Are high-street retailers doing enough to win new online customers?
Omnichannel retailers must beat, and not just compete, with ecommerce pure-plays by prioritising new customer relationships online.
Omnichannel retailers, fresh from the challenges of 2018, have understandable concerns about their high-street futures. Yet for all the weekly headlines that reinforce market pessimism, the outlook may not be as bleak as they may think – in fact, omnichannel companies are best placed to weather any distant storms. They just need to pick the right battles.
The high street is still high value
In summer 2018, a pair of high-profile reports countered the doom and gloom regularly portrayed in the media, instead pointing to a more positive outlook for the high street.
The most prominent of these came from the Office for National Statistics, which discovered that four in every five pounds spent in retail was in physical, high-street stores – a figure far higher than many pessimistic commentators would have predicted. That said, this negative outlook was reinforced by how newspapers chose to present the statistic with a more damning tone: that one in every five pounds was spent online.
Alongside the ONS release was another from Salesforce, which claimed that the “brick-and-mortar store is far from passé”. Its survey of 6,000 consumers and 500 million digital transactions discovered that 46% of shoppers still prefer to buy via physical stores, compared to 35% through laptops and 18% with mobile devices.
While the landscape continues to evolve away from the age-old standard of high-street shopping, the general public still prefers to shop there. But this shift in channels will continue unless omnichannel businesses learn from their pure-play ecommerce rivals, as it’s online where they attract the custom they need to survive.
It all starts online
While Salesforce statistics provided some hope, a deeper delve into its findings proved otherwise. The act of purchasing retail goods may still favour tangible shopping experiences, yet the process of searching for products overwhelmingly begins online: 87% of shoppers in 2018 started investigations on digital channels, up from 71% in 2017.
These findings should send a clear signal to omnichannel retailers: they must compete with pure-play companies to win new consumers before they can convert them into loyal customers. If they do this, the rewards they’ll reap will far outstrip the ones gained by internet adversaries.
Omnichannel customers are more valuable than any other. According to a Business Insider Intelligence report from 2017, they spend an average of 4% more every time they’re in a bricks-and-mortar store, as well as 10% more online, compared to those who interact with a brand on just one channel. Newer data shows even greater value.
In 2018, Criteo combined online and offline global sales data from retailers and concluded that omnichannel shoppers accounted for 7% of all customers, but a four-times-greater share of sales (27%). By contrast, online-only shoppers represented just 24% of sales, despite accounting for 44% of custom. Offline-only consumers took an equal share of customers and sales (49%) – something that omnichannel retailers’ high-street stores continue to benefit from.
The odds are stacked in omnichannel’s favour. All these businesses need to do is adapt the formula to counteract the ongoing decline of the high street.
Omnichannel v pure play: Who does it best?
In our 2019 Retail Experience Score (RES) 100, we were disappointed to find the average standard delivery among 100 omnichannel retailers was 4.4 days and came in at a cost of £3.55. With a common conception being that online-only retailers offer far superior service levels, we analysed 30 serious pure-play companies to see how they fared in the two core services all businesses must provide: standard delivery and returns.
Despite research from Pitney Bowes underlining that 82% of UK shoppers prefer free shipping to fast, paid-for shipping, we found that pure-play average standard delivery time was only a slightly quicker 3.9 days, and at a marginally lower average cost of £2.98.
Clearly, retailers from all backgrounds are guilty of ignoring the demands of customers; just 10% of our selected 100 omnichannel retailers offer standard delivery for free, while just short of a quarter of our pure-plays (23%) provide this.
Meanwhile, only 53% of pure-play retailers analysed offer a free postal, courier or drop off returns method compared to 59% of omnichannel retailers. A massive 84% of omnichannel retailers already allow free returns to stores, providing them with an additional opportunity to upsell, while pure-play retailers take a hit with every return.
With these cost-free, flexible options, omnichannel retailers are far more attractive to the two-thirds of consumers (67%) that eMarketer research found to check returns policies online before purchasing. Yet the average time taken to refund customers in both the RES 100 and the online-only group averaged 13 days, despite further eMarketer findings showing that customers are 70% more likely to shop with a store if they receive a refund within 24 hours.
Give them everything you’ve got
Given the additional potential value of omnichannel shoppers, these businesses shouldn’t just match pure-play companies – they should beat them by harnessing their own strengths:
- They’re regularly larger, so can negotiate better shipping deals with logistics companies to deliver the free shipping that people want.
- Accurate stock checks can allow for faster ship-from-store models and lower both picking and packing costs by harnessing existing store staff.
- Click and collect is nearing ubiquity among the high street’s top 100 stores due to high demand – something that pure-play businesses cannot quite match, even with third-party C&C providers.
- Omnichannel businesses have the ability to upsell if goods are returned in store. As we found in our 2018 State of Omnichannel Report, businesses may lose an average of 23% of sales to returns, but have the ability to recoup an average of 18% of the total order via upsells if purchases are returned to a physical location.
If omnichannel retailers had already decided to provide free delivery, instant returns and accurate in-store stock check, they would have enticed more customers into making initial purchases with them, giving these brands the opportunity to introduce the wider benefits of their business models. Yet instead, by just trying to keep pace with what the average businesses offers, they have lost ground to pure-play ecommerce competitors.
Providing these levels of service may be considered a risk by many omnichannel retailers, but it’s not as problematic as not meeting customers’ expectations. By prioritising online sales and showing competitiveness to buyers in the research stage, they can reap the additional sales that omnichannel customers make both online and in-store, and begin to take back lost market share from pure-play competitors.
This article features in SHIFT's upcoming State of Retail Report 2019.