Retailers looking to succeed in the digital age must have a thoughtful omnichannel strategy, combining the convenience of browsing online with the enjoyment and convenience of shopping in store.
Despite the rise of e-commerce, research shows that consumers are still flocking to brick-and-mortar locations for their shopping needs. According to global strategy and management consultancy A.T. Kearney, almost 90 percent of retail transactions have some kind of a touchpoint in stores.
Data from consumer intelligence firm BIGresearch showed that while two-fifths of shoppers (40 percent) said they’d be shopping online during the holiday season, more than a quarter (28 percent) said they’d be shopping in stores, and 32 percent said they would be visiting both online retailers and physical locations.
Even a quarter (26 percent) of digitally native Gen Z and millennial shoppers will be spending at least $50 in physical stores over the holidays.
The trend could prove reassuring to retailers anxious about ceding physical transactions to online sales.
According to data management and analytics firm 1010Data’s latest Holiday Flash Report, one reason that retailers should continue to bolster their in-store strategies is the fact that online returns happen twice as frequently as in-store returns—and they can be costly.
Year-to-date through November of this year, Amazon saw a 6 percent return rate on net spend, while Walmart, with its massive network of physical stores, saw only 2 percent.
At clothing retailer the Gap, items ordered online during the period of 2015 through 2018 were returned four times more often than in-store sales.
According to 1010Data, the losses associated with returns are multifaceted. There’s the cost of additional postage and restocking, and then there’s the possibility that returned items may not be able to be sold at their original price. Depending on the timing during the selling season and the condition of the item when it comes back, it may need to be sold at a discount—or trashed completely due to damage.
Issues with returns affect apparel retailers disproportionately, the group asserted, because of the seasonal nature of the goods being sold.
“Looking across multiple retailers, there’s a considerable discrepancy in volume of returns by category, as well as channel. For example, you have Gamestop with a return rate of only 2 percent for full year 2018, while J. Crew hit 26 percent that same year,” Andy Mantis, chief business officer at 1010Data, said.
Despite the drawbacks, Mantis said retailers should attempt to make lemonade with the returns they’ve been given.
He cited the successful partnership between Amazon and Kohl’s, wherein purchases from the online marketplace can be returned in-store at the big box chain’s many national locations.
“These returns, particularly those in-store, can be put to positive use, if retailers understand how to capitalize on them,” Mantis said. While some of the Amazon returns came from the existing Kohl’s customers, the retailer was also able to lure new shoppers into its stores through the program.
1010Data’s research revealed that post-holiday shoppers can be swayed through similar methods.
During the week after Christmas of 2018, department stores and big-box chains saw nearly one third their in-store foot traffic come from shoppers who hadn’t visited their stores during the holiday season.
Those consumers, who hadn’t visited in months, or in some cases, ever, were likely returning gifts or spending the balance of gift cards from loved ones.
Making an impression during those visits, even if consumers are simply looking to make returns, can pay off. It did for Target and Kohl’s, which both saw half of their post-holiday shoppers return over the next six months.
A report from Simon Property Group points to sustainability as a reason to skip online shopping altogether.
In partnership with Deloitte, the world’s largest owner of retail real estate released data showing that online shopping leads to five times more returned products than shopping in store.
What’s more, ordering online also creates five times more emissions due to packaging like boxes, mailers and bubble wrap, compared with the paper or plastic bags that consumers accumulate while shopping in stores.
Mall shoppers also buy an average of 3.5 products per sojourn to their favorite shopping center, including both items they buy at their destination and ones that they purchase en route. The behavior, known as “trip chaining,” lowers the emissions related to their mall visit, because the trip is divided between multiple stops.
Building upon data from an initial study conducted by Deloitte in 2016, which analyzed the greenhouse gas emissions associated with a retail product’s life cycle, Simon Property Group updated the analysis with insights on recent trends in shopper behaviors.
Assuming that the consumer purchased the same basket of goods online as they would at a brick-and-mortar store, the study showed that shopping at a mall is roughly three times more environmentally sustainable than it was just three years ago, due to shifting consumer behaviors.
“In only a span of three years, we can see the impacts of an increasing rate of returns for online orders, and how mall shoppers are buying more items per trip as well as combining the trip with other errands, Kyle Tanger, managing director of sustainability for Deloitte, said.
“The sustainability impacts are predictable. As shoppers, if we can combine purchases and shop mindfully, we can significantly reduce transportation resources associated with multiple deliveries and product returns,” he added.