Digital Transformation Conversations

Digital Transformation Conversations

The importance of clicks to bricks, or how digital can unlock even further value from the ever-important physical store

It's received wisdom that people do most of their shopping online. And with online retail sales in the US expected to hit the $370 billion mark by 2017, you can understand this perception. But, as with much received 'wisdom', the reality is more nuanced. In fact, these online channels will only bring in a small slice of the retail sales pie – just 10% of all US retail sales[i]! When it comes down to volume of sales, the brick-and-mortar store still reigns supreme. Sales conversions, too, are much higher in-store – 14 times higher than their e-business counterparts[ii]. If you drive up the numbers, in terms of footfall, you can expect to see your cash registers start ringing.

This isn't that difficult a task. Consumers still love to shop in-store. Research shows that 51% of consumers prefer shopping at physical stores because it allows them to establish a relationship with the merchant.[iii] Not surprising. It is difficult for online stores to replicate the sense of immediacy in terms of getting answers to queries, establishing a personal relationship with the merchant and receiving real-time customer service – all of which are the stronghold of the physical store.

As a retailer, you might therefore ask what the issue is. After all, your customers are happy shopping in-store and more footfall equals more sales in-store. However, there is an opportunity to capitalize on digital to build even more in-store revenue. Taking the digital platforms that Internet-savvy customers like to use, and combining them with the high sales potential of physical stores, creates a winning combination with one result:  additional revenues.

There are plenty of digital tools for use at various points of the purchase cycle. Technologies such as mobile payment are already available at many stores. After installing m-payment devices across its stores, retail sales for Nordstrom jumped by 15.3% in the first quarter of 2012.[iv] So, it's not that retailers aren't using digital already. But there is a lot more that can and needs to be done.

When we looked at all the digital services out there, we realized that each one has the potential to bring in more sales. But there were two services that really stood out in terms of generating revenues in-store. One was the Appointment Booking service and the other was the Online Shopping List service.

The Appointment Booking service works around the concept of sales advisors in the store who assist shoppers and recommend relevant products based upon their requirements. We found that such a service actually encourages shoppers to spend more. In a survey conducted with more than 1,000 North American shoppers, 48% indicated that helpful store associates motivated them to spend more in-store.[v] The service lends itself well to up-selling of complementary products, which increases the average shopping basket size. We found that if a DIY or grocery retailer were to implement such a service, they could expect between 0.25 and 0.1% of additional revenues.[vi]

The online shopping list services connect with the customer early in the purchase cycle. As the name suggests, the service is primarily about creating shopping lists online and getting relevant information around specific products. Once in-store, the app also notifies customers about products that are complementary to items in the list but may not have been previously considered. When you limit customer interactions down to one specific channel, it secures brand loyalty. Since the service recommends complementary products, it increases the store's up-sell potential. We found that a DIY retailer could generate 0.05% of additional revenues by implementing an online shopping list service.[vii]

Both services have significant potential in increasing in-store revenues. But not many retailers are doing much about it. Only one out of every five retailers implements an appointment booking service. And out of the retailers that record consumer requirements, only 25% share personalized offers with their customers.  If you're not using consumer data to create meaningful, personalized experiences, customers will not want to purchase at your store. One would think that a service such as online shopping list would have social media sharing built in. But only 13% of retailers provide for such features in these services. Online shopping lists are meant to be dynamic and changeable in real time. Not offering social media shareability limits the reach and usage of a service that is intrinsically meant to be shared.

Today's consumer wants an omni-channel experience. As much as 60% of consumers expect converged retail channels to be the norm by 2014.[viii] Unless physical stores rise up to meet these demands, they will lose out on customers and sales. To know more about how digital helps you improve offline and online coordination, read our report: From Clicks to Bricks: Driving footfall in-store through digital innovation.

 
[i] Forrester, "US Online Retail Forecast, 2012 To 2017", March 2013
[ii] Capgemini Consulting analysis
[iii] Wanderful Media Research, December 2012
[iv] Forbes, "Nordstrom Sees Sales Boost from Mobile POS Devices", June 2012
[v] Motorola, "Holiday Shopping Study", December 2012
[vi] Capgemini Consulting analysis
[vii] Capgemini Consulting analysis
[viii] The Guardian, "Omni-channel retail: joining up the consumer experience", July 2013

About the author

Subrahmanyam KVJ
Subrahmanyam KVJ
Subrahmanyam KVJ is Manager of Capgemini Consulting’s Digital Transformation Research Institute.

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