The graph above from L2’s Digital IQ Index: Big Box shows many forward-thinking Big Box retailers have experienced a decline in margin expansion since 2010. Best Buy, for example ranks 6th of 64 brands in the study and in the Gifted class. Yet, its operating margin has declined by 235 basis points year-over-year since 2010. Walgreens, Kohl’s and Staples are other Gifted brands with little improvement in operating margins.
The phenomenon is indicative of how capital-intensive digital and omnichannel investments are, and the fact that many Big Box brands are still investing. As shown in the graph below, the majority of retailers have implemented basic features such as buying online and return at the store (73%). Yet, adoption of sophisticated features such as ship-from-store lags.
Brands do not have the option of slowing down their omnichannel investments as consumers increasingly expect to buy, return, fulfill, and return products everywhere. Significant gaps exist between what consumers expect and what brands can offer. For example 71% of consumers expect to see real-time inventory on the brand site, a service only 59% of brands offer.