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Physical Retail Helps Online: 'Halo Effect'

This is an archived post from OrderDynamics, now Tecsys retail division.
Physical Retail Helps Online: 'Halo Effect' We have all read about the battles between the physical store and e-commerce. Reminds you of the industrial revolution, doesn't it? Recall the headlines about man vs machine? Passionate. Emotional. Exciting. Yet, in the end, it wasn't about humans against machines at all. Today, we don't think twice about it. Would we want society to go back to the 'bad old days' of doing things manually? So too is the storyline in retail. Is it really e-commerce vs bricks and mortar? Or is it that physical retail helps online... and vice versa?

Retail's Battle?

It's not hard to find the doomsayers. Headlines that grab our attention scream: Stores are Being Hit by Online Retailing  (Economist) What the Amazon Effect Means for Retailers (Forbes) Bad News Brick-and-Mortar Stores: The Internet Finally Has you Beat (Adweek) E-commerce Will Overtake Physical Retail in 2024 (Generix Group) Is it really about one OR the other? Do customers HAVE to choose between online shopping or physical store shopping? Can't they have both?

Physical Retail Helps Online

Anecdotally, we knew that physical retail helps online. In 2016, Kohl’s CEO Kevin Mansell pointed out that regions where Kohl's closed physical stores, showed no growth or declining online sales. This was surprising given that online sales grew on average by 12% in that same year. Mansell made an early discovery that physical retail helps online grow. The International Council for Shopping Centers published research that fully supports this idea. The Halo Effect: How Bricks Impacts Clicks shows how physical retail helps online retail. In effect "bricks and clicks are not an 'either or' they are a relationship."  

How Bricks Help Clicks

Surprisingly, ICSC found that when a merchant opened physical - brick and mortar stores in a market, there was a 37% increase in web traffic. For established brands, opening retail stores in a specific market increased online traffic by 27%. Thus the physical space and branding serve as a reminder to consumers. Even more interesting is the drop. When retailers close brick and mortar shops, there is an average 4% decline in web traffic. By sector, the study found that closing stores dropped web traffic by: -9.5%     Fashion and Apparel -7.9%     Department Stores -16.4%   Home Furnishing In one dire case, closing stores for one merchant resulted in a 77% drop in web traffic. Disastrous. From the ICSC research, it is clear that physical retail helps online flourish. Both work together. It is about how click and collect solutions work together with stores, that counts.

Millennials & Omni-channel

[caption id="attachment_11719" align="alignleft" width="328"] Source: ICSC. The Halo Effect, 2018.[/caption] Being the new generation of shoppers, Millennials are critical. The research found that half of all omni-channel shoppers are Millennials. As an emerging and growing customer group, retail chains need to take note. Omni-channel is the seamless combination of online shopping and in-store shopping. In the case of omni-channel, it isn't just about how physical retail helps online shopping. Rather, it's about how you cannot separate online and physical shopping. Shoppers want a single customer experience with both. To build on this point, the study found, "more Millennials shop online only than in-store only. However, when a physical store is present, most will shop at those locations and online." In other words, given the option, Millennials choose both physical and online. On that point, Oliver Chen, a managing director at Cowen & Co., highlights "the name of the game is a seamless customer journey across channels. They (customers) just want to have an experience across mobile, desktop, and physical that is easy for them."

Physical Retail Helps Online AND Vice Versa

It isn't about online beating physical retail anymore. Yes, online is growing fast. And as that happens, more online brands discover that physical retail can help grow the online business too. Companies like Warby Parker, Indochino, Frank & Oak and others learned this important lesson early. But, the future of retail isn't just about how physical retail helps online. It's not the opposite, either. It is about how both work well together ... as a whole. That's the future of retail!   Author:  Charles Dimov is VP of Marketing at OrderDynamics. Charles has 23 years experience in Marketing, Sales and Management across various IT and Technology businesses. Previous roles include Chief of Staff, Director Product Marketing, and Director Sales. Charles has held roles in brand name firms like IBM, Ericsson, HP, ADP, and OrderDynamics.
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