Here's how brick-and-mortar boosts online engagement

BI Intelligence

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Opening a physical store can boost a retailer's website traffic from local customers by 52% in six weeks, according to a report from British commercial real estate company British Land.

The study, which used data from e-commerce marketing automation platform Connexity Hitwise, examined a sample of 29 UK retailers and found physical stores created a sustainable increase in digital engagement, with smaller retailers benefiting more from a brick-and-mortar location:

• The boost in web traffic from nearby customers was sustained for at least 15 weeks after the store opening, meaning brick-and-mortar stores can have a positive impact on a retailers’ e-commerce engagement.
• Small retailers typically had a larger increase in digital engagement from opening a physical store. For example, retailers with 30 stores or less saw an average web traffic increase of 84% from local shoppers.

This data highlights the growing importance of omnichannel options in retail, which can help turn this increased digital engagement into higher online and in-store spending.Omnichannel shoppers are particularly valuable for retailers — Ulta found that its omnichannel customers spend 2.7 times more than in-store-only shoppers, for instance. Meanwhile, JC Penney says 40% of customers using its click-and-collect omnichannel option make an additional purchase of more than $50 when they pick up their orders. By providing multiple channels to shop from, retailers can capitalize on this valuable demographic, resulting not only in higher levels of engagement, but also stronger brand loyalty and increased sales.

Brick-and-mortar retailers are caught on the wrong side of the digital shift in retail, with many stuck in a dangerous cycle of falling foot traffic, declining comparable-store sales, and increasing store closures. Over 8,600 retail stores could close this year in the US — more than the previous two years combined, brokerage firm Credit Suisse said in a recent report. Meanwhile, e-commerce pureplays are riding the rise of digital commerce to success — none more so than Amazon, which accounted for 53% of online sales growth in the US last year, according to Slice Intelligence. 

In response, many brick-and-mortar retailers have started to use omnichannel fulfillment methods that leverage their store locations and in-store inventory in order to better compete in e-commerce. These omnichannel services, including ship-from-store and click-and-collect, can help retailers manage the transition to digital by:

• Increasing online sales by offering cheaper, more convenient delivery options for online shoppers.
• Limiting the growth of shipping costs as online sales volumes increase by leveraging store networks for delivery.
• Keeping stores relevant by turning them into fulfillment centers that pull customers in to pick up online orders.

However, few retailers have mastered these new fulfillment services. While these companies have spent years optimizing their supply chain and logistics networks for delivering goods to their stores or directly to customers’ doorsteps, most have yet to figure out how to profitably bring their store locations into the e-commerce delivery process.

Jonathan Camhi, research analyst for BI Intelligence, Business Insider's premium research service, has laid out the case for why retailers must transition to an omnichannel fulfillment model, and the challenges complicating that transition for most companies. This omnichannel fulfillment report also detail the benefits and difficulties involved with specific omnichannel fulfillment services like click-and-collect, ship-to-store, and ship-from-store, providing examples of retailers that have experienced success and struggles with these methods. Lastly, it walks through the steps retailers need to take to optimize omnichannel fulfillment for lower costs and faster delivery times. 

Here are some of the key takeaways from the report:

• Brick-and-mortar retailers must cut delivery times and costs to meet online shoppers’ expectations of free and fast shipping.
• Omnichannel fulfillment services can help retailers achieve that goal while also keeping their stores relevant. 
• However, few retailers have mastered these services, which has led to increasing shipping costs eating into their profit margins.
• In order to optimize costs and realize the full benefits of these omnichannel services, retailers must undertake costly and time-consuming transformations of their logistics, inventory, and store systems and operations.

 In full, the report:

• Details the benefits of omnichannel services like click-and-collect and ship-from-store, including lowering delivery times and costs, and driving in-store traffic and sales.
• Provides examples of the successes and struggles various retailers have experienced with omnichannel delivery.
• Explains why retailers are having trouble managing costs with their omnichannel fulfillment efforts, which are eating into their profits.
• Lays out what steps retailers need to take to optimize costs for their omnichannel operations by placing inventory where it best meets customer demand.

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