Digital Growth Leans on Bricks-and-Mortar
Two weeks ago, Target reported 4th Quarter 2015 earnings, with remarkable online sales growth of 34 percent. Target COO John Mulligan indicated, however, that their digital sales growth would not have been possible without the company’s bricks-and-mortar presence, which allowed consumers flexible fulfillment options (see ICSC – Shopping Centers Today).
Why does Target feel their physical stores are so important? In 2015, a full 30% of their digital sales were from orders picked up, shipped from or shipped to a Target store.
Although online shopping offers consumers myriad benefits, new research has shown that customers are frustrated with some aspects of online shopping, and are demanding the advantages of in-store shopping as well. What consumers ultimately want – convenience, value, information and experience – is increasingly being offered by a combination of online and in-store retailing.
Online Fatigue Prompts a Swing Back to Stores
According to the U.S. Department of Commerce, e-commerce sales still represent a relatively small percentage of total retail sales, having grown from 3% in 2006 to 7% in 2015. And although e-commerce continues to grow, recent research by Accenture found “significant signs of a swing back to stores”, with more people planning to increase their in-store shopping.
An online store on a laptop computer in competition with physical retailers
Shoppers have online fatigue. The advantages of online shopping – price comparisons, reviews, convenient browsing – still exist. But the ever-increasing availability of information and buying alternatives on the internet has offered consumers almost too many options. As anyone who has sat down at the computer for what they expected would be a quick purchase knows, online comparison shopping and product reviews can provide exhaustive information and end up taking an inordinate amount of time.
Similarly, delivery service can be tremendously convenient, especially with free shipping. However, scheduling delivery can be a problem, and making returns by mail is less convenient than receiving by mail. Plus, online shoppers don’t have the benefit of seeing and feeling the merchandise.
Accenture reports, “Fewer consumers now cite ‘convenience’ as the main reason for shopping online. In fact, an overwhelming majority (91 percent) told us that it’s easier to complete a purchase in-store than either online (57 percent) or by mobile (36 percent). What’s more, when it comes to fulfillment, most told us that scheduling is more important than speed; and about one-third indicated that they are buying more in-store and carrying home compared to a year ago.”
As consumers initially embraced the availability of information and buying alternatives on the internet, many traditional retailers lost sales through showrooming, where customers would browse in-store but ultimately buy online. Recently, however, Accenture has found that webrooming (a/k/a ROPO – research online and purchase offline) is becoming as prevalent as showrooming. In some sectors, such as consumer electronics, apparel and home improvement, webrooming is actually happening more often.
Enter ‘Seamless Retail’
Online and in-store shopping were once separate and distinct activities. However, the now ubiquitous smartphone has bridged the gap between online and in-store shopping, allowing customers to do internet research in-store. This transformation, along with customers’ desire for integrating the advantages of both traditional and online shopping, has prompted retailers to re-assess how to best attract and serve their customers. As a result, many merchants are striving to provide their customers with ‘seamless retail’: the ability to shop easily at any time and any place, whether via computer, smartphone or physical store.
We’ll discuss the elements of seamless retail in our next post.