retailing across channels

we came across this article in the recent Harvard Business Review, and wanted to summarise some of its key findings which may be of use to retailers in Ireland.

an important part of being a successful retailer is bringing online customers into your store.

one of the biggest challenges for brick-and-mortar retailers is successfully competing with online retailers like Amazon.com. There are shops however who have experienced some degree of success with their websites. Despite this, the retail industry is well aware of the intense competition for online shoppers as retailers announce store closings.

for retailers that offer shopping via their website, the conventional “omnichannel” strategy is to engage their customers through multiple channels so that they will go to the physical locations as well as shop online. Perhaps the most successful method of encouraging both is through offering promotions and coupons.

the importance of distance to store

however, the distance between a shopper’s home and the nearest store might be the most important variable when customers are deciding how to shop. Recent research in the US asked 8,692 loyalty program members who shopped exclusively online and 24,804 loyalty program members who shopped only at the actual stores. Some of the 33,496 targeted customers were sent coupons which could only be used online; while others were sent coupons to be used only at the physical location. A third group were sent coupons that could be used online or at the store. The last group, the control group, did not receive coupons.

after sending the coupons, the researchers monitored the purchases for the next week and compared the effect the customer’s behaviour had on the chain’s profits. The loyalty program members were divided into two groups based on the proximity of the store to their home: those that lived within five kilometers and those that lived five kilometers and further. Though the department store knew that home-to-store distance would be a variable, they were surprised by the degree to which it was a factor.

for customers who lived within five kilometers, the coupons did not make a noticeable difference in the behaviour. The researchers concluded if the cost of getting to a store was low no added motivation was needed. However, if a customer previously shopped only online and also lived five kilometers or further from the store, the online coupon generated twice as much profit as the control group shoppers. From the customers that received the coupon valid in-store or online, profits increased by 800%. Finally, when shoppers living five kilometers or further and previously shopped only in the store were given coupons for use online, profits from them fell 51%. In other words, encouraging online customers to visit a store increased profits while encouraging customers who previously shopped at the store to shop online decreased profits.

online vs offline

retailers prefer customers to shop in both channels, believing that this would reflect a stronger relationship as well as more profits. However, encouraging in-store shoppers to begin shopping online ignores several key points with the first being the impact of impulse purchases, which primarily happens in-store, on profits. In-store shoppers are more likely to buy tactile, “experiential” goods like shoes and makeup.

based on the research, the best way to encourage online-only shoppers to come into the store is to provide those that live some distance way with coupons redeemable only in the store. Another method is to give an incentive, such as free shipping, to have online orders sent to the local store for pickup rather than the customer’s home. A third method to encourage shoppers to come into the store is to reduce the cost of travelling to a store. This can be accomplished by locating stores near public transit and housing developments or by ensuring ample parking.

Francis has extensive experience in working on complex digital marketing strategies for ecommerce, B2B, communities, and more encompassing all digital marketing channels.

Francis Mac Aonghus