As featured in Forbes on June 30th, 2017.
As modern shoppers gain access to new technologies and shift what they want to spend money on, retailers and online companies both have had to change their strategies and adapt. The result, despite headlines of store closures, is a merger of digital and offline shopping that delivers a better experience and, therefore, is good news for consumers.
As online goes brick-and-mortar, traditional retailers shut down
Brick-and-mortar is still the commerce king, accounting for more than 90% of total retail sales. But it’s e-commerce that is winning the growth prize, expanding 8-12% in Q1 2017 vs. 2.8% for brick and mortar. The big driver behind that growth is mobile. People typically spend five hours a day on their smartphones, with 90% of users whipping out the devices in-store while shopping. Furthermore, mobile devices have enabled companies like Amazon, Instacart, Airbnb, Starbucks, and Uber to succeed in the cloud.
As more and more companies leverage the usage trends to their advantage, internet direct-to-consumer companies are opening physical stores to expand and become more accessible to shoppers. Examples of companies trying the approach include Amazon, Blue Nile, JustFab, Bonobos, Athleta, Warby Parker, ModCloth and Casper. These businesses are able to take what they’ve learned from being pure-play online and transfer it to their physical locations, giving customers the human contact they often still want—as many as 70% of shoppers indicate that they’re looking for interaction in physical retail.
The movement of online stores into physical locations hasn’t boded well for many traditional retailers. Household names like Macy’s, Sears, Kmart and J.C. Penney have suffered and closed stores, primarily because their business model relied on physical expansion. Investments in online came too late, and they weren’t able to take advantage of the cost savings and customer loyalty providing an online option can bring. Employee morale and the customer experience both subsequently suffered, with margins plunging as the companies excessively cut prices to try to compete.
Mobile dominates, and new apps are key
As shoppers take advantage of the ease and convenience of shopping and researching by mobile, both traditional and online companies are rethinking the apps they’re creating. Successful programs are bridging the gap between offline and online choices. By bundling loyalty and options like Order & Pay, for example, Starbucks’ app commands approximately 19 million monthly active users. The app has been so successful that their mobile app sales account for nearly 30% of total sales at rush hour, with order ahead actually increasing wait times for regular customers. And overall, retailer apps are downloaded tens of millions of times each week, with about four out of 10 consumers(43%) interacting with companies through those programs on a weekly basis.
But it’s not enough to just throw up an app and hope for the best. Omnyway, a leading provider of contextual digital commerce platforms, asserts that mobile programs have to have the right ingredients to become a business’ secret sauce. If customers don’t get an added value from the app, then the use of that app—and, subsequently, sales—likely won’t hit company targets. It’s thus imperative to give customers a clear reason to use the app and not merely extend the e-commerce website, whether that means providing loyalty points, convenience or other abilities like storing e-coupons.
Redefining ‘on demand’
Personalization continues to be a strong incentive for consumers to buy, with 79% of millennial shoppers asserting that customized offers can up their willingness to make a purchase. But companies are also using new apps to provide other services customers are eating up. A good example is Instant Buy. With this service, consumers can scan items in ads to buy them, turning any surface into a point of commerce. Customers can instantaneously purchase, and retailers gain advertising revenue/impact. In this space, Omnyway has launched ZAPBuy, which keeps the buying experience contained within the context in which buyers see advertisements, works in any advertising medium (e.g., social media, email, billboards, catalogs) and reduces friction within the purchase process.
Self-checkout also is now an increasingly common option, with all eyes especially on Amazon and Whole Foods. Within this channel, customers now are enjoying four major options, all of which are designed to eliminate the need to wait in line and make payment easier.
- Self-checkout—Customers scan and bag their own goods, paying at the register.
- Portable scanner—Shoppers scan goods as they go through the store and pay as they leave.
- Mobile self–checkout—Shoppers use merchant mobile apps to scan what they want to buy and pay with their phone or credit card at a dedicated aisle.
- Order ahead/Buy Online Pick Up in Store (BOPIS)—Customers order online and pick up their items at a company’s physical location.
Consumers are at the helm for the future
The way that retailers and online companies are now operating is vastly different than what consumers experienced even a decade ago. Success in the future will depend increasingly on the creation and delivery of experiences that accommodate customers’ desire to work seamlessly between physical locations and online. Companies already are making excellent strides in this regard, but shoppers will continue to shape the direction over time, but adaptability is no longer a ‘nice to have’, it’s a necessity to survive.
Tom is passionate about the creation + delivery of transformative digital experiences at scale. He is currently Senior Director, Product Innovation & Business Development at the Hawkins Group.