Omnichannel initiatives drive sales for chain retailers
May 3, 2016 10:40 AM
Consumers like to shop across multiple channels, and retailers realize the ones that do drive the biggest profits.
Nearly all of the largest retail chains in the U.S. are taking notice—throwing time and money into so-called omnichannel technologies and strategies that more closely link their stores with the web.
For many, it’s about sheer survival.
Internet Retailer’s just-released report, Omnichannel Winners of the Top 500, shows that many chains are building up their omnichannel services, but some do it better than others, and few offer all options. A hands-on review of 30 chains by Internet Retailer research staff showed that buy online, return to store, for example, is common to all. 28 of the chains offer a store locator feature on a mobile app, 25 have scannable barcodes on store products and shelves and 22 offer buy online, pick up in store.
Some notable shortfalls: In-store stock counts were only available on 19 chain retailers’ websites, just 13 offer online price matching and merely three provide in-store mobile promotions.
With consumers routinely researching discretionary purchases online before they shop, whether in stores or via the web, retail chains have little choice but to meld their stores, web and mobile assets, experts and retailers say.
For Nordstrom Inc., a long-term commitment to blending e-commerce and stores was part of a plan dating to 2006 when it began merging online and store inventory. These cross-channel programs have contributed to web sales accounting for a growing percentage of overall sales for the luxury retailer in recent years. Nordstrom, No. 18 in the Internet Retailer 2016 Top 500 Guide, reported online sales of $2.832 billion in 2015, up 20.2% from $2.356 billion in 2014. Online accounted for 19.6% of overall sales in 2015, compared to 17.4% a year earlier and only 8% in 2010.
Bumping up 2015 web sales included free shipping incentives and in-store pickup of online orders among other enticements, but such programs ate into profits, which fell 17% to $600 million. Fiscal 2015 expenses increased 10%. The company said in April it would reduce staff, mostly corporate, by up to 400 in the second quarter to cut expenses by $60 million in 2016.
Nordstrom’s investments in e-commerce have been growing 35% per year over the past five years, chief financial officer Michael Koppel told analysts on the company’s year-end earnings call in February. The company says that rate of investment will slow in 2016, and the money Nordstrom does invest will be more focused.
Nordstrom plans to stay the omnichannel course, Koppel said at a March conference hosted by investment firm UBS. Nordstrom expects online sales to make up 30% of its business by 2020 and the costs of its omnichannel strategy are mitigated in one key respect. “Customers that shop with us in multiple channels spend three to four times more than a customer that shops in one channel,” Koppel said.
Read about how other large chain retailers are putting omnichannel strategies to work in the newly published Omnichannel Winners of the Top 500.
Included in the report are data-filled profiles of the 30 largest retail chains in the U.S., outlining:
1. Financials: 2015 and 2014 web sales, and the portion of total sales that stem from e-commerce in those two years
2. Omnichannel Strategy: Status check of each retailer’s omnichannel efforts, and insight from key executives on the results of those efforts.
3. Omnichannel Capabilities: A check on the presence of 17 omnichannel features such as beacons, the ability to ship orders from store inventory, and to allow store pickup of online orders.
4. Store Visit Findings: Researcher commentary on the effectiveness of those strategies once in store.
5. Key e-commerce contact information, each merchant’s ranking in the Internet Retailer 2016 Top 500 Guide, and much more:
- Charts and tables that outline web sales versus store sales for the largest bricks-and-mortar players
- An overview article analyzing this data, and revealing the successful strategies of key omnichannel players
- An exclusive survey conducted by Internet Retailer that reveals what consumers think about retailer’s omnichannel capabilities
- A feature story that explains why retailers that were historically online-only are now switching it up to open stores
- An entertaining, first-person feature article that puts online retailers’ omnichannel capabilities to the test