E-commerce disruption: loss or opportunity?
There is little doubt that recent e-commerce growth has driven significant disruption in the retail sector. In most cases, this disruption is blamed for financial losses and brick-and-mortar closures across the industry. However, little attention is paid to the benefit e-commerce provides retailers, including brick-and-mortar brands.
Here, we consider four key opportunities that e-commerce presents to retailers. Those retailers that seize these opportunities and learn to leverage them in a truly omnichannel business model will be best-positioned to thrive through the current period of change.
Opportunity 1: Touchpoints, touchpoints, touchpoints
The move to digital shopping creates opportunities for retailers to leverage additional customer touchpoints across a wide array of platforms and services. Previous interaction with consumers was often limited to short-term, in-store exchanges. Due to today’s widespread use of smart phones, retailers have invested heavily in multichannel marketing that can reach customers instantly and continuously through proprietary apps, email, text messages and social media. By engaging with consumers across various media channels, retail brands have unprecedented access to new customers and can build closer relationships with existing patrons.
Opportunity 2: Room to focus on customer experience
As transactions shift to online channels, omnichannel retailers can shift their focus from stocking shelves to driving innovative experiences in their physical stores. Retail brands are making key investments in brick-and-mortar experiences, including convenience features like automated and mobile check-outs (Zara, Nordstrom), “magic mirrors” that allow shoppers to digitally try on products (Neiman Marcus) and food-and-beverage offerings like Restoration Hardware provides in its Chicago flagship. With less space needed to accommodate inventory, retailers are free to come up with creative new uses for real estate and develop a brick-and-mortar brand experience.
Opportunity 3: Growing traffic and sales
Both research and case studies confirm that adding e-commerce channels to brick-and-mortar store networks can help a brand grow its customer base and drive revenues. A 2017 study by the Harvard Business Review found that omnichannel customers (those who shop across multiple channels) spend 4% more in-store and 10% more online than single-channel shoppers.1 The study also found that the more channels a customer used, the more money that customer spent in-store. This is because consumers are learning to combine the distinct benefits of each channel, such as using online channels to browse and in-store channels to test products. The National Retail Federation found that a majority of in-store shoppers (73%) go to the store with the intention of buying something specific; behaviors are very different online, where nearly half of shoppers spend their time just browsing (Figure 1). Combining channels ultimately helps consumers find and purchase products faster. These trends align with retailers’ findings that closing a store can drive down online sales in that market by up to 20%. Retailers that can facilitate this channel-surfing process will win in both customer loyalty and sales.
Figure 1: Consumers’ Shopping Intentions Vary by Channel
Source: National Retail Federation, Winter 2017/2018.
Opportunity 4: Data and customer insights
Of all the opportunities for retailers through the increased digitization of shopping, the one that offers the most strategic benefit is data. Historically, customer insights were limited, delayed and sometimes difficult to collect. However, as digital channels increase device interaction and customer touchpoints, large amounts of data are made available on how, when and why consumers shop. This data may be obtained from third parties at a high level, or provided by consumers themselves for access to exclusive offers and insider deals. The digital analytics that can be gleaned from consumer data are virtually endless. From measuring conversion rates, to predictive analytics and targeted promotions, to tracking customer movement through physical stores, digital analytics are a key tool for shaping retailer strategy.
As e-commerce continues to grow, both established and emerging brands must leverage the benefits of digital channels. Doing so will be key to growth in an omnichannel retail world.
» Next: What Are the Biggest Challenges Omnichannel Poses to Retailers?
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