The Evolving Role of the Store in e-Commerce
Why integrating the online and store experience is the key to retail success.
Bala Ganesh | UPS
When it comes to retail, silos are a silent killer.
In a siloed organization, those loyal to their own group or division may distrust the motives of others. There may be little or no communication between groups, and a tendency to cling to the status quo.
That can lead to missing new revenue opportunities, losing touch with customer preferences or falling behind competitors who act faster to meet customer needs.
As Harvard leadership guru Dr. John P. Kotter put it in a recent Forbes blog, “Silos can occur in global corporations or start-up ventures with 15 employees. And no matter the size, they are detrimental to an organization’s ability to succeed in a rapidly changing world.”
Retailers are not immune to this. At UPS, we often see brick-and-mortar store operations and merchandising management reluctant to embrace e-commerce.
Some may feel threatened by the idea of losing sales to a rival channel. Others may feel that e-commerce, with its emphasis on technology, takes away the personal touch that comes from having knowledgeable associates helping customers face-to-face.
Visionary retail leaders are finding ways to end such turf wars and get both store and e-commerce teams working together to meet changing customer needs.
Almost all major retailers now take an “omnichannel” approach to marketing, sharing customer data and using a variety of approaches to drum up business, ranging from targeted email campaigns to special offers for Facebook friends.
It’s no longer a question of “if” you do omnichannel retailing, but how well you do it to satisfy today’s demanding shoppers.
The 2015 UPS Pulse of the Online Shopper™ study brings the need for this cross-channel thinking into sharp focus — and illustrates the potential revenue gains from doing so.
In the study, comScore surveyed over 5100 avid online shoppers and found they cross channels for more than a third of purchases (36%) compared to 22% of purchases made while searching and buying in store. Only 42% of purchases take place entirely online. Bottom line: The store plays a role in nearly 60% of online shopper purchases.
Among those who use mobile devices weekly, 23% researched products prior to visiting a store, 22% researched products online during a store visit, and 22% opened email from a retailer and then made a purchase in a store.
The common thread: “in a store.” And every time an e-commerce shopper visits a store, whether to try something on for size, check the color, or pick up an online purchase, it’s an opportunity to cross sell or upsell.
Revenue gains from in-store pickups and returns
Our study found that over one third (38%) of online shoppers will choose ship to store or pick up in store to qualify for free shipping — up from 35% in 2014. That’s a trend likely to continue, since 41% of shoppers now using ship-to-store say they plan to do so more often.
Significantly, 45% of those who used the in-store pickup option have bought something else while in the store.
Some retailers increase that probability by mirroring the way an online store suggests other things you might like. At one luxury retailer, when you walk in to pick up a purchase, a live associate accesses the same recommendation engine that runs their website — and lays out “additional products you might like” next to the product being picked up. Merging the online and offline experience for customers substantially increased the upsell rate.
The revenue potential from in-store returns seems even greater. In the study, 61% of online shoppers say they prefer returning items to a nearby store — of those, 70% made a new purchase while in the store.
Retailers who nudge people into picking up and returning to a local store can gain significant additional revenue. Yet many retail websites routinely shuffle customers directly to the return-label creation process, without asking if they would rather go to a store.
What if a pop-up said: “You live two miles from one of our stores, would you like to see a map?” This need not involve a discount or special offer — simply reminding customers they can get an immediate refund may be enough incentive, if you do it the right way at the right time.
There’s a lot of untapped revenue potential from getting the store involved in the returns process — and making it even more convenient for today’s shoppers. Some 33% of time-pressed shoppers surveyed say they would find curbside pickups and returns an appealing option.
Walmart is pioneering the innovative use of their stores for online fulfillment, such as equipping 80 super centers to help fulfill online. And, they are currently testing a drive-thru model for grocery pickup in Bentonville, Arkansas, where shoppers who order online can drive up, scan their mobile phone and drive off with purchases.
More ways to leverage the in-store experience
Worries about “showrooming” may be unfounded. As mentioned earlier, the 2015 UPS study showed that shoppers using mobile devices in-store often cross channels — but only 19% purchased products on their mobile device while in a retail store.
Even then, people checking prices online while in-store may well be going to the retailers own website. In a keynote address at the 2015 IRCE conference in Chicago, Jason Goldberger, president of target.com, shared this insight:
“Target rolled out wi-fi three years ago in all stores despite the fear of showrooming, and found that the majority of visits through its wi-fi are to target.com. Target is now testing the concept of showrooming more directly by leveraging floor space for high-end displays that can be ordered online and delivered to the home.”
Patio furniture is one example. Customers scan product in-store but buy online via the wi-fi network. Since the scans are tracked via w-fi the store associate running the patio section gets credit for the sale.
The Target example shows that enabling mobile usage in the store plays into the online/offline merge. Embracing in-store technology shows high promise as well.
For example, 33% of mobile shoppers surveyed find electronic QR shelf labels appealing. Scanning one will take users to the retailer’s website, where shoppers can get more details, watch brief how-to videos, and read reviews posted by other buyers.
Another way to leverage stores and improve the customer experience is to use stores as virtual distribution centers. According to Goldberger, Target plans to convert 1,800 stores to mini fulfillment centers, and already ships 25% of their online volume from stores. It’s another way to get closer to the customer from a pickup and delivery perspective — reducing time-in-transit and shipping costs in the process.
Omnichannel is clearly here to stay. Even Millennials, who live a good bit of their lives online, still value stores for the experiential benefits. So those retailers that can best integrate the online and store experience are the most likely to thrive.
Bala Ganesh oversees marketing strategy for UPS’s retail and consumer goods segment.
