Online Drives Offline
By Tom Ryan
Consumers who research products like televisions and digital cameras online spend an average of 10 percent more in-store than their non-web searching counterparts, according to research from Yahoo! and ChannelForce.
The survey involved 1,100 in-person interviews conducted between February and March at Best Buy, Circuit City, Fry’s Electronics and Target. It sampled both purchasers and those who shopped for the products but didn’t buy. Respondents were asked how much education they had on their desired products when they walked in the store, where and how they researched the products, and the key sources that persuaded them to make a brand decision for the purchase.
Key findings include:
- Internet primary research tool: 75 percent of those who researched purchases before visiting a store used the internet as their primary source of information. The leading online resources were retail websites (73 percent), manufacturer websites (68 percent) and search engines (49 percent).
- Internet researchers spend more: Consumers who use search engines
to research online spend 10 percent more than non-searchers. Those who search
spend an average of $31 more on digital cameras and $46 more on digital camera
packages; and an average of $139 more on TVs and $190 on TV packages. - Internet researchers ready to buy: More than 80 percent of consumers
researching before making a purchase end up buying a brand from their original
consideration set. The remaining 20 percent said an in-store sales person
was highly influential in their decision. - Demographics skew male, young, higher income: Men (44 percent) are
much more likely than women (27 percent) to regularly shop this way. Among
age groups, those ages 25 to 34 (41 percent) are the most avid cross-channel
shoppers vs. 55 to 64 (31 percent), and 65 and older (23 percent). Consumers
with annual incomes of at least $50,000 (44 percent) are more likely to shop
in this manner than consumers with lower incomes (28 percent).
“We know that the brand experience begins well before the shopper walks into the store,” said Kurt Higgins, president of ChannelForce.
“Manufacturers and retailers should consider this information not only for marketing, but also for continuously educating and evangelizing store personnel.”
Jeffrey Grau, eMarketer senior analyst, said, “Internet-influenced store sales are greater than online sales. And it is also likely that the gap will widen as internet-influenced sales increase at a faster rate than online sales.”
Discussion Questions: Did anything surprise you about the findings of the online research study? How can retailers and manufacturers do a better job driving brick & mortar purchases through their websites?
Not surprising at all, as our research shows the value of the internet to the cross-channel shopper as a research tool. I think the main message to retailers about all this, be it information, ratings, etc., is that consumers want to make an informed purchase and they’re not always getting the support and information they need from store associates. As retailers look to expand the use of in-store TV, I hope they’ll think about using the medium as a means to inform and enrich product information, not just a way to place more generic ads in store. Awareness isn’t the issue at point of sale but the ability to make a sound purchasing decision just might be.
This clearly highlights the need for educated in-store employees, and shows that retailers can no longer “get away” with having uninformed associates to support the customer.
I remember reading an article not too long ago that identified that most online shoppers were usually more educated about the product type than the assistant in-store, trying to support their purchase. It’s key that retailers provide as much information within the store as possible to aid the purchasing decision; most shoppers research online to ensure that they identify the product(s) that best fits their needs, are informed of strong positive reviews and understand the price point. There is no reason why the retailer couldn’t provide this information within the store environment, using touch screen technology, or even supporting hard copy material. Consumers want to have peace of mind with their purchase, especially electronic acquisition, where so many options are available.
Having recently purchased a digital camera, I conducted all of my research online. The main decision points that I felt important were not only that the product covered the main functionality requirements I wanted, but more importantly, that I could also see examples of output and read customer reviews. Once I had found the camera that best met my needs, I simply searched for the best price and in this case, that was online.
The customer online research for items includes reviews from “independent” sites in many cases. In addition to price the consumer is interested in the reliability and features of a product. Lately, many retailers are including reviews of products post purchase from their customers. Now they have a more captive audience from their customer base. Also, retailers could use cnet, epinion, etc. to select merchandise for sale and charge more for the higher rated items. Even in this price conscious marketplace, there are those who will invest in quality.
No surprise, of course. From the June issue of Integrated Retailing:
How much does online research influence in-store sales? Oh, about $400 billion worth annually, at present, but on pace to surpass $1.1 trillion by 2012. That’s all. That’s a 16% (and rapidly growing) share of total retail purchases today, but includes more than half of all purchases of cars, consumer electronics, computers and appliances, and high percentages of such products as tools, hardware, garden supplies, home decor and clothing.
According to Forrester, 51% of consumers research online before buying offline. Why don’t they buy online? Speed, cost, service and convenience. That’s all! That’s not to say these consumers aren’t buying online: 83% of cross-channel shoppers also regularly make online purchases.
Cross-channel shoppers are younger, richer, more educated and more tech-savvy than the general market. More proof these are the most desirable customers: 45% say they buy other items once they’re in the store, spending an average of $154 on items other than those researched online.
Simply put, cross-channel shopping and selling is the future of retail. Retailers who master it will secure their future success.
As to the second question–how–that involves many factors. These include associate knowledge, shopping environment and experience, in-store access to online inventory ordering, CMR, etc. That’s a more customized question.
In-store kiosks and web-to-store pick-up to save on shipping are two very good methods to use the web to drive in store sales.
The limitation of any retail store is that it can only sell what it has physically on hand at any given moment. In-store kiosks provide the chance to save the sale when a SKU runs out of stock in the store, but inventory is still available. The customer can also be given the option for discounted overnight home delivery or free pick-up in-store.
Customers who shop online usually gain access to a broader assortment and special order capabilities and can opt to pick up the purchase in the store location of their choice. This saves the customer shipping and gets them into the store where most likely, additional purchases are made.
The web is a tool. In the hands of merchandising craftsmen, great things are created.
Consumers have tremendous control, so it is even more important for retailers to identify and understand their consumers. If you know who your valuable, profitable, and/or frequent consumers are and what they purchase, then you have some idea of their purchase behavior. If you do or purchase additional research to understand trends regarding that group of consumers you have a better picture.
You also want to know how those consumers make decisions. Then you may want to allow consumers to access independent and/or consumer reviews. The retailer then would want to make sure that the products in the consumers’ choice set that get good reviews are available at the store for a good price.
Another retailer approach would be to make sure that the employees in the store really do have enough training and product information to actually assist consumers in making decisions. Half-hearted sales attempts, pushing specific products, or knowing on the information on the package is not sufficient to make this alternative work well.
This is half our business: helping our CPG clients better understand who is visiting their brand websites and learning whether that interaction is leading to in-store purchases with the use of coupons that close the “engagement loop.” Consumer visits website, learns about product, registers, gets coupon, redeems it, brand gets report showing which registered consumers redeemed. Creates a real feedback loop and ROI measurement for the website.
Retailers can and should use the same tactics to close the loop. They already have a variety of tactics that involve consumers self-identifying in some way when they visit the store: a 10% off postcard, a free gift when you mention the secret word, a coupon. Any of these tactics can be adapted to the online experience with the goal of closing the engagement loop and identifying web visitors when they show up in the store.
Every retailer needs to know how online activity drives brick and mortar activity. But most don’t. The first thing in this process is to recognize that it is one shopper not two. And it’s one inventory, not two. Online retailers need to leverage their in-store inventories to drive increased sales and to drive traffic to the stores.
Retailers need to look at how they measure success. What’s the average spend online vs. offline? Gross margin? What are the leading sellers online? What are the pages most often accessed? What are the conversion rates for every category and price point?
How many of a retailer’s customers are first visiting the web? What’s their conversion rate in comparison to shoppers who haven’t visited the web store?
Old measures are woefully inadequate. For example, a key measurement of every retailer is comp sales. That’s a ridiculously shallow measure if a significant percentage of customers are buying online. Retailers must look regionally at sales performance to ensure how they understand if they are comping or not.
This is all about understanding how people shop and meeting their needs accordingly. If we see that folks that research online spend more in-store, we need to make it easy for them to search, shop and buy…no matter where the eventual purchase ends up. To address this (and the question about how to drive more brick & mortar purchases from sites), it’s a matter of ensuring the channels are synched properly and we create an easy path down the purchase funnel. To expand, these two channels should work together relevantly based on shopper needs…and the bridges between the two need to be built properly. This starts to happen when retailers get inside the minds of their shoppers and ensure that the online and in-store departments work together to support (and incent!) the buying process. Sounds simple, but many aren’t quite there yet!
Retailers need to make their in-store inventory more easily available to online users. That’s the next link in the chain from a consumer’s perspective–using online to figure out what product they want, and then locating the best place to get it, but in those cases where you just have to see it before you buy it–how big DOES that 50 inch plasma really look?–retailers need to make it easy for consumers to find their way to the right store. The worst thing that can happen in bridging online and in-store would be to send a consumer to a store that doesn’t have what they’re looking for. Consumers don’t care how your supply chain works. They want to buy anywhere and get anywhere.
Seems obvious to me. In the early days, retailers were concerned that online would erode brick and mortar. Now, they realize that it is complementary. What impact the recent Supreme Court decision regarding the ability of manufacturers to set minimum prices for their products has on online/offline will be very interesting to watch.
There really isn’t too much surprise here. As to what could be done–how about establishing slave terminals in-store that link customers to your website? Or, how about rationalizing the supply chain? Why, for example, can’t Barnes & Noble get a book to customer ordering from their store as quickly as that customer could get it from Amazon?
This data shows that customers are now relying on their own research to make purchasing decisions. The internet can be a wonderful thing and there is a huge amount of information at user’s fingertips but I think that it’s the starting point for consumers. A well designed and easy to navigate website will bring customers in, but it takes a well informed, knowledgeable associate to close the sale and that could be the missing link in driving retail sales. Retailers need to back up their great websites with even greater service at the store level. Nothing can replace the touchy-feely emotions that consumers need to make purchases.
Obviously, I can’t quantify the belief of online research adding sales to bricks and mortar stores. But it intuitively makes sense.
However, the disconnect is that the potential value of reinforcing online research needs to start with a store visit; especially, on the more complex and higher priced products.
Without using price, there can be a number of marketing tools to bridge the store visit with online research–therefore neutralizing the current disconnect. Hmmmmmmmmmm
Mad Marketing is alive with the combination of the online and bricks and mortar partnership.
Every bricks and mortar retailer would like to have a killer eCommerce web site that enjoys huge traffic. Even though the technology costs only a fraction of a few years ago, the item maintenance (photography, exact specifications, updates due to new items and stockouts, competitive comparisons, description wording) can be very labor intensive. Certainly the electronics business, the low-margin poster child, is challenged by the constant need for detailed updates. But most retail businesses are similarly challenged. Even more frustrating, the most descriptive helpful web site might just help some other retailer with a price $1 less actually sell the goods. It’s so easy to get the info you need and with a few clicks find some other site for $1 less, even if the descriptions aren’t as good.
Makes sense that online product research and higher spending are correlated. But I smell another classic instance of cause-effect reversal.
Spending is not higher because shoppers prepare with online research; shoppers are motivated to search online because they are already planning to spend a lot.
They are seeking assurance before the fact that the high-ticket product they are preparing to buy is in fact a wise investment–both in quality and price.
How do I know this? Because I do it too.