Department stores leverage brick-and-mortar locations to create omnichannel experience
Hurt by the gradual decline of the iconic US shopping mall format they long anchored and retail generalists in an era when specialty stores and personalization are on the rise, department stores are having to adjust their business strategies for the digital age. Ecommerce sales are still less than 15% of revenues for most players in the sector, but many that have taken steps toward digital-physical integration are starting to see their work pay off, according to a new eMarketer report, “Department Stores and Digital Commerce: Trends and Benchmarks.”
The persistent industry buzzword “omnichannel” has taken many forms across sectors, and department stores have been at the forefront of attempting to use traditional spaces as a value add rather than a detriment when competing against online pure plays.
“Amazon.com is thought to be the retail killer in ways from a price comparison standpoint and a research comparison standpoint,” said Danielle Bailey, principal at L2 Think Tank. “However, where department stores have an advantage is using and leveraging their physical locations as touchpoints to consumers.”
Seemingly small changes can have big impact. In a
Q4 2014 earnings call, Nordstrom co-president Erik Nordstrom mentioned that allowing in-store returns
of merchandise purchased digitally—a sensible move
for a retailer known for customer service—was a strategy starting to show results. “Well over 60% of our Nordstrom.com returns end up at our full-line stores, and well over 70% HauteLook and Nordstrom Rack returns end up at our Rack stores,” he said. Those in-store returns equaled increased foot traffic—for Nordstrom Rack, that amounted to an additional 1 million retail visits in 2014, Nordstrom said.
Foot traffic is important because of potential impulse purchases, according to Marshal Cohen, chief industry analyst at The NPD Group. “The retailers need you in the store, particularly the department stores. Forty-seven percent of consumers buy on impulse in the store. Online, they only buy 25% on impulse. So, where would I rather have you if I’m a store owner?”
L2’s Bailey attributed some of Nordstrom’s success
to early investment in digital, but also said the retailer
has been able to blend online and offline by adding Guideshops for once online-only menswear retailer Bonobos and more recently in-store studios featuring products from online-only custom footwear company Shoes of Prey. “What [Nordstrom has] done really well is seeing what’s worked online or seeing digital brands that they want to bring in-house,” she said.
Using digital innovations to enhance the in-store shopping experience is an extension of the omnichannel approach. Right now, this encompasses everything from clienteling apps sales associates can use to put together outfits for high-spending customers, to beacons sending real-time offers to smartphones, to interactive dressing room mirrors, to visual search.
Despite retailers wanting to be at the forefront of in-store technology, it is often fulfilling more basic needs that most improves the in-store shopping experience. Much larger percentages of US internet users surveyed by PricewaterhouseCoopers in 2014 said checking online inventory (40%) and self-service checkout (36%) would improve in-store shopping than would digital mirrors (4%) or video walls displaying products (7%).
eMarketer corporate subscription clients can view the full report here.