The Digital Path to Purchase is Rapidly Becoming a Superhighway

Stephen DeAngelis

June 2, 2016

Nearly every week we read about more brick-and-mortar stores closing their doors. The reason for these closings is almost always the same — more consumers are taking the digital path to purchase and avoiding in-store purchases. Eric Morath (@EricMorath) and Suzanne Kapner (@SuzanneKapner) report that e-commerce sales continue to outpace in-store sales. “Consumers boosted spending in April to the highest levels in more than a year,” they write, “accelerating their turn toward online shopping and widening the divide between in-store retailers and Internet outlets pitching lower prices and convenience.”[1] In fact, the rate of growth for e-commerce sales was nearly double that of in-store sales. To demonstrate how rapidly e-commerce is growing, Morath and Kapner note, “Amazon is now the second-largest apparel seller in the U.S., behind Wal-Mart Stores Inc., according to Morgan Stanley. That category was once dominated by department stores.” A couple of years ago, Scott Welty (@scottwelty1), global vice president for retail industry strategy at JDA, warned that many business executives weren’t taking the e-commerce challenge seriously. “The technology-driven shift to omnichannel shopping is the most transformative change to hit retail in decades,” he wrote. “Yet in a global survey of CEOs conducted by PwC [in 2014], only 22 percent felt this monumental shift would impact their organizations. Are these retail CEOs missing the boat?”[2] Apparently they were. Welty continued:

“In the midst of this omnichannel transformation, most of the CEOs surveyed still seem to be focused on the traditional levers of growth. Their top three priorities all deal with expansion — expanding into new regions or markets, expanding by opening more stores, and expanding through mergers and acquisitions. They appear to be fixated on the numbers at a time when success in retail is shifting to providing the best possible customer experience across channels. Similarly, the top threats the retail CEOs listed were the traditional factors of increasing competitive pressure and margin erosion/cost reduction. Attracting and retaining customers, key issues in an omnichannel world, were farther down the list.”

Joel Bines (@Joel_Bines), co-head of consulting firm AlixPartners LLP’s retail practice, told Morath and Kapner, “Just like bookstores and music stores and hardware stores before them, apparel retailers are underestimating how fast Amazon is going to eat their lunch. We’ve seen this movie before.” Morath and Kapner go on to note that some executives are still in denial about the impact online sales are having on their business. “Executives at traditional large retailers struggled to explain the slump,” they write, “which for some companies was their worst since the recession. Some pointed to a decrease in mall traffic, while others said shoppers were spending more on items their stores don’t sell such as entertainment, travel and food.” Even though the picture looks dim for brick-and-mortar stores, many analysts believe the picture is not altogether bleak. Supply chain experts at MIT insist, “Bricks-and-mortar stores … still provide a vital interface with customers.”[3] Although they do note, “Switching to an omni-channel business model requires retailers to drive change in many parts of the supply chain.” Kelsey Lindsey (@kelseyalindsey) reports that a Deloitte study encourages retailers to stop focusing exclusively on sales and concentrate on making the customer’s digital path to purchase more enticing. She explains:

“Ever since shoppers could access inventory and compare store prices with a few clicks on their phone, omnichannel sales have become a big focus for brick-and-mortar retailers. But while retailers are focusing on driving consumers to buy across all channels, they may also be losing sight of the bigger picture: The customer’s path to purchase. … While brick-and-mortar retailers may be quick to acknowledge the creeping influence of digital in their stores, some observers say they still lack the resources to use digital to its full advantage. Rather than merely focusing on the ‘buy’ that digital can help drive, retailers need to focus on the whole consumer journey: before, during, and after visiting the store.”

Adam Weiss (@adamLS), General Manager for Rakuten Affiliate Network, has a few suggestions to help retailers develop a successful online-to-offline strategy.[5] The first thing he recommends is considering the use of digital coupons. “Most consumers simply look to their daily email promotions to find discounts for in-store purchases,” he writes. “These coupons contain individual codes that, once scanned, reveal the referring source and let retailers identify what promotions were most effective in driving in-store sales. This information can be analyzed in real time, since it is collected by the point-of-sale (POS) system. The logical next iteration of the printable coupon is the use of mobile coupons.” He suggests the more local and personalized you can make the offer the better. He also recommends considering location-based marketing. He explains:

“Location-based rewards primarily run on apps and let a merchant, or one of its partners, geo-target shoppers by location, sending them deals or points for walking into a brick-and-mortar location. For example, you’re browsing around your favorite cosmetics store and receive an alert on your phone offering a 10-percent-off coupon. Naturally, this alert from your mobile app will entice you to buy the products you’ve got an eye on. A variation of the model involves the user taking a specific action. This type of location-based or loyalty program rewards consumers when they ‘check in’ to an offline store. This model has evolved down to the merchant level, offering gift cards, prizes or discounts for advertising your location through social media properties.”

Of course, to take advantage of location-based marketing you need to get consumers to into or near your store — and that’s the rub. Chad Brooks (@cbrooks76) reports that new research finds “the best way to increase your in-store sales is to boost your online messaging.”[6] He then offers ten ways to get shoppers into your store:

 

  • Give shoppers a reason to shop in-store: You want to incentivize shoppers to visit your business. This can be done in a myriad of ways, including by offering options to order online and pick up in the store, along with in-store-only coupons and sales.
  • Be mobile: When creating your content strategy, you are best served by focusing on the mobile experience. Few channels are better than mobile at reach and right-time-location targeting.
  • Online to offline: This type of thinking and planning with your digital strategy is critical when mapping the customer journey.
  • Rethink print ads: Print ads today can provide more value when they are used in conjunction with other types of communication. Boost the value of print ads by spreading the content across digital channels in order to reach customers where they are actually gathering information to make purchasing decisions.
  • Unify digital efforts: You need to break down the silos between departments and digital channels. Doing so makes it easier to create a unified strategy for the best customer experience.
  • Coordinate offline and online: Plan for online content with similar teams and processes that are in place for delivering offline content. This enables a more coordinated strategy.
  • Measure what works: It is critical to implement a method of tracking your digital marketing success. Rather than using metrics like impressions, you should focus your measurements on specific customer actions.
  • Use loyalty data: Leveraging this information allows you to personalize and contextualize your messaging.
  • Define local at every stage: When creating targeted local messaging, think about more than just geographical areas. Consider how local can be applied to who, what and when, in addition to where.
  • Be tactful: Although you might have a treasure trove of great digital campaigns you want to launch, you don’t want to turn off customers by constantly bombarding them with personalized messaging.

 

The most important of those suggestions is to “be mobile.” Google’s Matt Lawson (@onemanisthelaw) writes, “Smartphone shopping has created a new ‘front door to the store.’ That’s the phrase the retail giant Target now uses after learning that three-fourths of its guests start their shopping journey on mobile, and that one-third of guests who click on a mobile search ad take a trip to a Target store.” Lawson agrees with Weiss that retailers need to be more personalized and local in their advertising. And he suggests that retailers work hard on providing consumers with online information that is both useful and informative. The consumer digital path to purchase will continue to erode sales in brick-and-mortar stores, but they still play an important role. Even so-called digital natives have confirmed they still enjoy the in-store experience. However, retailers do need to find a successful omni-channel strategy if they are going to keep their traditional stores open and profitable.

 

Footnotes
[1] Eric Morath and Suzanne Kapner, “Retail Sales Gain Is Fueled by Web,” The Wall Street Journal, 13 May 2016.
[2] Scott Welty, “Are CEOs Missing the Boat on Omnichannel?Apparel, 8 July 2014.
[3] “Where Bricks-and-Mortar Meets Omni-Channel,” Supply Chain @ MIT, 12 May 2016.
[4] Kelsey Lindsey, “Why omnichannel as you know it is ‘dead’,” Retail Dive, 29 May 2015.
[5] Adam Weiss, “Capitalizing On The Digital Trail To The Offline Purchase,” Marketing Land, 4 September 2015.
[6] Chad Brooks, “10 Ways to Turn Online Marketing Into In-Store Sales,” Business News Daily, 30 September 2015.
[7] Matt Lawson, “5 Ways Consumers Connect to Stores With Mobile Shopping,” Think with Google, February 2016.