Brick-and-mortar retail is on a collision path with the reality of supply and demand.
Thanks to Amazon, more people are shopping online, with ecommerce growing three times as fast as overall retail sales. This explains the thousands of store closures we’ve seen over the past couple of years. Moreover, the U.S. is “over-retailed,” with roughly five times more space per capita than any European country. So, there’s no reason to believe the bottom has dropped.
However, for today’s consumer shopping in the era of omnichannel, the line between digital and in-store is blurred. At Shoptalk, a retail and brand-focused conference in Las Vegas, Helena Foulkes, CEO of Hudson’s Bay Company, discussed the link between their retail physical stores and online channels: 97 percent of returns for online purchases happen in stores, half of the store visits start online and half of the online visits result from prior in-store visits.
After attending my second Shoptalk event in the past year, it has become clear that not all players in the brick-and-mortar segment will meet the same fate; there will be winners and losers. And retailers that win in this era will be the ones that embrace technologies to meet the new expectation of personalized and frictionless experiences.
In the past couple of years, we’ve seen some retailers finding ways to do just that. For example, at Saks Fifth Avenue, in-store style advisors use Instagram to promote products and provide clients with personalized curated outfit recommendations on a Saks branded digital platform. Macy’s is rolling out interactive displays in its stores that allow shoppers to find the perfect fragrance through a personality quiz (the same quiz currently on its site) or search for fragrances based on scent notes.
A few digitally native vertical brands, such as Casper and Bonobos, have opened creative, highly experiential physical stores that complement their online experience. Others, like Harry’s, are partnering with major retailers such as Target to establish an in-store presence. Notwithstanding the momentum online, they’ve all come to recognize most purchases—83 cents of every dollar—are made in brick-and-mortar stores.
For most brands, opening their own physical store is not viable; they rely on their retail distribution network. However, the number of brick-and-mortar retailers that will make it across the digital transformation finish line will be in short supply. Therefore, brands must align with those poised to win. Competition will be fierce for positioning at those transformative retailers. So, to ensure a brand’s continued success at those points of sale, they need to become an effective omnichannel partner or risk losing their place to a brand that will.
How does a brand prove itself and win at retail? By creating the ultimate online flagship store that showcases the brand experience and effectively engages consumers on an increasingly digitally led and self-directed path to purchase.
Here are some critical success factors brands need to think about as they look to launch or upgrade their direct-to-consumer online store.
Don’t model your brand’s digital commerce site after a retailer
Too often, brands replicate the Amazon shopping experience. However, according to Adweek Brandweek Insights research, customers don’t shop with brands to save money or for convenience; they shop directly with brands because they “love the brand.”
Offer an immersive brand experience from click to home
JuE Wong, CEO of Moroccanoil, said at Shoptalk, “When [customers] are visiting your brand site, it needs to be like inviting them into your home.”
The site design and user experience must reflect the culture of the brand and what its fans love about it. And that needs to carry all the way to delivery and the unboxing experience. (For example, Gerber’s baby food packaging has a white interior to promote sterility, and every box contains a personal note from the president of the company.)
Leverage the right data and analytics
Adweek Brandweek Insights found that 98 percent of marketers agreed that data can improve the effectiveness of the brand’s overall marketing strategy. Critically, this also means sharing that data with retail partners will help them understand how they can be more successful in converting your customers.
Constantly test to optimize the brand experience and drive conversion
Customers are always evolving. Small, low-cost experiments allow brands to stay ahead of these changes and improve the overall ROI of the site. Additionally, these insights can be used to inform retail partners on developing trends before putting new products on the shelves.
Be smart about pricing
You don’t want to undercut your retailer partners by having the lowest prices online. If you decide to put items on sale, only make them accessible to VIP or loyal customers.
That last point about brands and retailers raises the long-standing question of channel conflict. Tony Puccetti, COO, digital commerce services at Blue Acorn iCi, a customer-experience consultancy owned by Adweek’s parent company Beringer Capital, worked at Puma when they first started their direct-to-consumer program in 2000. The retailers were unhappy at first but then saw positive results within the first 12 to 24 months. “The end customers would go to the Puma site and stores, but then they would go into their local mom-and-pop sports stores or retail chains and ask about the Puma products. Over time, Puma increased revenue across their owned channels, and retailers also saw more foot traffic and revenue.”
Regardless of where the customer journey starts or ends, the individual will visit the brand’s online store at some point. By positioning your brand’s online flagship to complement your winning retail channels, consumers will be assured the best brand experience along their own path to purchase. As Puccetti says, “If you do it right, you and your retail partners will expand and take a bigger market share.”