It’s no secret that traditional retailers are in trouble. Seven of the biggest brands in the industry, from Macy’s to Target, have lost between 15 percent and 95 percent of their market value since 2006, while Amazon’s market value has skyrocketed 1,910 percent in the same timeframe. Not a single retailer is immune from the titanic shift in shopper preferences, and the cracks are showing.
Macy’s announced plans on January 4 to close 68 brick-and-mortar stores nationwide in 2017, followed quickly by Sears revealing plans to shutter 150 Kmart and Sears stores. The recent spate of store closings doesn’t just impact major retailers; women’s apparel chain The Limited announced just after the new year that it would close all 250 retail locations and shift to an online-only model. News of store closings from Macy’s, Sears, and The Limited are only the latest casualties in the retail wars.
Traditional retailers have a revenue problem in their brick-and-mortar stores, which is compounded by the 23 percent increase in retail sales through digital channels. The largest share of the growth in digital retail sales go to native online retailers, with Amazon itself capturing 26 percent of all online retail sales. As Amazon expands into more markets, like grocery and fashion, the threat facing traditional retailers will only grow.
Enter Omnichannel Retailing, the Savior of Brick-and-Mortar
A recent article in Harvard Business Review presented the summarized results of a research study that involved 46,000 customers of a single retailer leveraging an omnichannel strategy. The researchers who ran the study segmented the customers based on whether they were online-only (7 percent), in-store only (20 percent), or used multiple channels (73 percent). The largest segment of customers, who used multiple channels, were termed “omnichannel customers.”
The findings were striking: omnichannel customers spent an average of 4 percent more in store and 10 percent more online in the 14-month study period versus the customers who purchased through a single channel. And every additional channel used resulted in a higher amount of money spent; customers who used four or more channels spent 9 percent more on average versus people who used just one channel.
This is huge news for struggling retailers. Driving an omnichannel experience, where online research is paired with in-store merchandise, which includes targeting offers to specific consumers through a variety of channels can drive greater share-of-wallet and increased loyalty versus focusing on a single channel (like online retailing). Brands can even leverage omnichannel retailing to drive a practice the HBR article calls “webrooming,” where consumers research a product online and then purchase it in-store so they can have it immediately.
Getting down to brass tacks, the simple point of the study is that retailers who blend online and traditional retail outperform those that don’t. Amazon is an 800-pound gorilla in the online retail world, and the chances are very good that no brick-and-mortar retailer will ever equal their online sales. The strategy: engage your customers in a way that Amazon can’t.
Traditional retailers can do something Amazon will likely never be able to do: allow customers the chance to try a product before they buy it. It’s in the blend of online and offline into an omnichannel strategy that retailers can fix their revenue problem—but only if they have the right technology supporting their goals.
Omnichannel Won’t Work Without the Right Platform
Omnichannel is not a new idea and retailers have often embraced the thinking only to be disillusioned when that email vendor who claimed to do omnichannel not only could not, but actually made the problem worse by further fragmenting their channels, data, operations and strategy.
At RedPoint, we’re in whole-hearted agreement with the study’s findings. Omnichannel retailing is a fantastic strategy to counteract the revenue loss from declining in-store foot traffic and the dominance of Amazon in the online world.
However, you can’t put an omnichannel strategy in place without the right platform to support it.
The platform you choose needs to have certain components if your omnichannel strategy is going to succeed. The reason we know this is because we’ve seen it. RedPoint has a number of retail customers, and they use our customer data platform (CDP) technology to implement an omnichannel experience. In fact, we pride ourselves on providing our clients the ability to engage customers irrespective of channel. We enable retailers to define a messaging strategy that is abstracted from the channels and execute that strategy across any channel where the customer may appear, either inbound or outbound.
To help our customers achieve their omnichannel goals, we leverage an open ecosystem, in-line analytics, and connected customer data—augmented with intelligent orchestration that allows you to serve up the right experience, in the right context, to make the sale no matter the channel. Our machine learning enables the RedPoint platform to optimize the customer experience on the web, through a mobile, or in any synchronous reaction where context matters.
And let’s be honest … context always matters. Customers expect to see the right offer at the right time, whether it’s 2 a.m. or 4 p.m., Cyber Monday or Memorial Day. Omnichannel retailing—where the experience is seamless between website and physical store—is decidedly the way forward for retailers that want to compete against Amazon and other online behemoths. But to make that strategy work, you need the right tool in place. Without it, your store is likely to go the way of Woolworth’s or Borders Books & Music … living on only in business school textbooks. Omnichannel retailing offers you a chance to avoid that fate, and that’s news that every retailer should care about.