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Amazon is saturating the market with new ways to keep customers shopping with them. The recently passed shopping holiday, Amazon Prime Day, garnered record sales numbers, surpassing Amazon\u2019s Black Friday and Cyber Monday. Results like these are causing brick and mortar retailers to think more strategically on how they compete against Amazon and other online-only sellers.<\/p>\n
Many retailers are looking to omnichannel selling as the next differentiator. Retailers like Macy\u2019s, Bed Bath & Beyond, and Home Depot regularly leverage promotions and coupons to encourage in-store-only customers to shop their website and vice versa.<\/p>\n
Harvard Business Review, in an article on making the most of omnichannel retailing, discussed research from a Temple University team to gauge profitability of omnichannel promotions, with special emphasis on one particular variable influencing customers\u2019 decision to shop in-store or online: proximity to the nearest store.<\/p>\n
The researchers randomly selected 56,000 members of a Chinese department store\u2019s loyalty program and sent targeted coupons based on their shopping history:<\/p>\n
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- Coupons redeemable in-store only<\/li>\n
- Coupons redeemable online only<\/li>\n
- Coupons redeemable in either channel<\/li>\n<\/ul>\n
The control group was sent no coupons.<\/p>\n
For a week, the researchers monitored the targeted group\u2019s purchases and their effects on the retail chain\u2019s profits, net of coupon costs, etc., segmenting customers based on their distance from a physical store location.<\/p>\n
Shoppers who live within 5km of a store were found to be insignificantly impacted in their shopping behavior by coupons.<\/p>\n
For shoppers who live further from stores and who had previously only shopped online, profits doubled with the in-store-only coupon, and increased 800% with the omnichannel coupon.
\nProfits fell by 51% from commuting shoppers who previously purchased only in-store but were given coupons redeemable online only.<\/p>\nThe study concluded that omnichannel promotions are more profitable when drawing online-only shoppers to stores, where environmental influences like impulse buys and the ability to try on and experience goods like apparel, makeup, and shoes increase purchase likelihood. Comparing prices, too, is more tedious in stores than online, so shoppers are more likely to purchase what\u2019s in front of them in the aisle.<\/p>\n
Another effective strategy for using coupons to bring shoppers in-store, as seen at Walmart and other retailers, is offering free shipping for in-store pickup options rather than home delivery.<\/p>\n
\u201cIf customers come to your [physical] stores regularly, you should not encourage them to shop online,\u201d said Xueming Luo, marketing professor at Temple University who led the research team.
\nIn light of retail commentators recommending store closures to deal with lost profitability against ecommerce, this research brings surprising good news to retailers looking for ways to optimize their omnichannel retail strategy. Retailers recognize a key factor that observers overlook: it assumes sales from a closed store will become online sales \u2013 but those sales are in fact extremely difficult to win back.<\/p>\nLuo point out marketplace evidence reinforcing advantages of physical retail for an omnichannel strategy: formerly online-only retailers (Amazon included) are investing in brick and mortar locations. \u201cOnline shopping is very goal-oriented and transactional,\u201d Luo says. \u201cTraditional retailers\u2019 strength is the in-store shopping experience, and they need to play that up.\u201d<\/p>\n
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Going omnichannel?<\/h3>\n
See how you can unify your data and retail technologies with Retail Pro to get a 360 degree view of your business and build your omnichannel tech strategy today.<\/p>\n
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Amazon is saturating the market with new ways to keep customers shopping with them. The recently passed shopping holiday, Amazon Prime Day, garnered record sales numbers, surpassing Amazon\u2019s Black Friday and Cyber Monday. Results like these are causing … Continue reading