eCommerce let me down this year. It failed to deliver the exact colour of trainers my daughter requested for Christmas. Instead, I found myself back on the high street at the wrong end of a frustrated queue, in an overly warm shop, eventually getting what she wanted when a staff member took the time to search at the back of the storeroom. Strike one to the physical store.
Chatting to a Research Partner from one of the big four consultancies over coffee, it seems eCommerce may not be all it’s been cracked up to be for retailers either.
In the middle of a conversation about how we are connecting online browsing to physical visits he casually mentioned how noticeable it was that retailers are slow in releasing any profitability figures for their digital operations. “You try finding any data on it,” he challenged. After an admittedly time-restricted search myself, I suspect he’s on to something. There’s plenty on sales and revenues. But practically nothing on profit.
What he said next is presumably nothing new to anyone in eCommerce. The core reason why many digital retail operations may not be profitable is something they can’t really do anything about – returns. It seems just one atypical consumer behaviour is to order a dress in multiple sizes and then send the non-fitting items back. With the resulting collection, damage checking and re-stocking decimating the ‘cheaper online’ margin into the bargain. ASOS’ CEO has claimed reducing just 1% of returns would put £10 million on his company’s bottom line.
My analyst chum also pointed out it then presumably costs far more in staff and consumables like vehicles and fuel for individual items to be picked, packed and driven than for collected items to be hung on a rail and scanned at the till.
Do these joint Achilles heels of returns and higher-per-item operating costs mean it may actually be better for retailers to get a consumer in store, rather than a theoretically cheaper-to-run website?
If so, it’s a case of click-and-collect (C&C) to the rescue. But even that may not be delivering the goods, if you’ll excuse the pun. According to the analyst there doesn’t seem to be much evidence that C&C is leading to any upsell once collectors are in store, which presumably is one of the reasons for giving over valuable retail and storeroom space in the first place.
So, if he’s right, what does a retailer who is committed to digital to do? I can’t fix the issues around the costs of packing and delivering goods, but I think there are lots of things that can be done to increase spend, loyalty and return on investment once you know for sure that a customer is in-store. The keywords that come to mind here are insight and engagement.
It’s entirely possible to connect online browsing history to an account that is collecting an item in store. As the customer collects their TV, jumper or hair dryer, they can be pointed towards complementary products via notifications direct to their smartphone. Unlike online profits, you’ll find plenty of data about how much customers like to use their smartphones in-store.
If we are able to identify through previous purchase history that the customer has a keen interest in fashion then, once in-store, their device can be used to show them what’s trending this week and direct them to the exact location where they’ll find a best seller. Or a virtual catwalk from their favourite blogger. Or maybe a financial incentive to purchase within the next 10 minutes.
The trick is knowing that they are definitely in-store, which C&C can definitely confirm. But we can do that even without a purchase collection. In fact we can go further, as we can know exactly where the consumer is in-store and for how long.
Knowing an app user is in-store because they are detected via beacons means the retailer has the opportunity to use their browsing or purchase history to cross-promote and upsell. Maybe the phrase should be click and connect.
In fact, it’s also entirely possible to do it the other way round. When we know the user has dwelt near an item in-store but it fails to appear in their purchase history, it can be a prominent recommendation on their next visit to the website.
This holistic approach to retail isn’t just omnichannel marketing, it’s the Age of Context, so wisely captured in a book of the same name by Robert Scoble and Shel Israel. I seriously urge you to read this, regardless of whether you are a physical or digital retailer currently – you’ll almost certainly be both in the near future anyway.
As brands like Argos for one are recognising, consumers are ready to engage on mobile devices in-store and they are open to retailers joining their digital and physical experiences together if this will improve the overall customer experience. Context comes from marrying the data you have about a customer to their reason for being in-store, and engaging them on that basis.
It’s this ability to bridge the digital/physical divide using proximity engagement connected to back-end data that will deliver the holy grail of business; competitive advantage.
Imagine a retail store that understands exactly what your preferences are, quickly directs you to them and perhaps even offers enhanced content when you are next to them? And maybe also takes the sale over the smartphone that’s delivering this engagement, saving you time at the tills. I’ll take that over an unconnected store every time. And given how our society is becoming increasingly more digital by nature, I won’t be alone.
Proximity engagement will blur the lines between eCommerce and traditional retail. It can rejuvenate both, but physical stores especially will be given their chance to become the hero in the consumer’s eyes.
