Why Omni-Channel Retail Is So Effective
Contrast this with the last time I went to IKEA. A few months ago, I was looking for a rug for my room. Before leaving my apartment, I clicked through IKEA’s website to peruse their rug selection. This was partly to make sure my visit wouldn’t break the bank and partly to avoid a wasted trip, since the closest IKEA is about an hour away on the subway. Everything looked okay online, so I made the journey. Three hours later, I walked out of the store with the following: two rugs, plastic runners to keep them from sliding around on the floor, a set of tea candles and a glass holder, a clock for my desk, a new set of sheets, and a small cactus plant. Eight items in one in-store visit, versus five orders in six months online.
Conventional wisdom would have it that the convenience of online shopping supersedes the usefulness of brick-and-mortar establishments. But if my IKEA adventure (misadventure?) is any example, there’s more to the equation than simply: ecommerce > physical retail.
These days, when customers have the ability to use a retailer’s dressing room, then look at their smartphone to see if Amazon has a similar, cheaper item, it’s vital for retailers to find a way to stay afloat. More and more companies are adopting omni-channel retail as their chosen solution, and there is already considerable evidence that these systems are, and will continue to be, effective.
Wide-Ranging Applications
Content and social marketer Aaron Agius provides a handful of omni-channel success stories in an article for Hubspot. The companies in question could hardly be more different, and their particular omni-channel systems are accordingly diverse.
For instance, some systems rely on in-store touchpoints to share product information with customers. Agius describes the setup used by UK fashion retailer Oasis: “If you walk into one of their stores, you’ll find sales associates armed with iPads that are available to give you on-the-spot, accurate, and up-to-date product information. The iPad also acts as a cash register, making it easy for associates to ring you up from anywhere in the store. … If it appears something is out of stock, the staff can instantly place an online order for you to have the item shipped directly to your home.” Outdoor sporting goods retailer REI, Agius notes, has integrated similar in-store touchpoints.
Other companies have mobile apps that give customers the option to conduct business remotely and fulfill in-person. One such example is Chipotle, whose mobile app allows customers to place an order online and pick it up in-store, as well as save frequent orders to a mobile account. Another is Disney: “Even [Disney’s] trip-planning website works well on mobile—that alone is something you don’t see happening very often. Once you’ve booked a trip, you can use the My Disney Experience tool to plan your entire trip, from where you’ll dine to securing your Fast Pass. In the park, you can use your mobile app to locate the attractions you want to see, as well as view the estimated wait time for each of them.”
These four businesses—Oasis, REI, Chipotle, and Disney, as well as others—have wildly disparate products and customer bases. And yet, according to Agius, all have developed omni-channel solutions and seen them pay off.
The Best of All Worlds
So, we know omni-channel is widely applicable. Not just for a narrow sliver of industry, but for a variety of businesses that can tailor an omni-channel system to their customer base. Retailers who see themselves trailing in Amazon’s wake understand that it behooves them to develop an omni-channel solution.
More difficult to understand is why omni-channel works in the first place. What makes it effective? A few recent studies on modern consumers’ shopping behavior help to provide some answers:
The first takes us back to my IKEA trip. That particular outing is an example of what I like to call “black hole shopping.” The Harvard Business Review calls it evidence in favor of omni-channel. A January 2017 HBR article describes a study which examined the shopping habits of 46,000 customers at a major US retailer. According to the article, most customers—73%—use both online and in-store channels to shop. For these multichannel shoppers, the study found that those who researched items online before going to the store tended to buy more items: “Surprisingly, conducting prior online research on the retailer’s own site or sites of other retailers led to 13% greater in-store spending among omnichannel shoppers.” In other words, enticing “multichannel” shoppers into brick-and-mortar stores can lead to higher sales. Customers find what they were originally looking for, like rugs, but also make impulse purchases, like tea candles or small cacti. The article describes this phenomenon—researching online before buying in-store—as “webrooming.”
A more recent Harvard Business Review article describes another study conducted in China, with similar conclusions regarding in-store shopping. This study, run by marketing professor Xueming Luo of Temple University, examined the behavior of 56,000 consumers in the loyalty program of a Chinese department store: “On the basis of purchase records, [the researchers] identified 8,692 who shopped exclusively online and 24,804 who shopped only in physical stores. (They dropped the remainder, who already shopped in both channels, from the study.) Some of the 33,496 targeted customers were sent coupons redeemable only online; some were sent coupons good only in physical stores; and some were sent coupons good in either channel.” Online-only customers who lived more than five kilometers away from one of the company’s brick-and-mortar stores responded positively to online-only and flexible coupons: “the online coupon generated twice as much profit as among the control group, and the flexible coupon increased profits by 800%.” Giving in-store-only shoppers online coupons, however, decreased profits from that group 51%. Based on these findings, Professor Luo advises in the article, it’s better to spend time and energy to get online-only shoppers in-store than vice versa: the in-store-only shoppers are less discerning in comparing prices and already tend to buy more.
Bigcommerce.com launched its own study of modern consumer behavior, reporting its findings in a piece by Editor-in-Chief Tracey Wallace. In the article, Wallace describes a kind of behavior one might call reverse-webrooming: “A 2015 InReality study found that 75% of shoppers have browsed for items online while in a physical store. Our survey took things even further, confirming that 25% of Americans have actually made an online purchase while standing in a brick-and-mortar store.” In other words, while customers use online channels to conduct research for in-store purchases, they also conduct in-store research to make online purchases. A thorough omni-channel system capitalizes on both behaviors.
The Bigcommerce study also explored “conversation killers” and “pain points” for online customers. Wallace writes that high shipping costs are a significant deterrent for many shoppers: “66% of Americans have decided not to buy an item because of shipping costs.” Following that, “the natural limitations of buying online are the leading cause of abandoned carts. Nearly half of respondents (49%) cited not being able to touch, feel, or try a product as one of their least favorite aspects of online shopping. Another 34% said difficult-to-return items and long delivery estimates were also a pain.” The study reported that online shoppers seek “immersive features” like reviews, pictures, or comparisons to lessen the anxiety of being unable to experience a product in-person.
Simply put, customers want both flexibility and certainty in making a purchase. They want to be able to browse in-store then buy online, or browse online before making a trip to the store. To retain the convenience of online shopping while reducing the drawbacks of buying from a virtual platform. To use their personal technology in a physical retail establishment. In other words, they want the best of all worlds. Omni-channel systems are designed to deliver that. It’s unlikely they’ll be disappearing anytime soon.
An Omnichannel strategy takes the view that all customers use all channels to some degree or another and often use a number of channels to start and finish a single action (like a purchase).
Instinctively, to me, omnichannel sounds like the better of the two strategies and a recently published report by Harvard Business Review, “A Study o46,000 Shoppers Shows That Omnichannel Retailing Works” – January 03, 2017, would appear to back this position up.