Omnichannel Is Omnipresent: How savvy retailers integrate brick-and-mortar and e-commerce
January 20, 2023
Despite a tendency to depict e-commerce as a foe of physical retail, savvy retailers have capitalized on the synergy between the two. This trend accelerated during the pandemic and has staying power for the long term.
The best omnichannel retailers—those who have mastered multiple sales channels—are experiencing significant growth. (For example, Lululemon is enjoying double-digit growth in both same-store and e-commerce business).
But how exactly are these retailers doing it? Here are three ways.
1. Mobile App Concentration
Mobile app use has risen sharply, as highlighted in our report Retail Tech: Three Ways Tech is Influencing Consumer Shopping Preferences. Shoppers realize that they have more information and choices than ever before and greatly value the freedom to shop whenever and wherever they want.
Retailers know that consumers can experience their brand at any time. By providing different touchpoints, retailers are able to provide the ideal experience for a range of shoppers. For example, if a retailer schedules a special “discount day” at its store location, it can launch a similar offer on its app, providing the same opportunity to consumers unable to visit the store that day.
Companies expect app usage to accelerate. People now spend over four hours a day on mobile apps—so much that m-commerce is forecast to be the dominant share of digital sales within the next five years. If the 2022 holiday season is any indication, it could happen sooner. On Thanksgiving, m-commerce accounted for 55% of all digital sales, according to Adobe. In addition, they reported that m-commerce made up 51% of all online sales over the entire Cyber Week, up from 46% in 2021.
Figure 1: M-Commerce Growth
2. Drive-Thru Expansion
The popularity of drive-thrus among quick-service restaurants (QSR) exploded during the pandemic as people grew wary of exposure to others, and local restrictions forced many restaurants to close indoor dining. Retail tech company Fingermark estimates that drive-thrus accounted for up to 90% of a typical restaurant’s revenue following the initial COVID-19 outbreak.
How people engage with drive-thrus has also changed. Long gone are the times when drive-thrus simply served on-site customers. Now, people use drive-thrus in multiple ways: on-site ordering, ordering through mobile apps in the form of click-and-collect, or ordering through a third-party delivery service where a courier picks up the food for them.
Many QSRs, which were traditionally not drive-thru-oriented, have adapted by building out sites with multiple drive-thrus to handle various connection points. Panera, Shake Shack and several others are mostly seeking drive-thru-ready sites.
3. Expansion of Logistics Networks
Retailing is more than selling goods from store shelves. To be successful, a modern warehouse network must be in place to fulfill orders from all channels. Demand from retailers has been a catalyst behind industrial real estate’s resilient performance, with record-low availability and robust rent growth. Retailers (including food & beverage and general retail & wholesale) have been responsible for 35% of industrial leasing in 2022 year-to-date.
Some retailers have begun to tap their mastery of supply chain dynamics as a revenue opportunity. For example, Gap Inc. markets its logistics network, called GPS Platform Services, to other retailers. With 13 distribution centers and over 9,000 employees, GPS can fulfill same-day and two-day delivery, as well as international shipping. In addition, its reverse logistics service is a highly desired capability during the holiday season, as detailed in CBRE’s 2022 Holiday Trends Report.
Although many are skeptical about the metaverse as a sales channel, several retailers are positioning themselves for what could emerge as the next step in omnichannel’s evolution.
We have already seen music events, fashion shows and branded virtual goods unveiled in the metaverse. Other retailers are building metaverse-based touchpoints through activities such as games and meet-ups. Some may view these efforts as a novelty, but retailers are viewing them as a critical foundation to establishing their next-generation digital presence. McKinsey & Company predicts that the metaverse could generate $5 trillion in value by 2030.
The term “omnichannel” may eventually be retired in favor of simply “retailing.” As we observed during the pandemic, retailers that master the multichannel approach will find themselves more resilient to changing market conditions and more successful in the long run.
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