Are Retailers Neglecting Stores For Digital Channels?
A screenmediamag.com story claims retailers are neglecting stores for their e-commerce websites when allocating marketing dollars. Referring to research from the Platt Institute, the article emphasizes what it calls a "broad discontinuity" between what retailers should be doing and what they actually are.
Retailers apparently see social, e-mail, mobile and direct channels taking precedence over bricks and mortar stores. Investment aimed at future — rather than current — sales also focuses on "direct mail and catalogues, digital marketplace and call centers," according to the report of the research.
Platt’s study, Retail Attitudes and Adoption Trends of Multi-Channel and Omni-Channel Marketing, focusing primarily on North American stores, concludes that retailers consider their websites to be worthy of greater investment. Stores are allegedly "seen as the third best channel in ROI terms, after websites and direct sales."
Platt worked with the American Marketing Association (AMA), supported by Digital Signage Expo, to seek insights into retailers’ attitudes to multi- and omni-channel marketing, present and future. "Perceived channel ROI," integrated marketing and related challenges were queried for both stores and websites.
The study identified under-investment in physical selling locations and social media, and over-investment in direct mail, catalogs and digital marketplaces, although there are considerable plans being made to evaluate and amend strategies.
Earlier this year, VentureBeat reported on research from Forrester and Shop.org into the ways retailers are directing their marketing spend. While most online spending concentrates on search, "reaching relevant consumers remains a struggle." Social media is used "to tell and distribute ‘brand stories’ rather than drive direct sales," while mobile obviously concentrates on reaching consumers directly through the devices they carry around with them. Of 65 respondents, 59 percent were store-based, perhaps lending support to Platt’s findings.
- Retailers ignore stores, fritter budgets on baubles – screenmediamag.com
- PRI Research article examines retail attitudes and adoption trends of multi-channel and omni-channel marketing – rAVe Publications
- Retail Attitudes and Adoption Trends of Multi-Channel and Omni-Channel Marketing – Platt Retail Institute
- Online retailers are still trying to lure you in with search, says Forrester – VentureBeat
- Are you part of retailers’ $14m digital budgets? – Media Sales Today
Discussion Questions
Are retailers achieving a sensible balance between marketing off and online? Are there any you can point to that are emphasizing digital channels to the detriment of their brick & mortar business or vice versa?
I’ll be interested to hear what real live retailers have to say on this question…but the study doesn’t reflect what I’m hearing from CIOs.
There has never been more interest in enhancing the store experience. There’s huge interest in interacting with the customer in the store, and they’re looking at mobile payments to digital signage and data analysis that reveals personal preferences.
When study after study comes back, Millennials are most likely to browse online and buy in-store; when studies like this show retailers chasing the shiny objects in the future, it seems the smart ones are continuing to balance their resources to be fully present in 2013.
Depends on the retailer, the market and the channel. But all in all, I see a great many retailers with (expensive) half-assed digital efforts that clearly have not been thought out in terms of strategy and ROI. Sure, some of this stuff is very sexy and wins awards in New York, but is it truly 1.) paying for itself or 2.) providing differentiation to shoppers?
We are at an interesting time in the nascent omnichannel transition. While there is a surface understanding that customers move between different screens and physical stores on their various paths to purchase (and 2013 has seen the an amazing proliferation of “omnichannel” job titles throughout retailers’ organizations) the deeper implications aren’t yet broadly realized.
More than 90% of retail still happens in-store. Take Amazon’s sales out of that equation and the number for retailers with brick & mortar channels is even higher. But a lot of the influence on in-store sales happens through mobile devices. Late last year, Deloitte published a study showing that by 2016, smartphones are likely to influence between 17% and 21% of US retail purchases equating to $628-782B in sales. (They now think they underestimated that number.)
A primary challenge for retailers is to understand how digital marketing dollars drive in-store sales. And then invest accordingly. This challenge is amplified by many organizational structures that separate digital/physical store operations and the way those discrete teams’ success are measured – usually as sales within their own channels.
It is likely that we’ll see broad groups of winners and losers as retailers figure out (or not) the relationships between digital and in-store.
The balance is more at hand than this study wants us to believe. Retailers have both interests in mind and in action plans. One group within the hierarchy seems to be focusing on today (in store) and the other is looking more futuristic (e-commerce).
It is not a question of “either or,” but how to make investments integrated and seamless to create leverage across all channels consumers want to shop.
In a recent study by Accenture, 65% consumers reported that they “webroomed” vs. 62% who said they they “showroomed.” Webrooming is the opposite of showrooming – it is when consumers shop online but purchase in-store.
So investments in digital and online may in fact have a great benefit for stores if executed properly.
The store is a great place for customers to congregate. The experience is social, local, (and to get to the store you have to be mobile…) and it’s hard to beat the experience of touching, feeling, or trying something on before you buy.
By the numbers sales fall heavily into the in-store, vs. the online category. Sometimes it’s easy to confuse the marketing spend on branding, vs. generating traffic, vs. selling product and remember that a Retail Marketeer needs to pay attention to all of those categories.
I haven’t read the report and at 58 pages, its going to take me a few days to get to it, but if what the Platt Retail Institute is suggesting is accurate, then retailers are making a conscious decision to focus on online over their brick & mortar assets.
If that’s true and they are okay with migrating orders from one sales channel to another, they understand they will need to reduce their real estate footprint over time and can execute effectively in doing that, that’s their decision to make and I don’t see any issues with it. The challenge will be knowing which retailers can do this well vs. the ones that won’t.
What doesn’t make sense to me is the investment in catalogs when you have the online presence. That to me seems like a logical place to shrink one’s investment given the cost. Most catalog companies get this as they were the first targets for eCommerce companies in the mid and late 90s because they already managed transactions where the customer wasn’t standing at the register when paying and they shipped packages to the customers’ homes.
Overall, around the world, I see far more investment in physical stores versus online presences for those retailers that have significant presences of both. The physical store is still the backbone of the retailer that has its roots in stores. Even pure online retailers are thinking about or have already invested in physical stores.
I just recently attended a meeting with a few of the largest retailers we all know. Top merchandising and store execs attended. It was a small group and we talked about this area. A main point discussed was the need to enhance the store level roles by using mobile tech – especially BYOD situations. Leverage the ecomm element within the store and capitalize on the use of the web by the store teams as they serve shoppers.
Big word regarding all of this was balancing the spend of capital so that the resources best serve the shopper based on the region.
No. But why should we expect this? Retailers are reacting to what they see as the most important marketing spend for this particular time. The growth is in the Internet. Maximizing the Internet presence of a retailer means increasing sales at a lower cost. Brick and mortar stores cannot offer this.
I think that retailers are SMART to pay attention to the implementation of, importance of, and operation of digital channels. In the future – and for a few select retailers currently – flow between the digital channels and brick and mortar should be liquid and smooth.
Shop and purchase online will only grow as the last decade has shown. However there is a LOT to be said for touching and trying on items, seeing them and their color in person. Evaluating the quality in your hand. Also, let us remember that the brick and mortar store, as well as the online site both need to be the BEST face that the particular retailer can show. Both experiences should compliment one another.
Neglecting brick and mortar can be acceptable for a time as digital is introduced or perfected, but the physical store cannot be neglected for long going forward, and remains the ultimate representation of “brand.”
As with many studies, size of retailer tells a compelling story. Larger retailers are 20 points more likely to be implementing omni-channel marketing than smaller retailers, according to Platt.
This follows a general pattern: While larger retailers spend more online, smaller retailers lag.
Small retailers are less likely to have websites than other local businesses, according to BIA/Kelsey research. When they do, they spend less on them. When they have Facebook pages they update them less frequently. Small retailers are less likely than other SMBs to keep customer lists.
Yet small retailers may serve a more online savvy market. As stated in the Shop.org study, the percent of emails first opened on a smart phone are 28% for all retailers and 42% for small retailers.
Apparently, the digital divide between individual demographics is true in retail firmographics as well.
I think the balance is dependent on the merchandising and brand strategy of the retailer we are talking about. Most retailers have a tendency to swing between online and offline investment bursts due to management silos competing for resources.
There are over 32 different media forms that Influence consumer purchase. Designing the proper allocation for the mix of media depends upon the product target audience, product category, and distribution channel of the retailer’s goods and services (brick & mortar, online, catalog, or digital device). A blanket statement one form of media is being over-emphasized to the detriment of another can’t and shouldn’t be made.
Promotional media includes the impact of direct mail, coupons, advertising inserts, AND in-store promotion. Platt’s studies in regards are correct in projecting the importance of “in-store.” This media form is second only to word of mouth in terms of influence on the most consumers.
That, however, does not mean that Online should be trimmed. Based on the annual Prosper Media Behaviors & Influence Study (MBI), Online is playing an increasingly stronger influential role among consumers – particularly Millennial and Generation X, as well as minority populations. Online/Internet should be earning a greater share of advertising spend, not less.