand their customers’ likes, dislikes, and communication preferences. To maximize the benefits from this merging of these two distinct universes, retailers need to take a few key actions.

Include Digital and Physical Retail in Planning

Adopting what’s often known as a “bricks and clicks” strategy is transformative. Digital retailers that include a physical presence, whether that involves partnering with a traditional store or opening their own location, often experience higher sales. A study of one retailer, referenced in a recent Harvard Business Review article, found that omnichannel customers spent on average four percent more in-store and 10 percent more online over the course of 14 months versus customers who used only a single channel. Every additional channel used resulted in a higher amount of money spent; consumers who used four or more retail channels spent nine percent more on average versus single-channel consumers.

All through the e-commerce revolution, physical stores have continued to play a vital role in the customer experience. Whether it’s the physicality of touching a product or the immediacy of fulfillment, the physical presence has maintained its importance. These channels are not mutually exclusive. Forrester estimates that web-enabled online sales are 50 percent of total retail sales. That means $1.5 trillion of sales are either online or conducted with an assist from digital information.

Well-deployed digital and physical retail channels have a symbiotic instead of a parasitic relationship. While there are certainly digital merchants that cannibalize business from physical stores, the reality is that including both avenues in business planning can and does spark better business results than leaving them separate.

Focus on Providing a More Cohesive Brand Experience

To maximize the convergence between digital and physical channels, retailers need to emphasize providing a cohesive brand experience across channels. A unified brand experience has proven far more effective in completing transactions. Researchers at E-tailing Group found that 40 percent of consumers purchase more from retailers that provide a personalized shopping experience across channels.

Integrating digital and physical retail channels also offers better insights into customer behaviors. By combining information such as a customer’s clickstream with their in-store purchase patterns, retailers can better target offers in real time to spur customer behavior and strengthen loyalty. The Northridge Group found that 55 percent of adult shoppers already use two or more communications channels to connect with a customer brand. When you add in emerging IoT channels such as wearable devices, the data flow can provide tremendous insights to retailers ready to read and understand them.

Build Better Offers with Timely Information

Relevance is the new currency with consumers. To secure the buyer’s interest, trust, and confidence, the retailer must communicate to each buyer as “a segment of one” with timely information, in the right cadence and format. This allows for even more nuanced offers. Marketers need to understand where they can find the best times to interact with their customers as each is on their own unique buying journey. More channels means more on-ramps and off-ramps for this journey, creating a much more complex landscape.

Clean, accurate, and complete data enables retailers to orchestrate data-driven interactions that gain and retain new customers, exploit new revenue opportunities, and increase the average order value and customer lifetime value. It enables retailers to execute enhanced, highly personalized marketing campaigns to acquire new customers, customize offers for new products, and deliver highly personalized engagements that customers increasingly demand – all with faster turnarounds and lower costs.

Operate at the Speed of the Customer

All this means operating at the speed of the customer with a high level of contextual awareness. With this knowledge, the retailer can know where the customer exists in their own journey and provide the messages they need at that time to help move them through the buyer’s journey.

Ultimately the convergence between digital and physical retail is about creating a perfect blend of immediacy and convenience, giving all customers the information they want when they need it to help them along their own journey. Then, when the moment is right, delivering the product in the form and location that they need it most.

Retailers who deliver the right message at the right time, in the right format, are the ones who will survive in the long term. More than that, they are also the brands who will be well-positioned to take advantage of new technologies over time. This is especially true because customers’ lives increasingly blend digital and physical experiences anyway – brands who can account for that interaction stand to benefit.

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Thomas Kaczmarek
Thomas Kaczmarek

Thomas “Tom” Kaczmarek has more than three decades of marketing and customer engagement experience, including business development and database marketing. As a director of customer engagement for RedPoint Global, Tom focuses on helping the company’s retail clientele implement omnichannel marketing strategies to reach the connected customer. Connect with Tom on LinkedIn and Twitter.