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Insights

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.

Icon read pink Read 6 mins
Are high-street retailers doing enough to win new online customers?

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.

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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.

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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.

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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 State of Retail Report 2019.

Insights

How can you offer an in-store experience if you can’t deliver the basics?

In recent months, there’s been much talk of retailers needing to offer an experience on the high street – but is this really at the top of the British consumer’s shopping list?

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How can you offer an in-store experience if you can’t deliver the basics?

Since the financial downturn of 2008 and the boom in ecommerce, many established retailers have relied heavily upon cost-cutting in a bid for self-preservation.

Employee bases have been severely reduced – a trend that looks set to continue, given recent announcements from major players like Marks & Spencer, Tesco and Debenhams. This obviously has a place in a changing market, but it can often go too far and does nothing to combat dwindling footfall.

As such, the high street continues to suffer, as do British customers. Our State of Retail Report discovered that 62.1% of people don’t think UK retailers are working hard enough to create a shopping experience worth the time and cost of visiting their stores, while almost 43% of respondents feel that customer service in UK retail stores has worsened over the last ten years. Fewer than one in five believe it has improved.

When presented with a wide range of options, the majority of people (52.5%) also underlined that poor customer service is the main factor that discourages them from shopping with a retailer again.

The high street’s shift towards a more self-service experience, while reducing costs, seems to have inadvertently levelled the playing field with pure-play ecommerce rivals. Now, they need to consider how to rebuild that advantage, using the assets that separate themselves from online-only counterparts.

Come back to what you know

Many retail commentators talk about the need for the high street to create better experiences to lure consumers back to bricks and mortar retail. Some businesses interpret this as introducing a well-stocked café, product demonstrations, fashion shows, or simply ramping up the free giveaways.

Yet for all the intelligent technology and logistics infrastructure in the world, service is a crucial layer that bonds the retail experience together, and one that consumers tell us is severely lacking.

Let’s briefly reflect upon one of bricks-and-mortar retail’s greatest modern success stories. Apple’s stores, while being glass-fronted and inviting, do nothing out of the ordinary. Yes, it took its machines out of their boxes, connected them to the internet and encouraged consumers to interact with them. But the steps it took to truly buck the retail trend was to invest heavily in well-trained, friendly and abundant staff. It made its number-one priority customer interaction, empowering them to give great service.

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Can you have your cake and eat it?

Sometimes, the most unlikely places provide the best examples of the way to do things right. McDonald’s, in particular, offers an excellent approach to customer service which has become such a part of its fabric, it’s continually overlooked due to its industry roots.

Over the last few years, the fast-food giant has installed self-service kiosks in the majority of its restaurants, but rather than using this as an incentive to cut employee numbers, it instead repurposed these roles to offer a new layer of service for customers, targeting table service, cleaner restaurants, and even just having someone on hand to give kids balloons.

Further afield, service and certainty was a core theme during our trip to Abu Dhabi’s Yas Mall, and nowhere more so than with its sprawling Lego experience. For approximately £2 entry, we experienced its “Pop in and Play” concept. Its walls were giant Duplo bricks, and within these were different product-line building tables for Star Wars, Disney, Technic and more, catering for young and old.

Huge rollercoaster roads created one centrepiece, allowing customers the freedom to build their car and race them against others; those with more digital skills could instead enjoy one of the five PlayStations, each one featuring a different, recently released Lego video games. Every single product being demonstrated was in stock and available to purchase.

Most importantly, brand ambassadors were on hand to enhance the experience, offering advice and support to anyone interested in Lego products. It’s something an online rival just can’t replicate.

Relaying the foundations of retail

While technology, underpinned by cost-cutting measures, has been well used to make the customer experience more efficient, it also regularly replaces – and sacrifices – what consumers want: knowledgeable and helpful staff, a personalised experience, and good service.

As outlined throughout this report, the correct investment in technology can remove substantial costs from omnichannel retail while driving up footfall through more aggressive online positioning and improved click-and-collect services.

But to maximise benefit from these initiatives and realise the full value of growing an engaged, high-frequency, multichannel customer base, the store service level must meet the customer’s expectations.