6 of the Top Omni-channel Trends Retailers are Using Successfully
Omni-channel retailing. It has been a buzz word for many years, touted as the future of retail. Well the future has arrived. The pandemic has revealed many things but who would have thought it would thrust omni-channel retailing into the spotlight? Well it has. During what has been one of the most tumultuous years in history what has emerged from the devastation in the retail sector is the strength of omni-channel retailers.
While everyone is talking about Amazon analysts are just as bullish on Target, Home Depot and Walmart. eCommerce sales for these retailers skyrocketed during the pandemic and their omni-channel offerings is one of the reasons why. Omni-channel retailing is essentially the ability for a consumer to shop seamlessly across channels. Imagine that a consumer wakes up this morning and buys a new pair of Nike sneakers online. She likes the convenience of ordering on her mobile phone but she wants those shoes today. So she goes to a Nike store to pick up her order. Just like that she’s all set. The retailers that can make that shopping experience as smooth as possible are the ones that are going to win. Your customers don’t care if you have an eCommerce department and a separate retail stores department they just want what they want on the channel of their choice.
It’s important to remember that the vast majority of retail sales still happen in-store, even during a pandemic. In the second quarter of 2020 eCommerce only represented 16.1% of total retail sales in the United States. Stores aren’t going anywhere anytime soon. That’s why creating a smooth and integrated shopping experience is so important. As retailers continue to develop and refine their omni-channel strategies here are the trends that are setting retailers up for success.
1. In-store pick up continues to be a popular service
If someone is shopping from the comfort of their home why would they make a trip to a store to pick up an eCommerce order? One of the primary reasons consumers like click and collect is because it saves time. You don’t have to wait several days to get your order which is often the case if you are not shopping with Amazon. It also gives consumers more of what they want which is control. Instead of hoping your package arrives at a certain time you can simply head to a store at a time of your convenience. Picking up orders in-store also avoids the waste and clutter associated with boxes of online orders.
Most of the top retailers realized many years ago if they wanted to make a dent in the eCommerce market they had to give consumers a variety of ways to shop seamlessly. Take Home Depot. This might surprise you but Home Depot has one of the top five largest eCommerce businesses in the United States. It generated $10 billion in eCommerce sales in 2019. That puts it ahead of retailers like Target and Wayfair which are also known for their eCommerce capabilities.
Back in 2017 Home Depot launched a multi-year strategy called One Home Depot with an $11 billion investment to “further unlock a frictionless interconnected shopping experience allowing our customers to seamlessly blend the digital and physical worlds” said Craig Menear Home Depot’s CEO. This strategy has involved not just improving eCommerce capabilities but a $5 billion investment in Home Depot’s stores. In the first quarter of 2020, Home Depot’s digital sales were up 80% and more than 60% of orders were picked up in a store.
Because so many of Home Depot’s customers pick up their orders in-store the in-store experience takes on added importance. It becomes an opportunity to increase each customer’s basket size when they arrive in-store to pick up their eCommerce order. One of the ways Home Depot has enhanced the in-store experience to ensure it is aligned with the offline experience is with digital signage. Digital signage placed throughout the store allows Home Depot to provide ratings and reviews of merchandise in-store so that customers have quick access to that data while shopping. Reflecting on this investment Menear said: “as a complement to our store investments, we are investing to strengthen the competitive advantages that we have built through the blending of our physical and digital platforms into a more seamless interconnected experience. For example, our chain wide rollout of digital appliance labels connecting ratings from the digital world to the physical world enhancing the in-store shopping experience.”
The reason an initiative like this is meaningful is because it recognizes and appreciates how consumers shop online even when they are in a different channel. Instead of having to take out your phone to conduct a product search and then spending time to look up the reviews, all of the information is right there in plain sight creating a seamless customer experience.
Home Depot has also made an investment in pick up lockers - 1,300 Home Depot stores have lockers where customers can pick up eCommerce orders. This is a highly valued service by customers with 95% of customers rating Home Depot’s pick up service five out of five stars. “[We] have seen a 250 basis point increase in checkout scores for stores with lockers versus those without” said Menear.
More convenience based transactions where customers can order ahead and pick up their orders have become so popular that Starbucks has modified its store strategy. Starbucks stores have always affectionately been known as the “third place” between a customer’s home and work. But Starbucks can’t ignore that many customers are opting to take their orders on the go.
In November of last year, the first Starbucks Pickup location store opened in New York. Starbucks Pickup locations are small and do not have seating but there is enough space to pick up mobile orders. Starbucks is planning to close 400 stores in North America by the end of 2021 and open 300 new stores this year with a focus on pickup and takeaway. 80% of Starbucks transactions are already “on the go” and in the first quarter of 2020 17% of Starbucks transactions in the United States were mobile transactions. "Our vision is that each large city in the US will ultimately have a mix of traditional Starbucks cafés and Starbucks Pickup locations," Starbucks said in a statement.” While the pandemic heightened this trend it was already gaining in popularity.
2. Curbside pickup takes off, boosted by the pandemic
Retailers like Target and Walmart have known for many years that convenient options for consumers to pickup eCommerce orders were important but no one knew that 2020 would be the year when the general public would see the full utility of these services. With 75% of the US population living within 10 miles of a Target store, Target is able to leverage its store network to serve customers better. For example, Target provides a Drive Up service which allows customers to pull into a Target parking lot at nearly 2,000 stores one to two hours after making a purchase online and have Target employees bring their purchase directly to their car.
In Target’s most recent quarter it experienced its strongest sales growth ever. Sales were up by 24.3% in the second quarter and key to that growth is its omni-channel offering. “Our second quarter comparable sales growth of 24.3% is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9% and stores enabling more than three-quarters of Target’s digital sales, which rose nearly 200%,” said Brian Cornell, Target’s CEO. Target’s Drive Up service grew the fastest out of all of Target’s same day eCommerce services, up more than 700% in the second quarter.
“Target definitely smashed it out of the park… It’s very evident that today more than ever [a] good omni-channel strategy is key for any retailer to survive. It’s not just about selling key essentials but really investing in the omni-channel experience – something that Target did five years ago” said Michael Lasser, broadline and hardline retail analyst at UBS.
Target and Walmart are not the only ones focusing on curbside pickup. Fast food retailers are also working on their curbside pickup strategy. In an effort to drive more digital sales Chipotle launched an initiative last year called Chipotlanes. Instead of ordering at a drive thru window or by punching an order on a kiosk located outside, customers using Chipotlanes order using Chipotle’s app or through the company’s website. Once a customer has placed an order they drive up to the drive thru window at a specified time to pick up their order. Speaking about the initiative, Chipotle’s CEO Brian Niccol said: “it’s clear that customers appreciate the added convenience, because these stores generate digital sales far above the national average.” Starbucks is also planning to offer curbside pickup at as many as 1,000 locations.
3. Connected mobile apps bridge the offline and online shopping experience
Retailers are also using mobile apps to provide a more connected shopping experience across channels. If a consumer can start shopping in one channel then seamlessly finish in another that releases a lot friction in the shopping process. For example, how many times have you spent hours browsing online only to find that it was hard for you to remember what you looked at once you arrived in-store at a retailer? In Home Depot’s shopping app customers can create a shopping list then once they arrive at a store Home Depot’s mobile app has functionality built in to direct customers to the location in the store where the product on their shopping list is located. Home Depot describes the functionality as “a GPS for your shopping list. ” The mapping technology in Home Depot’s app makes it easy to move from online browsing to quickly getting what you need in-store.
Kroger has also implemented similar functionally into its app. Last year in two stores Kroger started testing functionality where shoppers could create a shopping list using Kroger’s app and when customers arrive in-store the app guides shoppers along the fastest path to where the item on their shopping list is located in-store. Then as the customer approaches the shelf where the item is located the shelf displays an icon signalling it has the item the customer is looking for. Once a customer has picked up their item and scanned it, the app shows what the next item on their list is and guides them to it.
Another source of friction between shopping online and in-store is when a customer needs to try something on in-store they discovered online. Nordstrom has functionality in its mobile app that allows customers to reserve merchandise online to try-on in-store. Customers can reserve up to ten items they want to try on when they arrive in-store. When a customer is 0.2 miles away from the store a sales associate places their items into a fitting room and notifies the customer when the fitting room is ready. Customers must opt-in on Nordstrom’s app to give Nordstrom their location details. “Geolocation is a big unlock for us. What's important about that is: we know where you are and that's not because we're doing some weird, creepy thing, [but because] it's actually better service for you” says Jamie Nordstrom, President of Nordstrom’s stores.
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4. Offering delivery for offline shoppers satisfies a need
While the conversation often centres around all of the different ways to get customers their online orders as quickly as possible, retailers should also think about the needs of customers shopping offline. We have all had a moment when we bought too many things and now we can’t carry all of our purchases comfortably home on our own. Your customers can always call an Uber but finding ways to make the after sales process seamless is also beneficial.
In China, Alibaba’s Hema grocery chain allows customers to have their groceries delivered to their home once they are done shopping in-store. Customers shopping at Hema can have groceries delivered in 30 minutes for free, if the delivery address is within three kilometers of a Hema store. This is a great way to offer a service that is provided to eCommerce shoppers to offline shoppers as well, further blurring the notion of different channels and instead providing customers exactly what they need when they need it.
5. More options for returns reduces friction
Returns is a key source of friction for both customers and retailers a like. Staples recently announced a program where it will start accepting eCommerce returns from other retailers starting early next year. This program “will alleviate the stress consumers often face when looking for an easy and efficient way to return products,” says Craig Grayson, VP/GMM, print & marketing services at Staples.
Last year Nordstrom announced that its smaller Nordstrom Local stores would accept returns from Kohl’s and Macy’s. Getting returns right is critical for any retailer that offers eCommerce. Until the day arrives when you can just leave your returns on your doorstep to be collected by someone else, it’s a multi-channel endeavour.
Convenient returns is often a factor consumers consider when choosing one retailer over anoother. This is especially the case for consumers that do not have a car to drive packages to the post office for drop off. “We’ve found that 97% of consumers are likely to shop with a retailer again following a positive returns experience,” says Adam Vitarello, president and co-founder of Optoro, the returns processing startup partnering with Staples.
The other benefit of accepting returns from other retailers is that it can boost foot traffic. That is one of the reasons why Kohl’s started accepting returns in its stores from Amazon customers last year.
6. Social commerce is another way to simplify the shopping experience
If omni-channel retailing is about meeting your customers where they are then social commerce is the definition of that. Social commerce is eCommerce meets social media. For the most part consumers in North America engage in very little social commerce. Think about the last time you scrolled through your Instagram feed and saw a great jacket but then lost interest as you were re-directed to the retailer’s website.
Social commerce attempts to allow consumers to move seamlessly across channels. Social media giants like Facebook have been trying to crack social commerce with little success to-date. In this vein, Facebook launched Instagram Checkout which allows consumers to buy merchandise directly on the app but only a limited number of retailers have signed up so far. For example, Sephora launched Instagram Checkout this summer which allows customers to buy brands sold at Sephora directly through their Instagram feeds or Sephora’s Instagram stories. But when it launched only 80 or so out of the 290 brands sold at Sephora were part of the launch. “Instagram Checkout definitely helped jump-start the appeal of completing a purchase on a social platform,” said Debra Aho Williamson, principle analyst at eMarketer. “The idea has been around for years, but never really gained much traction."
But in China, social commerce is booming, expected to reach $242 billion in 2020 up 30% from last year. By the end of 2020 social commerce will represent 11.6% of retail sales in China. One of the apps facilitating social commerce in China is Douyin (TikTok is Douyin’s sister app or the English equivalent and it is also owned by ByteDance). Douyin has 690 million users globally. In 2018 Douyin entered a partnership with Alibaba to allow creators using the site to market their merchandise. This partnership enabled app users to click on links in videos so they can make purchases on third party sites like Alibaba’s Tmall. Recently Douyin banned links to outside eCommerce sites ensuring that all eCommerce sales stay within the app.
The potential for social commerce is one of the reasons Walmart is interested in investing in TikTok. “Shoppable video is the omnichannel trend to watch in 2021,” says Sucharita Kodali, an analyst at Forrester. Outside of China, TikTok recently entered into a deal with Shopify to enable shoppable video ads on the platform. “If you're watching a TikTok video and somebody's got a piece of apparel or an item on it that you really like, what if you could just quickly purchase that item,” says Walmart CEO Doug McMillon. “That's what we're seeing happen in countries around the world. And it's intriguing to us, and we would like to be part of it.”