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Analysis: Sorting out omnichannel


E-commerce isn’t a zero-sum game, despite a persistent perception that online sales always come at the expense of in-store sales. Rather, as most retailers that have successfully melded the two channels can attest, each of online, in-store, and mobile commerce channels can enhance the others. Research shows that shoppers who “channel surf” across online and in-store environments tend to spend more in each than single-channel patrons.

In May, CBRE will debut its “Definitive Guide to Omnichannel Real Estate: Knowledge Center.” The online hub will provide detailed, data-supported answers to 20 key questions about the intersection of e-commerce and bricks-and-mortar retail.

What follows is a sneak peek at a report that provides some answers to those questions in an effort to bolster omnichannel hype with facts about how digital strategies benefit retailers and why stores remain a key part of their strategies.

Defining omnichannel

The meaning of omnichannel may seem obvious: Retailers selling goods online and in stores. But that’s not the end of it. For consumers, the omnichannel experience should be seamless as they move between channels. It should allow them to order an item online and return it in the store without a hiccup. The retailer’s brand, its culture, and its prices should be consistent across channels. What that requires of retailers is extensive integration of systems, personnel, and real estate.

CBRE Research — M-commerce total shares and share of e-commerceMobile mastery

Retailers should prepare for mobile devices, namely smartphones, to become the dominant platform for e-commerce in short order. Research firm eMarketer forecasts that mobile devices will facilitate $424 billion of e-commerce — a 54% share — by 2021. Driving this trend is near ubiquitous adoption of smartphones and availability of Wi-Fi. Shoppers often research their anticipated purchases online before visiting a store, and many continue their research on their phones while in the store. Several retailers have already incorporated smartphones into the shopping process. Sephora allows shoppers to try on lipstick shades virtually by using their own image on their phones. Shoppers also can use their phones to access beauty information from in-store kiosks.

E-commerce’s share

Determining e-commerce’s share of retail sales can lead to confusion because there are so many ways of calculating it. The U.S. Commerce Department tallied $453.5 billion in online sales in the United States in 2017. If that figure is calculated as a percentage of all retail sales, including food and beverage, then e-commerce’s share is 7.9%. If the scope of retail sales is limited to mall-category sales, e-commerce’s share is 26.2%. The best measure in most cases is to calculate e-commerce as a percentage of all retail sales excluding food and beverage, which put it at 8.9% in 2017.

Online’s opportunities

Retailers gain many advantages from operating online, but the primary benefits are the multiple opportunities to interact with customers and the data that can be collected to better serve them. Whereas retailers in past decades used primarily passive advertising, they now have multiple touchpoints to interact with customers through tailored online ads, proprietary apps, email, text messages, and social media. Additionally, e-commerce provides a wealth of data on the who, where, when, how — and sometimes why — of shopping habits through records of browsing and transactions. Mobile-phone tracking can reveal customer traffic patterns around a shopping center or trade area. That data then can be used for a range of analytics, including conversion rates, predictive analytics, and targeted promotions.

Do shoppers really prefer online

A common misconception by shoppers, media, and industry players alike is that consumers increasingly prefer shopping online and that e-commerce eventually will overtake in-store shopping as the dominant shopping channel. The truth: Shoppers prefer using multiple channels for a purchase. While the final transaction will take place either online or in a store, the entire process of researching, testing, deciding to purchase, completing a transaction, and receiving the item often spans both channels. A 2018 study by Forrester Research found that 38.5% of in-store purchases were digitally influenced in that the shopper browsed, researched or price-compared the item online first. In turn, the store’s role has changed beyond being solely a transaction venue to also serving as a showroom for sampling items and experiencing the brand.

CBRE Research — Percentage of offline sales that are digitally influenced

Three adaptation strategies

There’s no surefire formula for omnichannel success, but three strategies have emerged as favored options for retailers. First, retailers are focusing on improving their in-store experience, such as how Nordstrom’s Trunk Club has done with its “clubhouses,” complete with bars, personal shoppers, and semi-private living rooms. Second, many retailers use stores to fill online orders, including programs to encourage in-store pickup of online orders and returns. Third, retailers have diversified store formats to reach multiple audiences. Target and others have introduced smaller-format stores for dense urban markets. Nordstrom rolled out its Nordstrom Local concept of smaller stores focused on services. Meanwhile, more retailers are using pop-up stores to test new concepts and locations.

Reach varies by category

Retailers, landlords, and real estate investors alike are wise to be aware of e-commerce’s penetration and growth rate in various retail categories. For example, home improvement merchandise is among the smallest e-commerce categories in retail with online sales of $9.6 billion in 2017, but perhaps not for long. Forrester Research predicts the home improvement category will generate one of the largest online growth rates — nearly 20% — between now and 2022. The highest rates of e-commerce penetration last year were in the categories of computers (78% of sales were online), books (66%), and small appliances (49%). The lowest were in food and beverage (3%), home improvement (3%) and furniture (8%).

CBRE Research — Select e-commerce sales by product category

Melina Corde

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