For years, retailers have been told that to compete in the new ecommerce world, they need to have a well-established omnichannel organization. The 2016 holiday season proves that the time has come—and it is not going away. Retailers that do not have a solid omnichannel strategy that lets customers shop whenever and however they want to shop are going to be left in the dust.
How do I know this? Let’s look at the evidence.
Role of the physical store has changed
December store sales were down 10.7% and saw a 13.4% decline in shopper traffic. However, the average transaction value and sales per shopper metrics were up significantly (5.6% and 3%, respectively).
First Data’s Holiday 2016 SpendTrend report found that overall consumer spending growth increased 4.7%. Whether using a PC, tablet or mobile device, Americans continued the recent trend of making their holiday purchases online as retail ecommerce transactions grew by 12%. Additionally, more than one fifth (21.3%) of all holiday spending was conducted online, a substantial increase from 15.4% last year.
This sends strong signals that the role of the physical store has changed. In this digitally-empowered era, consumers will shop for a specific subset of products in brick and mortar stores: fit products. These are higher value products that shoppers want to try out or try on in the actual store location. For items that are less expensive, commodity, or that they’re already familiar with, they’re buying online.
This indicates the need for a clear omnichannel strategy to take advantage of brick and mortar strengths and maximize opportunities.
Pressure to acquire customers through promotions
According to analysis by DynamicAction, retailers were holding on average 12% more inventory by mid-December than they were in 2015. This led to big pressure to discount to acquire more customers and move inventory. Retailers were therefore promoting much more heavily in 2016 than in 2015. Overall promotions were up 34% overall and 52% specifically within the holiday season.
The combination of too much inventory with too many promotions provides a mixed bag of results. As a retailer, you might have to promote what you were already promoting just to move it off the shelf. However, if you instead have a clear understanding of the buyer’s journey and an omnichannel strategy to support it, you know how customers are going to buy and can properly inform your inventory levels.
Black Friday lost its crown
Historically, Black Friday is the biggest shopping day of the year in terms of people that visited and purchased at a physical store. However, Black Friday was dethroned in 2016 by Christmas Eve Eve (December 23rd).
The biggest reason for this is that About 10 million more Americans shopped online than in stores over Black Friday weekend—it was a large weekend, but people were shopping online. Similarly, Target and Kohl’s reported record online sales on Thanksgiving. Again, this issue is not that people aren’t shopping; people have just changed how and where they are shopping, and retailers must understand and react to that reality.
Omnichannel: The time is now
Holiday 2016 retail performance is proof that the role of stores has changed. Brands are converging their digital and physical touch points into a singular, seamless shopping experience—driven by a thorough understanding of the buyer’s journey. Successful brick and mortar stores are right-sized in footprint and located in high-trafficked areas, staffed optimally around peak traffic hours, and focused on brand awareness, customer acquisition and value-added services, complementing the long-term cultivation of shoppers through various digital touchpoints.
Omnichannel, omnichannel, omnichannel. You’re been hearing it for a while. Now is the time to act.