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In Omnichannel World, the Physical Store Remains King

A new study issued by global management consulting firm, A.T. Kearney, argues that consumers still prefer to make their purchases in physical stores, despite the proliferation of cyber-retail.

According to the report, “Recasting the Retail Store in Today’s Omnichannel World,”  a surprising 61 percent of shoppers still cleave to physical stores as their preference. A modest 31 percent reported that they prefer online shopping and  an astonishingly low 4 percent make most of their purchases on their mobile devices, defying the conventional wisdom that click-and-order shopping is overtaking brick-and-mortar store sales.

The study’s author, Michael Brown, wrote, “Stores are important to consumers, but it is critical that retailers with brick-and-mortar assets understand the new role the store network plays in optimizing sales, profits, and loyalty across all channels. Despite the dramatic shifts in consumer shopping behaviors enabled by ecommerce and mobile, very few retailers have transformed the physical shopping experience to efficiently and effectively support the new behaviors. Retailers must know how and why their customers shop and then retool and redeploy the store network accordingly.”

The A.T. Kearney report is consistent with another study recently issued by the Edgell Knowledge Network (EKN), a New Jersey based research firm. Despite the rise of omnichannel as a focus of retail strategy, some retailers have been discouraged that their transition to  omnichannel operations hasn’t been immediately transformative.  The Edgell Knowledge Network (EKN) conducted a study of more than sixty retailers, 41 percent of which specialized in apparel. The results indicated that consumers typically demonstrate a ready willingness to alter shopping behavior, quickly adopting new technologies as they arise. More and more, shopping is moving out of physical stores, shifting to mobile devices and laptops.

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The EKN study revealed that 63 percent of the retailers surveyed identified their biggest concern as the accelerated adoption of new technologies by both customers and competitors. Moreover, 42 percent complained that their companies suffered from a lack of an IT department skilled enough to meet these challenges, and 48 percent worries that investment in new technologies wouldn’t produce an adequate rate of return.

Nevertheless, technological advancement is no guarantee of commercial success. EKN research director Guarav Pant explained that investment in omnichannel strategies is just one part of the retail puzzle. He said, “People think that if you put all of the technological bells and whistles in the store, it will be the best store. But it may end up being a mausoleum of technology. If [some technology] doesn’t work for the brand, it doesn’t make any sense.”

Many major retailers are now tweaking their approach to cyber-sales, trying to find new points of synergistic connection between traditional store-based retail and internet-based retail. For example, there is remarkable synergy between Sak’s online marketing and in-store sales. Email marketing produced $5 of in-store business for every $1 customers dropped on web products. Besides making it easier for Saks to identify its customers and track their shopping preferences, the close connection between online and in-store success makes cross-platform marketing strategies more viable. Rodgers called this approach a “business transformation enabled by technology.” The lesson he drew in looking at omnichannel expansion is a powerful one: “Don’t view it as just an IT project.”

Keith Pickens, senior vice president and CIO of Express, agrees wholeheartedly with Rodger’s interpretation. “At the end of the day, I think brick-and-mortar and e-commerce become one channel,” he said.

Express, a $2 billion company with 600 stores throughout North America, is now integrating all its business platforms with Oracle’s Fusion suites. Pickens foresees the collaboration with Oracle as the key to growing both its online and in-store sales simultaneously by more closely coordinating their activities. He remarked, “We really see Oracle’s ATG e-commerce engine being where the consumer comes in and interacts with us. It’s where they go in and get electronic coupons, it’s where they get their sales’ histories. Today, it is where our loyalty is.”

It also remains to be seen how much of the stubborn resistance of traditional retail is bouyed by older shoppers slow to adopt new technologies. Another study conducted by Piper Jaffray found that teen shoppers are aggressively making the shift not only to shopping online, but specifically on their mobile devices. More than any other consumer group, teens are shifting the nature of their shopping habits faster than retail strategy is accommodating them, fueled by breakneck technological progress. Shopping has become a largely cyber-affair, with 82 percent of males and 78 percent of females making their purchases online. Trips to the mall are down 25 percent. Even more telling, considerably more than half of all teens surveyed reported preferring to buy apparel online.

The A.T Kearney study surveyed more than 3,000 shoppers in both the UK and US.