Retailers apprehensive about Amazon’s expansion can take heart in the fact that the in-store experience is still the biggest driver of sales, according to research presented at L2’s Omnichannel Breakfast on Thursday.
E-commerce accounts for 7% of U.S. retail sales, and that percentage is steadily increasing each quarter. Yet digital shoppers still find physical stores more important than other retail channels. In a 2014 Capgemini survey, 72% of global respondents valued the traditional in-store experience, while 67% prioritized retailer websites.
Consequently, this year saw major Prestige brands like J. Crew and Neiman Marcus adjust their focus from e-commerce to in-store retail. Mass brands like Walmart and Home Depot also returned to focusing on their brick-and-mortar locations.
L2 research suggests that rather than shifting from physical sales to e-commerce, retailers can find opportunity in using technology to innovate the in-store experience. U.S. digital shoppers see the ability to check in-store availability online as the most important omnichannel retail capability. However, few companies have adapted to this need, even J. Crew, whose catalog origins belie its archaic website. Home Depot is an exception: its website lets customers filter products by which ones are available in their local store.
Brick-and-mortar stores play a key role in omnichannel retail. Clothing companies like American Eagle Outfitters offer “reserve, try and buy,” where customers can reserve clothing online and try it on at a physical store before committing. Sears, Kmart and Nordstrom offer curbside pickup, which fuses the convenience of e-commerce with the immediacy of retail purchase.
Even Amazon has picked up on the need to combine e-commerce reach with brick-and-mortar locations. Earlier this year, the retail giant opened a staffed location at Purdue University where students can pick up items they’ve ordered online or return rented textbooks. Amazon is also experimenting with Kindle Trucks, roving electronics vendors that mimic the style of trendy food trucks.
Amazon’s move suggests that the future of retail lies in fewer but more efficient locations. That future could look like Argos’ recently unveiled hub and spoke system, which includes 120 large-format “hub” stores that each serve several small-format “spoke” stores and “digital concept” stores. Inventory is replenished frequently, letting customers choose from thousands of products and pick them up the same day. As omnichannel grows, such unusual retail formats are likely to become increasingly common.
L2 members can view full presentation here.
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