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Future of Retailing: Omnichannel Distribution

Posted by Capital Retail on May 30, 2014
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Future of Retailing – There is plenty of talk about Amazon crushing traditional brick and mortar stores. According to ICSC, it’s not quite the battle you think. Brick and mortar is still the dominant format for shopping with 78% of consumers preferring to shop In-Store. Consumers purchase at online retail websites an average of 2.2 times per month but 7.5 times per month at brick and mortar stores. Additionally, consumers spend significantly more per month in a physical store than online,$1,710 vs. $240, respectively. In fact, some retailers who started online have now opened physical stores such as sunglasses retailer Warby Parker. On the surface it appears online sales is going to win in the races as e-commerce growth outpaced in-store growth, nearly 5 to 1 according to recent ICSC reports. However, if you look deeper, the growth rates are easier to achieve when calculated off a small base-17% growth for e-commerce only accounts for $38 billion, while in-store growth of 3.5% equals $144 billion. Surveyed consumers say they want both online and in-store options from the same retailer. This “omnichannel” retailing combines the best of online and in-store experiences together. Retailers need to be acutely aware of this permanent trend as omni-channel produces higher net sales. Retailers that provide an in-store return option from online purchases can expect a 95% net sale vs 77% net sale for online returns only. However, the best omni channel retailers are going further by adding social media and promotions both online and in-store. Customers now use their mobile phones and computers to compare promotions, prices and products before heading into a physical store to buy clothes, electronics and increasingly, groceries. Those retailers that don’t include the internet as part of their brick and mortar strategy will face declining same store sales. The most profitable retailers will be ones  that can execute online and in-store experiences simulataneoausly and harmonouesly. Consumers will flee physical stores if an internet strategy is nor part of the retailers overall strategy to gain and keep customers. Bricks and mortar retailers are working hard to compete with online retail as noted in a recent WSJ artice “Can Wal-Mart Clerks Ship As Fast As Amazon Robots”. Bricks and Mortar have the potential to beat the pure online players but only if they fully intergrate the internet into their inventory, sales, returns, and customer communications.  
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