The headlines surrounding retail in recent years have been quick to cover the e-commerce acceleration driven by the Covid-19 pandemic. But while U.S. Census Bureau data says online sales soared 44 percent over a two-year span to $257.6 billion at the end of 2021, brick-and-mortar retail sales still jumped 20.2 percent to a whopping $1.52 trillion.
Simply put: physical stores are still a massive piece of the retail puzzle and retailers cannot afford to build out a growth strategy without including them in their plans.
But more important, retailers need to optimize these store locations and integrate brick-and-mortar with the digital experience to attract their most profitable consumers—omnichannel shoppers. According to McKinsey and Co., these consumers shop 1.7 times more than those who only shop in a single channel, making them incredibly valuable to the retail bottom line.
Adam Lynch, chief operating officer and co-founder of the California-based lifestyle apparel brand Marine Layer, can vouch for this. Lynch revealed in a recent Sourcing Journal webinar that the retailer’s omnichannel consumers shop at the same rate—1.7 times more than those buying through one channel only. Marine Layer is continuing to scale across channels, complementing its growing store presence of 48 locations with an e-commerce site, a catalog and wholesale partnerships with Nordstrom and Bloomingdale’s.
“We get about 38 percent of our revenue from those 17 percent of buyers that are willing to participate cross-channel,” Lynch said. “We may acquire someone in a retail store and get their email address. We’re very happy to then have them progress into omni—we get them a catalog—that’s a nice customer life cycle for us.”
Attracting these customers requires an understanding of the new KPIs that drive the different channels, according to Liza Amlani, principal, Retail Strategy Group. KPIs that are traditionally examined in the digital world will now be applied to the physical realm, and vice versa, she said, highlighting sell-through, gross margin and customer lifetime value as the top metrics that retailers must assess as they scale their business.
But while measuring metrics is vital, Amlani said that retailers still have to put themselves in their customers’ shoes if they want to get, and keep, their business for the long haul.
“The point of having an omnichannel journey that delights—whether through product or experience—should be seamless,” Amlani said. “Even though a store may have the most customers in its proximity, most customers are digital-first. That’s where they’re engaging with the brand. Look at a Nike or a Lululemon or any performance brand that has a fitness app or a connected app.”
Amlani stressed that merchants must go through the customer journey across all channels, as well as social, to discover exactly what those friction points are.
“As soon as that customer feels friction, they’re going to move on to the next brand,” she said.
Asad Ahmed, principal industry solution advisor for retail and e-comm, NetSuite, indicated that small retailers that start exclusively with an e-commerce site often select different bespoke solutions at different phases of their growth. The pitfall here is that many of these solutions don’t smoothly integrate with each other, or may not integrate at all.
“When you start building these solutions out, you can see parts of the picture but you’re never able to see the full picture,” Ahmed said. “That’s what retailers tend to struggle with. Omnichannel isn’t just customer-facing, it’s also enterprise- and internal-facing. Your employees need to see those bits of information as well.”
Ahmed added that many retailers are still uneasy about deploying enterprise systems, mostly due to fears about the transition process itself, namely perceived time and money invested.
The investments are even more vital in today’s constrained global supply chain environment, where retailers have even less certainty of where their product is and how they can get it to the right store. Currently, retail’s biggest supply challenges have been a lack of visibility and detailed reporting, as well as having too little information about their vendors, Ahmed said.
But Marine Layer has been “fairly insulated” from the supply chain woes, according to Lynch, noting that the retailer has leveraged air freight to transport its products from overseas. He noted that during the past 18 months, the company also underwent a significant replatforming of its back-end technology, which resulted in Marine Layer shipping online orders from store stockrooms.
Depending on the season, Marine Layer now ships between 15 and 20 percent of its e-commerce orders from its 48 stores.
“It makes all my planning team look like geniuses, because we don’t strand inventory in the back of houses of a store anymore,” said Lynch. “There might be a regional reason that this particular piece of the assortment doesn’t sell well in Texas. We used to be 100 percent exposed to that just sitting in the back, and we would have to do a pullback and that’s super laborious and costly.”
As seen in Marine Layer’s ship-from-store example, getting the back end tidied up enables stores to flourish and work seamlessly with the e-commerce operation.
“Every department in your company needs to be interconnected,” Ahmed said. “Your marketing needs to know what your supply chain looks like, what your POs look like, when they’re being sent out and when they’re being delivered. If they know when all of that is happening, they can start targeting their marketing based on that. When you talk about the stores, they need to know when the inventory is coming in, and which other stores have the inventory.”
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