The Omnichannel challenge

The Importance of On- and Offline Sales – How Companies are tackling the Omnichannel Challenge

In the heyday of the dot-com era, we all thought the intent was going to kill the physical store. And indeed, with tanking earnings and emptying malls it can sometimes feel like we were right. In 2015 there were over 200 million digital shoppers who spent an impressive $249 billion.

But, despite these figures, 85% of retail sales are still projected take place in physical stores. Still, it’s clear that the retail industry is reinventing itself. Slowly but surely, companies are devising retail models that work for people who are making increasing use of a growing array of Internet-connected tools to change how they search, shop, and buy.

A complete retail strategy is one that encompasses on- and offline experiences. Both channels are still extremely relevant and retailers cannot rely on two separate strategies.

The traditional brick-and-mortar store and the online retail world are converging into one customer shopping experience. As our world becomes more and more digital, customers are increasingly using more than one channel in their purchasing process. This has led to a phenomenon called omnichannel shopping.

Omnichannel is the name of the game

Trying to reap the unique benefits from both on- and offline channels, retailers have recognized the importance of developing an omnichannel retail strategy. Not only does omnichannel connect the physical retail stores and the online shop, but it also encompasses mobile apps, social media and more to offer a seamless experience for the customer.

A good omnichannel strategy should accompany the customer through the entire buying process from inspiration to research to purchase.

Each channel offers benefits the other does not. Online shopping offers instant accessibility, price transparency, and convenience to order whenever and wherever. On the other hand, physical stores offer instant gratification and the safety of being able to inspect the product in person.

Given the unique upsides of each channel, it’s no surprise that customers are interacting with multiple channels to make their purchasing decision – two new terms for how they are doing this are Showrooming and Webrooming.

The Showrooming and Webrooming Challenge

Showrooming is the when a customer looks at a product in store and then buys it online – usually for a lower price. For example, you might go to BestBuy to look at a TV, but then decide to buy it off Amazon for a cheaper price.

The Showrooming trend emerged back when online shopping first started, and, at the time, it greatly concerned brick-and-mortar retailers. However, according to the Nielsen Global Connectivity Study in 2016, these fears may be “somewhat inflated”. Customers are not just showrooming, they are also doing the opposite: Webrooming.

Webrooming is the when a customer researches a product online, only to actually purchase it in a store. For example, you might research a product on Amazon where there are lots of reviews, but then decide to purchase it in person to make sure you really do like it. In fact, recent studies have found Webrooming to be just as prevalent or even more common than Showrooming.

Show- and Webrooming have become two core behaviors of the modern retail customer. Let’s take a look at how retailers are dealing with these behaviors.

Getting the Webroomer to your store

In the case of Webrooming, there are a few thing retailers can do to drive customers to their locations versus the competitors’. The most important of these is product availability transparency.

Make your inventory accessible

As customers, we all know the predicament. We have our eye on a product and we want to check it out in person before purchasing, but no one wants to go all the way to the store just to find out it’s out of stock.

To curb this issue, some retailers have been listing inventory availability on their websites for a few years now. But, this means the customer must already be on the retailer’s website.

To convert a Webrooming customer that has entered a generic product search query on Google, retailers need a different strategy. This is where Google Local Inventory Ads (LIA) come into play.

For the most part, LIAs display products as with regular Google Shopping queries. However, if the shopper then clicks on the ad, they arrive on a “Local Storefront”, a Google-hosted page for the retailer. In this view, they can see the product availability at nearby stores.

Once that the customer knows the product is available nearby, they are incentivized to head to the store.

If you’re interested in setting up Google Local Inventory Ad Campaigns, we’ve got just the piece for you.

Retailers using Google Local Inventory Ads

The department store Macy’s has stated that they have had great success with LIAs in their omnichannel strategy. They realized that if a customer wants a specific product, they will want exactly that and nothing else – size, color, cut, you name it.

LIAs allow customers to know with high certainty if they will be able to purchase the exact item if they make the trip to a store. And as Macy’s puts it, “they’re indifferent if the customer converts online or in the store”, they merely want to offer a seamless experience.

As such, they have combined their siloed budgets into one combined marketing budget to make sure the channel efforts are complementing each other, offering the best customer experience and of course, driving sales.

Getting the Showroomer to Purchase In-Store

Like Macy’s you likely don’t care whether a customer purchases in-store or online. A sale is a sale. But, in the case of Showrooming – where price largely motivates the purchase – retailers need to avoid customers purchasing their products online from another store.

As a retailer, if you’re able to match price, you’ll likely solve most of the problem. However, if can’t, you should focus on making in-store visits as exciting as possible – think the Apple store.  Attracting customers in-store will hopefully motivate impulse buys of less price sensitive products.

As this Business Insider article puts it, retailers need to figure out what the gray area” products are. There are impulse products, such a candy bars and on the other extreme, Showrooming products, such as TVs.  Somewhere in between, there are is the gray area with products in the mid-price range that you can get customers to easily convert in-store.

A great example of gray area products is smaller electronics or tech accessories as these aren’t high ticket items that a customer would excessively research. After the gray area items have been identified, it’s a matter of adjusting the in-store layout and sales strategy.

Pure Online Players living in an Omnichannel World

We’re living in an omnichannel world, one where seamless customer experience, convenience, and information accessibility have decided the game for themselves –  for now.

So, how do retailers with a purely online presence fit in?

Fortunately for purely online retailers, Showrooming often works in their favor. For example, Best Buy and other electronics stores often serve as a Showroom for Amazon.

But what about those customers that tend to Webroom on the pure players’ websites, only to then purchase the product in-store? Mostly, they want to 1. get a better idea of the product and 2. they want the instant gratification of owning the product after purchase. Let’s take a look at how online players are addressing these needs.

Detailed Product Information and Illustrations

It’s (so far) impossible for online retailers to offer their customers the opportunity to see and touch the products in person. This can be a major challenge for online retailers especially in the fashion industry, where texture and fit are extremely important.

Many retailers have been experimenting with new ways to help customers get a true sense of the product before they buy.

What began in the fashion industry, with product reviews, pictures from every angle and even video footage, has extended to “size” estimates (if a product runs large or small), as well as user pictures.

For example, Rent the Runway, a designer dress rental website, encourages customers to upload pictures of themselves in the dress to give potential customers style inspiration and an idea of the fit on different body types.

On most fashion retailers’ websites, users can find just about anything they want to know about the product. But how are retailers solving the instant gratification issue?

Getting the Order In

There are two big barriers which prevent customers from ordering online: the cost of shipping and the length of time it will take to receive the product. Which is why many retailers like Zalando have started offering free shipping.

Free-Deliveries: Zalando pioneered the free shipping model in Germany, something unheard of before that time. Since the company founding in 2008, Zalando has now grown to be the largest Fashion pure-player in Europe. Granted, this is also attributable to the many other tactics Zalando has taken on. Nonetheless, bold strategies like free shipping, helped Zalando win over customers and ultimately the market.

Same-Day Deliveries: Retailers are increasingly trying to tackle the same-day delivery challenge. There is good reason to, as almost two-thirds of millennials have stated that shipping options play a major role in their online shopping. As millennials will soon make up 75% of the workforce with all the spending power that entails, this demographic will need to be catered to.

Amazon is a pioneer in same-day delivery. They have recently expanded their same-day delivery option to almost 30 metropolitan areas in the United States and have begun experimenting with drone deliveries in parts of the UK.

For those companies who do not yet have the logistical systems in place, third-party players, such as Stuart, are also an option. These companies strive to be urban on-demand delivery solutions for the last mile.

Recommendations for Retailers

Customers expect convenience, accessibility, instant gratification, and an overall seamless experience. Retailers must understand these desires and leverage an omnichannel strategy to satisfy their customers throughout each step of the process. There is immense value in a unified retail strategy – it allows for consistent and frequent communication and more points of conversion.

Each retailer faces unique challenges – use your data to understand your customer and anticipate needs and developments in the market.

If you’re prone to Showroomers

  • If you can, match prices and offer free delivery
  • Identify your “gray area” products and focus your sales strategy on these
  • Work with loyalty programs to incentivize shoppers

If you’re prone to Webroomers

  • Offer customers insight into inventory through your website as well as Google LIAs
  • Consider working with a joint budget for off- and online marketing to ensure optimal channel focus and maximum returns

For all Omnichannel Players

  • Give customers the option to move freely between on- and offline by allowing click-and-collect (online ordering and in-store pick-up) and flexible return policies

If you’re a Pure Online Retailer

  • Display a comprehensive overview of the product and let users be a part of the information collection through reviews and pictures
  • Incentivize Webroomers to purchase online by offering free or same-day delivery

ABOUT THE AUTHOR


Chesran Glidden

Chesran is a Business Development intern at crealytics and is currently pursuing her Masters in Management at WHU in Germany.