Contact Sales

I keep hearing about omnichannel retail. Even the ICSC is getting tired of holding sessions on the topic so it must be a really big consideration when picking site, right?

Maybe not.

While some research has been done on the subject, I don’t know anyone who puts any thought into the omnichannel nature of their business in their site selection process. This may not really matter; but how do we know if we don’t even look?

At its heart, omnichannel means that there are a number of stages in the buying process that may or may not require physically entering a store. These stages are Discovery, Trial & Test, Purchase, Delivery/Pickup, and Return. While theoretically this may involve catalogs or personal shoppers, etc., for all practical purposes it means adding online shopping into the equation.  Some of your sales come from your store and some of your sales come from the web or some from a combination of the two.

I don’t think anyone who thinks carefully about it expects that in-store sales and the online sales are completely independent and certainly the research bears this out (see this excellent report by AT Kearney). There is, as one would expect, an interplay between in-store and online sales. According to AT Kearney, this interplay depends on the type of products you are selling and which age cohort you sell to. I suspect it also has a lot to do with the lifestyle segmentation of your customer-base around a given store.

Some of our retail customers have shown evidence that having a store in market increases the propensity to shop the brand online. The A. T. Kearney report claims that only 35% of shopping takes place in-store without an online component to the buyer’s journey and 10% of shopping takes place online without an in-store component. This means that 55% of shopping has some combination of the brick & mortar and online.  While a careful reading of the A.T. Kearney report shows that 25% of omnichannel sales will be ascribed to brick & mortar and not to online, that still leaves 10% of sales that will be ascribed to online that only result because there is a store open in the market.

Given this, has any traditional retailer ever considered the impact of a new physical store on their online business and taken that into consideration in their ROI calculations?  I bet someone is doing it but I don’t know them (if anyone does, please chime in). Please note that I DO know companies that consider the impact of omnichannel on their stores but not vice-versa.

All the percentages above are based on averages.  But every type of retail is different. So I spent some time brainstorming with TAS co-founder Bill Dakai how one would think about this interplay of brick & mortar and online retail.  We tried to keep it really simple. Here are some of the ideas we came up with.

There are three possible impacts on your online sales from opening a store in a market:

While economists and marketing types would want to attack this problem in aggregate (i.e. chain-wide) we market analysts and dirt-kickers know that if you really looked at this in detail, different stores would likely experience different impacts. In some places online sales would go up, in others it would go down.  There would likely be some net impact up or down chain-wide but this would mask the real story as well as the real opportunity.

In the future, I will explore topic this in more detail.  But in the meantime, please share your thoughts and experiences on the questions and ideas outlined in this blog.

Joe Rando