The business model of traditional brick-and-mortar retailers is optimized for an earlier age, when consumers were limited to a handful of options. That’s not tenable any longer – the pace of commerce has dramatically increased, and there is often a small window when brands can make the sale regardless of touchpoint.
The marketshare of native online retailers has also increased in the past few years; retail sales through digital channels have grown by 23 percent, and 26 percent of that growth is attributed to Amazon. With those kinds of results, it’s clear that the existential threat to brick-and-mortar stores shows no sign of stopping – or even slowing down. The only way forward is with an omnichannel retailing strategy that blends in-store and e-commerce experiences into a seamless buying journey.
This integrated customer journey, which allows brands to track consumers as they switch between online and offline touchpoints, will also empower companies to provide a common series of contextually relevant interactions at the speed of the customer. That’s the promise of omnichannel: relevant messages, delivered in real time, reaching the consumer at the exact moment of need.
The Value of Omnichannel Retailing
For all the growth in e-commerce sales over the past 20 years, one main sticking point remains: the inability to try something before purchase. Even as native online retailers increasingly offer same-day shipping, there is still a time delay between when the item is purchased and when the customer receives it. This is a particular issue with apparel sales, and is likely one of the reasons brands such as Indochino and Modcloth have opened small brick-and-mortar storefronts in recent years.
Brick-and-mortar stores also often allow for consumers to buy online and pick up in store, which eliminates the time delay of native e-commerce transactions. Omnichannel also tends to be more profitable than focusing on a single touchpoint. Recent research from Deloitte showed that consumers who interact with brands through multiple channels spend 82 percent more per transaction than customers who only shop in store. Physical stores still have a role to play in a world of rising digital commerce.
There is no better example of this than Amazon’s recently announced $13.7 billion acquisition of Whole Foods. Amazon has already entered the grocery business with its AmazonFresh line, which you would expect they’d focus on instead. But the acquisition of Whole Foods is a strong sign that Amazon still sees value in the in-store experience, and rightly so. Brick-and-mortar stores still dominate retail spend, with recent U.S. Census data showing that 92 percent of all retail sales were in physical stores. E-commerce sales are growing though, which means brands must include digital and physical touchpoints in their engagement strategy.
A well-deployed omnichannel retailing strategy accomplishes this unification between the online and offline worlds. Through unifying digital and physical brand experiences, companies can leverage multiple touchpoints – a mobile website, in-store beacons, geofences, the online customer portal, etc. – to craft highly relevant messaging informed by an extensive customer interaction history. When brands deliver relevant messaging, the results can be staggering: A high-impact recommendation conveying a relevant message is up to 50 times more likely to trigger a purchase than a low-impact recommendation, according to McKinsey.
One additional key component of an effective omnichannel strategy is real-time customer engagement, which enables retailers to respond to customer actions quickly and with the appropriate context. Real-time responsiveness can improve consistency in cross-channel messaging, which consumers see as a persistent sticking point for many brands. Forrester Research recently found that 70 percent of consumers have a negative view of inconsistent cross-channel messaging; brands that avoid improving their cross-channel capabilities risk reputational damage that can lead to customer attrition.
Omnichannel Retailers Outperform All Others
Retailers that adopt an omnichannel strategy reap substantial benefits from blending online and offline experiences into a coherent set of interactions. Their customer retention scores are much stronger for one; Aberdeen Group recently found that companies with strong omnichannel customer engagement have an 89 percent customer retention rating, versus 33 percent customer retention among companies with weak omnichannel engagement.
Higher customer retention isn’t the only benefit. The E-Tailing Group found that 40 percent of consumers purchase more from retailers that provide a personalized shopping experience across channels – a key component of an omnichannel strategy – and IDC research showed that omnichannel shoppers have a 30 percent higher lifetime value than those who shop using only one channel.
An omnichannel retailing strategy that seamlessly integrates the digital and physical means the retailer can benefit from increasing e-commerce sales, while also maximizing the value of their physical footprint. The value to the retailer is enhanced further when the strategy includes real-time speeds; customers then receive relevant offers in the same session or at the moment of need, increasing the possibility of making a sale.
Omnichannel Is the Future of Retail
The days of e-commerce and brick-and-mortar stores as separate entities are gone. Retailers need to connect the dots between the digital and physical worlds of commerce to craft a seamless and relevant experience across channels that is delivered at the speed of the customer. Realistically, an omnichannel retailing strategy where the physical and digital are co-equal in importance is the only way to consistently understand where, when, and how customers want to engage and interact during the buying journey.
Customers want brands to understand them regardless of touchpoint, and want to receive messages that account for their history with the brand. Retailers can accomplish this in an increasingly multichannel world only through integrating the digital and physical into a single buying journey. Only then can retailers be sure they will avoid the fate of Woolworth’s and Borders Books and Music – living on only in business school textbooks.