Merchant Innovation

Retailers Want To Grow, But Can’t Agree On How

Just about every retailer knows that if they’re not ready to adapt to changes in the market, they might as well close up shop. Whether it is quickly and efficiently setting up eCommerce operations on every social network imaginable or managing stock inventory with a more data-driven edge, it can seem at times like there are more ways to innovate than retailers capable of attempting them.

At least, that’s what the latest study from HRC Advisory suggested.

In an investigation into what strategies help retailers achieve balance in omnichannel activities, HRC Advisory found that only 20 percent are engaging in a mix of growth methods and eCommerce innovations that will benefit all arms of their brand instead of coming at the expense of online or brick-and-mortar sales. Antony Karabus, CEO of HRC Advisory, explained that capital expenditures continue to be an ongoing problem for retailers trying to pivot toward omnichannel strategies.

“In fact, 80 percent of the retailers surveyed are spending approximately the same total amount of capital as in prior years, using internally generated cash flow,” Karabus said, according to Women’s Wear Daily. “Of the 80 percent of retailers that are spending approximately the same capital as in prior years, the vast majority of their total sales and profits are generated from brick-and-mortar stores, yet 40 percent are prioritizing eCommerce and omnichannel investments as their top capital spend.”

It can be tempting to think because customers are still surging toward eCommerce for an increasingly large share of their purchases, that consumers are equally turned off from physical storefronts. However, Karabus warned that retailers who fail to reinvest in their stores and bring them up to a level where the in-store experience rivals the online one might run into serious problems a few years down the road.

“The distortion of capital allocated to the channel that almost always contributes much less than 15 percent of total sales and a much smaller percentage of total profits is likely to have a meaningful impact in the mid- to longer-term on profitability and competitiveness,” Karabus noted. “This is particularly the case as retailers defer maintenance of their profit-generating store fleet, which we expect will result in the physical store shopping experience to start falling behind the eCommerce experience.”

What’s behind the disconnect between the retailers that are nurturing both online and offline strategies and those that can’t strike a balance? Bridget Weishaar, a retail analyst for Morningstar, told Investor’s Business Daily that some of it stems from the industry’s desire to offer roughly analogous consumer experiences whether they’re online or in the store. However, a more complementary approach that emphasizes the respective strengths of all available strategies could be the key to true omnichannel retail success.

“The entire industry is trying to reach an equilibrium between [online and offline],” Weishaar told IBD. “It’s all about bringing them together to increase sales.”

Weishaar pointed to Nordstrom as one brand that has shown adeptness at bringing in disparate retail modes for omnichannel success. She explained that the high-end fashion brand recently purchased Trunk Club, a subscription-based service that sends male shoppers style tips and clothes based on prior purchases. However, if there is ever a chink in the armor of this eCommerce strategy – say, if the shipped clothes don’t fit – customers can bring them into a physical storefront to either process returns or get them tailored to their exact specifications.

An omnichannel strategy like Nordstrom gives both online and offline marketplaces the chance to leverage sales whenever the opportunity arises. Such an integrative approach allows both to grow, while more shortsighted attempts at omnichannel success could leave retailers with middling sales now and potentially none later.

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