Here’s one way retailers can measure cross-channel influence

Discussion
Photo: RetailWire
Nov 21, 2016
Nikki Baird

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.

How much do stores really influence online and how much does online really influence stores?

The topic came up at a private event I attended in early November focused on omnichannel and the future of the store. How hard it is to measure cross-channel influence is usually one of the first things to surface in such discussions.

I shared findings from RSR’s omnichannel strategy report that showed retailers seem to completely underestimate digital’s influence on stores (and vice versa). Retailers believe online only influences about 30 percent of store sales, and yet companies including Forrester that estimate online influences put that figure at 60 percent or higher.

One attendee, however, pointed to how a store closing could offer some cross-channel insights.

His team had been going through an analytics exercise that looked at sales by customers across channels in a given area to understand the overall health of that trading area. In the middle of the analysis, a store closed and it showed that online sales in that trade area also fell 20 percent.

Twenty percent! That particular trade area took a double hit by closing that store — it lost the store’s sales and the visibility and presence in consumers’ minds to the point that it lost online sales too.

This retailer was lucky that it happened while doing its analysis or else management might not have seen this kind of drop at all. But now we have something to look at too. Whether closing a store or opening a new one, retailers should make sure that part of that process entails a before and after look at customers living in that trade area to see the impact the store had on online sales.

Such an analysis won’t definitively answer the question of how much each channel influences the other, but it could spark a more pragmatic conversation about online/store influence.

DISCUSSION QUESTIONS: What do you think of the cause-and-effect relationship between store openings/closings and cross-channel sales? Do you see any other paths to measuring how one channel influences the other?

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"Shoppers connect the retailer across all channels far more than most of us think."
"There are too many retailers still operating in silos not understanding the effect of channel synchronicity or how to plan against it."
"Bottom line, take a big picture view of the business — stop trying to allocate revenue based on where an order is taken or delivered."

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16 Comments on "Here’s one way retailers can measure cross-channel influence"


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Ralph Jacobson
BrainTrust

I agree with Nikki 100 percent. Most retailers severely underestimate cross-channel influence. We all assume there’s some push and pull from one channel to the other, however shoppers connect the retailer across all channels far more than most of us think.

Another somewhat related point is how metrics are affected across channels. Simple things like if a consumer purchases three shirts online and returns two of them at the store, how are the revenue metrics settles among the channels? And if that store closes and the local market online revenue declines similarly, how do metrics align?

These are critical yet somewhat basic questions to answer.

Herb Sorensen
BrainTrust

I wish I had the metrics to support this, but even without, I agree 100 percent. This is the core driver behind what I call “The Webby Store,” chapter five in my second edition of “Inside the Mind of the Shopper.

Dr. Stephen Needel
BrainTrust

Reminds of all the neuromarketing findings that arise from studies of brain-damaged patients. Perhaps a retail store is as much about advertising as it is about selling. I’d love to see data on the reverse – do online sales go up in a trading area when a store opens?

Bob Phibbs
BrainTrust

That was a great insight to learn. I’m wondering what a brand would do with that information though. Would they decide to leave the store open? I doubt it. The metric I wish someone — anyone — would measure is the cause and effect between store employees and cross-channel sales. The one staring in your eyes when you walk into a store determines how likely you’ll return to the brick-and-mortar store as well as the online version. I would posit that the influence over shoppers and their friends is much larger than anything to be gleaned in bits and bytes.

Charles Dimov
Guest

Fascinating questions and study. If the effects of omnichannel/cross-channel retail work both ways (which seems intuitively sound), the significant implication is whether a brand should consider more of a hub-and-spoke model. In this case a brand might leverage more small and pop-up stores with hubs as the main larger locations. Naturally, they would need a strong order management system to do routing, show customers inventory online at all locations and ensure even the small locations take returns. Could this drive enough exposure and personal contact to drive greater sales?

Nikki — you have truly touched on a fascinating topic with some wide-ranging retail implications!

Mark Ryski
BrainTrust

I’m not surprised by the finding, but I am intrigued. This is a terrific example of just how interconnected channels have become, and how little we all still know about the true influence/impact these channels have on each other. It’s easy enough to conceptualize omnichannel, it’s a much more difficult proposition to measure and ultimately understand the impact.

I have analyzed brick-and-mortar store traffic/conversion rates and compared these to activity on the retailers’ website looking for clues about how online activity may be influencing store visitation and conversion rates. The results were fascinating, but somewhat inconclusive — much more work needs to be done. I think much could be learned from a closer collaboration of brick-and-mortar store analytics and online analytics.

Jasmine Glasheen
BrainTrust
Jasmine Glasheen
Principal Writer & Content Strategist, Jasmine Glasheen & Associates
3 years 8 months ago

The 20 percent sales decline the aforementioned retailer experienced after closing their brick-and-mortar store is just the tip of the iceberg. A brick-and-mortar location not only lends credibility a brand, but it acts as a testing center.

Technology has not eliminated the need to actually touch and experience a product firsthand. One can’t tell what apparel will feel like based on fabric alone. Sure, customers will still order the product online if the website offers a better deal, but retailers ignore the value of tactile experience at their own peril.

Doug Garnett
BrainTrust
Doug Garnett
President, Protonik
3 years 8 months ago

I’ve been surprised when I hear people suggest that store and online aren’t connected and have heard executives suggest that online would increase in an area when a store closed. In mere communication terms, the presence of a store is a huge advantage for a retailer or brand. Physical presence is powerful in driving consumers to think of a retailer when they need something related to that store.

But I’ll offer caution about interpreting the numbers too far. Watching the impact online while opening/closing stores gives us tremendous hints — but we simply can’t measure enough to have it be fully accurate.

That said, the Forrester number has always seemed exaggerated — I believe it’s based purely on consumer recall and not highly-reliable data (if I recall that wrong, I welcome more detail). So settling the influence online at a lower number is in line with my experience.

Ken Cassar
BrainTrust
Ken Cassar
Principal, Cassarco Strategy & Analytic Consultants
3 years 8 months ago

This is a really interesting finding — and fortuitous indeed! I look forward to the day, though, when we move past this discussion. There are certain things that we just take as settled — we don’t calculate the ROI on cleaning the bathrooms, but we do it anyway. We can’t quantify the incremental store traffic that results from air conditioning the store during the summer, but we do it anyway. A well-integrated omnichannel organization ought to be taken for granted at this point, folks.

Ryan Mathews
BrainTrust

There may or may not be, but it will really take some serious study. Stores close for a variety of reasons, one of which is cross-channel sales. But to link a particular closing to cross-channel activity or to gin up projected estimates will take a lot more rigorous analysis.

Camille P. Schuster, PhD.
BrainTrust

Why is it so difficult for retailers to see that consumers see one store and one brand whether the consumer uses a tablet, smartphone, computer, call center or visits the store? It is one company to the consumer and the consumer does not care whether the retailer divides or separates those operations. What happens in one channel affects the other channel. The fact that retailers do not understand the relationship means they do not understand what their consumers are doing. Are you tracking consumers and their activities regardless of channel or are you tracking sales by channel? One is a store-centered approach and one is a consumer-centered approach. If you are not using a consumer-centered approach it does not make any difference if the cross-over influence is 20 percent, 60 percent or 95 percent, because you are going to lose to the competition that is tracking and analyzing what their consumers are doing.

Laura Davis-Taylor
BrainTrust
Laura Davis-Taylor
Chief Strategy Officer, InReality
3 years 8 months ago

How riveting. I would LOVE to see a second wave of this study to understand why — and if there are measures to prevent it based on the insights.

As an industry, we desperately need more studies like this. There are too many retailers still operating in silos not understanding the effect of channel synchronicity or how to plan against it. I am crossing my fingers that this starts a movement!

Mohamed Amer
BrainTrust
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
3 years 8 months ago

Experienced retail hands that have been wildly successful in stores will always think stores first and all else feeds that beast.

New-age retail hands believe online is all the rage and the only path to growth. The store is nothing but a fixed cost and dead weight of pre-historic proportions.

Metrics follow your world view and assumptions. The truth is that retail is about people — whether as shoppers or as employees. Yes, data is growing exponentially and is changing how retailers make business decisions but, at the heart of it, shopping is based on interactions and all interactions (even machine-based) are designed by people, executed by people and involve people.

Bottom line, take a big picture view of the business — stop trying to allocate revenue based on where an order is taken or delivered. Stores and websites are not mutually exclusive, supply chains transcend front-end processes and thoughtfully-designed interaction settings coupled with well-trained people will differentiate the experience. Focus on delighting your customers and understand what that entails.

Adrien Nussenbaum
Guest

It’s true that the cross-channel impact is likely underestimated. There are some other ways to potentially measure the actual impact. For example, tracking the additional purchases made by customers when they visit a store to pick up an online order (or to return something they bought online). Those types of numbers would help to capture the value of that omnichannel approach.

Mark Price
BrainTrust
Mark Price
Managing Partner, Smart Data Solutions, ThreeBridge
3 years 8 months ago

We have successfully measured the impact of store openings and closings at the individual customer level, where you can clearly see the increase in total volume when a customer becomes multichannel and the decrease when that customer loses the retail channel option via a pre-post analysis (accounting for seasonality, of course). If you can track customers across both digital and physical channels, then the data speaks clearly.

Ken Morris
BrainTrust
Ken Morris
Retail industry thought leader
3 years 8 months ago
There is no question about the impact of cross-channel influence. According to a Nielsen Global Survey of E-commerce, 60% of consumers browse online before making an in-store purchase and 51% of consumers browse in-store and buy online. This is strong data that supports the decisions of pure play retailers to expand to other channels — like Amazon and Google opening up physical stores. Trying to measure the impact of a store closing is measuring the downside. Most retailers measure and manage the upside. For example, a simple cross-channel promotion will yield more insight than a store closing. Offer an online customer a coupon only good in the store nearest the ship-to zip code and for a short duration (1 week) and measure the response. Offer another customer the same coupon but at a location further away to measure the sensitivity. Or, provide in-store coupons that are good for online discounts with a coupon code to measure the influence of physical store on online sales. Buy online, pickup in-store (BOPIS) statistics is a direct indication of… Read more »
wpDiscuz
Braintrust
"Shoppers connect the retailer across all channels far more than most of us think."
"There are too many retailers still operating in silos not understanding the effect of channel synchronicity or how to plan against it."
"Bottom line, take a big picture view of the business — stop trying to allocate revenue based on where an order is taken or delivered."

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