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Forrester: Retailers still investing in new stores

With the cost of operating an e-commerce site more costly than ever, retailers clearly see the value of physical stores.

That’s according to a survey conducted by Forrester for the National Retail Federation in which more than half (54%) of retailers said they would open new stores, and overall, 36% of respondents said they would have a higher store count in 2019 than in 2018. Only 7% of respondents said that their net store count would decrease. A significant number of retailers (38%) reported that they would experiment in 2019 with flexible formats like pop-ups to generate brand awareness and avoid the costs of long-term leases.

According to “The State of Retailing Online 2019” study, it is more expensive than ever to operate an e-commerce site. Approximately one-third of retailers surveyed reported increases in expenses ranging from their IT and marketing budgets to fulfillment and customer service costs.

Also, more merchants this year reported that their average order values decreased, despite conversion rates having increased for many retailers.

To bolster their customers’ store and digital experiences, increasingly customer-centric retailers are investing in omnichannel fulfillment services, personalization tactics and mobile marketing, according to the study. They are also making strides in better measurement and refined omnichannel programs.

“Retailers are evolving with customers’ shopping behaviors by creating a seamless shopping experience online and in store,” said NRF VP of research development and industry analysis Mark Mathews. “From pop-up stores to social marketing, retailers are finding innovative ways to engage and acquire new customers.”

The study found that omnichannel programs are still a work in progress. A significant portion of retailers surveyed this year, for instance, are just now investing in tactics like “buy online, pick up in-store,” which is the most common area of investment reported for 2019. The study noted that retailers still face a number of challenges with respect to omnichannel, including “elusive” endorsement by the C-suite.

“The success of any cross-channel initiative depends on the senior-most team members endorsing such programs,” the report noted. “Several senior executives whom Forrester interviewed in 2018 still don’t prioritize digital channels enough and focus instead on their core businesses and historic capabilities.”

Another challenge is the lack of inventory visibility. The most important investment for any omnichannel program is to ensure that shoppers, store associates, and suppliers know which products are where in every store, the report noted. Yet many retailers surveyed have still not achieved that vision: 56% said that inventory accuracy was a problem for their omnichannel efforts. And 65% said that another challenge is having inventory planning systems that forecast cross-channel demand.

Retailers also face challenges with regards to personalization. Most personalization in retail today happens largely on websites and in email marketing. Limited metrics, the inability to track shoppers across multiple touchpoints, and incomplete marketing attribution hinder deeper content personalization efforts.
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