With the rapid rise of online commerce, retailers have asked themselves how brick-and-mortar stores can win. To be clear, brick-and-mortar stores aren’t going anywhere. Smart marketers know that in this case “how” isn’t a question; it’s an opportunity to establish a competitive advantage.
There’s no proof that brick-and-mortar has a firm place in modern society quite like Amazon – the supposed killer – opening a physical location of its own. What’s more, Amazon is not alone. Rent-the-Runway, Birchbox, and Bonobos, businesses founded on the idea that retail should be in the cloud, have all cut the tape on physical addresses.
Online commerce still represents a relatively small percentage of total sales. AT Kearney reported that brands with a brick-and-mortar presence captured 95% of all retail revenue. 67% of online customers visit a physical store before or after purchase. According eMarketer, by 2017 in-store retail will account for $5 trillion in sales, more than 11X the amount generated online. By 2025, McKinsey forecasts that online commerce will represent less than 15% of total retail sales.
The reason brick-and-mortar holds such prominence in the retail world is customer experience. There are numerous advantages a physical store provides that online cannont:
What brick-and-mortar retailers need to understand to achieve long-term succes is that new business models are not the enemy. Stagnation is the enemy (we all know what happens when brick-and-mortar businesses fail to evolve).
Fortunately, there are a few actioanble next steps that retailers can take in order to remain effective at driving purchases from modern consumers. In no particular order:
According to eMarketer, 36% of consumers considered electronic receipts sent via email or text the most appealing technology available in retail stores. In-store kiosks allowing customers to order items that were out of stock or not sold in the store ranked second. Shelf labels that customers could scan to purchase or search for info came in third.
NB: all of these benefits have nothing to do with technology itself. They are implementations of technology that make customers’ in-store experiences easier. Oftentimes, retailers incorrectly view technolgoy as an end in and of itself. To attract the more lucrative pragmatic majority (beyond early adopters), envision in-store technology like an awesome sports ref – i.e. keeps games under control and organized without being an attention hog.
Forbes.com reported on an online survey of over 1,000 shoppers in the U.S. and Canada that said the strongest driver of brand loyalty was customer engagement. The majority of survey respondents said that polite, courteous, and knowledgeable in-store employees made for the best shopping experience.
To quote marketing expert Arnold Schwarzenegger, “Well duh.” Of course those characteristics matter. What’s between the lines is that customers value engagement that provides value to them. Three examples:
According to McKinsey, 35% of what consumers purchase on Amazon and 75% of what they watch on Netflix come from product recommendations based on personalization algorithms. Physical retailers can follow suit. Loyalty program data, for one, is ideal for discovering customer preferences and profiles. Location data, much talked about, will only become more usable in the future (beacons in particular have a ton of potential). Eventually, retailers should strive to replicate the online experience, where customers in-store can easily access relevant information that helps them make a decision.
Remember, there’s one too often overlooked maxim to remember when it comes to data: experience dictates success. Those brands that wait for the perfect time or solution before launching an analytics solution will fall behind. Implement a data program now to develop the experience needed to manage outreach in the future (just don’t forget that all important effortless customer experience).
Harris Interactive found customer retention to be 6-8 times more cost effective than customer acquisition. Physical retailers have to move away from treating each customer the same. Of course you need a baseline for all, but – without exceptions – some customers have more value for a business than others*. Combine the tactics mentioned above – technology, engagement, personalization, and data – to develop an understanding of how to ensure that those who visit come back and those who drive the majority of your revenue never switch allegiances.
*The eBook “6 Critical Stats For Customer Loyalty” contains the exact stats – 25% of customers contribute 2/3 of revenue: