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Which is more expensive – Omnichannel or retail stores?

Retailing is in desperate need of new metrics – "Cost to sell through"

JuralMin, Pixabay.com

By Chris H. Petersen

Omnichannel is all the rage and a still a key topic at most retail conferences. You have seen the phrase used many times in our posts: "Omnichannel is the New Normal". There is little question that omnichannel has become the new way customers shop and purchase across time and place. While omnichannel is normal for consumers, retailers are still scrambling to meet the rising expectations of seamless shopping online, in store, and hybrids of "click and collect". The dirty little secret about omnichannel that is not getting nearly enough attention – omnichannel can cost a lot more than simply running stores. Retailing has entered the age of desperately needing new metrics reflecting the "net cost to sell through and deliver".

Why this is important: On the surface, omnichannel sounds like a panacea to bolster sales. But, some channels are far more costly than stores. CFOs face new challenges of balancing sales versus the increasing cost burden of omnichannel.

7 Critical questions traditional retailer metrics can’t answer

Traditional metrics of sales and share are not enough for omnichannel

Image Credit: patrisyu

By Chris H. Petersen

At the most basic level, retail is a simple business about selling products for more than the retailer paid for them. Historically, retailing was based upon selling from shops. And, even when retailers open virtual stores, the core metrics have been mostly focused on sales, revenue, margin, growth, and market share. In today's omnichannel marketplace, the customer is now the new POS – Point of Sale. They determine where they purchase, how they pay, and where they collect. Retailer systems and metrics were not designed to track "flow" to the consumer. Traditional POS systems are no longer enough when trends shift to "click and collect". Today's retailers are facing new business questions that will require new data, metrics and benchmarking.

Why this is important: You can't manage what you don't measure. Retailers have always measured sales at a location. With today's customers, how those purchases occur and flow in omnichannel paths is just as important as the final sale receipt.

Location is the new cookie …

Tracking your phone location is just like tracking your internet cookie 

Image Credit: Mapichai

The old adage in retail was … Location, Location, Location! That was certainly true in the days before the internet when the physical location of the store was the major critical success factor. Today, store location is still important, but the emphasis on location is increasingly shifting to location of you the consumer. In an omnichannel world, consumers are quite literally the POS – Point of Sale. While online retailers can track your every click on the path to purchase, stores have been flying blind regarding whether you are even in their store. That's about to change in dramatic ways! Customer location analytics and traffic flow will be integral parts of the store of the future. Location is the new "cookie" for physical stores. So, what does this mean for retailers … and for you the consumer?

Why this is important: Cookies have been used to track our online behavior for a long time. Our smartphones are now enabling the new "cookie of place" that retailers are using to track our presence, behavior, and even what we reach for on the shelf!

Place: The final frontier … They can “see” you now!

Trends and issues related to tracking your location

Image Credit: Stuart Miles

Without you realizing it, that smartphone you are carrying announces your presence, and leaves a "breadcrumb trail" of data everywhere you have been. Your smartphone is literally like your internet cookie … it enables retailers and space managers to track your location and behavior. Location based data and analytics is one of the most dynamic trends impacting the future of retail stores and space. It is also being used by many other institutions to plan and manage services. What are the risks and rewards of location based tracking … for retailers and you as the consumer? One thing for sure, if your phone is turned on, someone somewhere is probably watching … and will be more active about offering personal assistance.

Why this is important: Knowing when, where and how people move through "Place" is a huge benefit to retailers and space managers. Consumers can also benefit with a better experience, but there are some trade offs as well.

The elephant in the room no one is acknowledging in retail

CX requires critical KPIs for performance and the performers

Image Credit: Courtesy of Chris Petersen

Everywhere you turn you see the term "omnichannel". And, for those of you following this blog, we have written several posts on how today's consumers are transforming their shopping behavior. Omnichannel shopping means that consumers have unlimited access to product information and pricing. Yet, the majority are still going to stores to make their final purchase. So, what does that mean for the future of retail? Consumers will increasingly have very different expectations for their store trips. They are voting for stores that can provide personalization and service after the sale. In short, the consumer expectation for the store of the future is more than a showroom with wait staff. The real elephant in the room is whether retail stores will invest, measure and recognize the performers that make a difference.

Why this is important: In the "Differentiate or Die" scenario, store associates are a key critical success factor. Yet, most retailers have few, if any, metrics to track peak performers or reward them for their performance that consumers highly value.

Millennials ditching TVs should be a “canary in the coal mine”

Do you have a "canary" or radar for predicting disruptive trends?

Image Credit: Gualberto107; Freedigitalphotos.net

Early coal mines did not have ventilation systems. So, miners would bring a caged canary into new mine shafts. The reason was that canaries are especially sensitive to methane gas and carbon dioxide. The canary's life was often short, but meaningful in terms serving as an early warning system for lethal conditions the miners could not detect. Retailers and brand marketers have been relying on the same metrics and "alerts" for many decades. But, the recent shifts in consumer consumption behaviors may not even show up on these outdated systems. For example, millennials are ditching their TVs in record numbers. What does that mean for retailers? What is the "canary in the coal mine" for todays' omnichannel consumer?

Why this is important: Old habits die hard. Many marketers are clinging to media and metrics of the past when consumers are literally disappearing. The changing pattern of omnichannel consumption requires detecting trends … early!

A quantum leap in store visit conversion … from Google?

Google begins rolling out store visit conversion data to retailers

Image Credit: Cool Design

We have posted previously on the lack of sophistication of tracking what happens with shoppers in retail stores. Our blog post on "Footfalls - The single greatest miss in retail metrics" still receives a lot of interest. There is no doubt that the future of retail stores will require more sophisticated ability to track shopper behaviors and flow within stores. But in today's omnichannel world, the even bigger misses are metrics and tools that track whether online behavior results in a store visit. Turns out that Google is working on that for retailers! Is this yet another example of "big brother" watching, or analytics that will help both the retailers and the consumers?

Why this is important: There has been a seismic shift from traditional media to online advertising. A big question for retailers is whether online ads produce results for their stores, or their e-commerce competitors. Google is rolling out a new service that promises to actually track whether online clicks result in more store visits.

Top Reasons why people buy things online

Trying to understand what drives omnichannel behavior

Image Credit: Naypong; Freedigitalphotos.net

Many of our recent posts have focused on omnichannel. The underlying theme is that retailers don't get to choose, consumers do. What is driving retail today is the changing behavior of consumers. They shop any time and everywhere, but the data shows that they are increasingly shopping online. Why? What do consumers look for most online? The key to future success in omnichannel retailing is developing a fact based approach to understanding consumer online preferences. HubSpot blog just published 8 great resources with stats on consumer online behavior. Some might surprise you, and some will not. It's what you don't know that can kill you.

Why this is important: Marketing is both art and science. Getting smarter about marketing online requires challenging assumptions with some science that substantiates consumer behavior and what they really want online.

7 Critical Questions required for Business Decision Precision

Today's stakes are too high for "Lies, damned lies, and statistics"

Image Credit: Stuart Miles; Freedigitalphotos.net

Collecting data is certainly not new. However, with the advent of "Big Data", there is almost a blind faith that if we can collect more data, link it all together, we will suddenly become more intelligent and make better decisions. The challenge with all the data available today, is how do you make sense out of it? The typical answers are "data mining" and analytics. Just because you put mountains of data through a computer to generate more elegant views of it, doesn't necessarily mean you'll be any smarter! In fact, more analyses often yields paralysis. Today's business decisions often do not require more data … they require asking 7 Key Questions for Decision Precision.

Why this is important: We don't lack data today, we are literally drowning in it. The key to better decisions is not data analyses to create more views, but asking the right questions to narrow the focus on how to accurately measure outcomes.

Which retailers can survive on a 1% conversion rate?

3 Reasons why traditional retail metrics need to be re-examined

Image Credit: CoolDesign; Freedigitalphotos.net

For decades, retailers have been focused on two survival metrics: traffic and conversion rate. Retail marketing and promotions were designed to get people off the couch and into the store. But, traffic means nothing without conversion in terms of a sale based on who is in shopping today. So, who can survive on converting just 1% of traffic into sales? Amazon and the e-tailers would be the logical guess. But, there is in fact a retailer with stores, who is not only surviving, but thriving on a 1% conversion rate. The identity of this retailer might surprise you! It is yet another case study of how traditional metrics need to be re-examined in the context of omni-channel consumer shopping behavior.

Why this is important: The whole is greater than the sum of the parts. Traditional metrics like conversion rate can be misleading without understanding the context. The changing dynamics of omni-channel is creating a need to re-examine all retail KPIs.