Although the “death of brick-and-mortar” was frequently discussed throughout 2017, it’s clear now that the idea was more fiction than fact: During the holidays, brick-and-mortar stores actually posted year-over-year (YOY) sales gains. And lets not forget pure-play online companies opening brick and mortar stores such as Amazon, Casper, and a slew of other digitally native brands.
The retail pendulum is moving back to brick and mortar because modern consumer behavior has never changed. The store is still the focal point, with digital advancements we are just now able to have a clearer view of the shoppers journey.
Consumers Prefer to Research Online, Buy Offline
The best sites in the World convert 2-3% of online visitors and consistently a dealer locator is within the top 3 or 4 pages consumers click on a brands website. Meaning, more people try and buy local than checkout on your site.
This clearly demonstrates a disconnect in how brands are selling and is less consumer centric. Shoppers are seeking the convenience of online ordering with the service only physical retail can provide. Making it more difficult for consumers to buy, how THEY want to, results in lost sales opportunities for both brand and retailer.
Consumers don’t care about online or physical retail sales channels. They just want to buy a product on THEIR terms.
Why do Brands Silo their Online & Physical Retail Sales Channels?
Many who read this article might think it’s because a brand makes more money on a direct to consumer sale, right? The perception is more profit, but it comes at the expense of consumer experience, dealer relationships, and long-term profitability.
- Anywhere a product is listed offline, sales of that brand typically increase by 6X
- D2C only jeopardizes dealer relationships, loyalty, and product placement in store
- 90% of retail sales still occur at brick and mortar
- Acquisition costs without brick and mortar retail are approximately 20%
- Most D2C sales generated from in-store visits or prior familiarity to brand
- Most online D2C sales are discounted with a coupon, free shipping both ways
- Shipping costs are outpacing inflation and growing at 5% per year
- D2C Only Brand vs Amazon Private Label – Who is going to win?
All of this equates to the direct to consumer model becoming less profitable over time. Now lets factor in that quite often direct consumers do not come back to order more and the discounted direct to consumer sale has incredibly low customer lifetime value as they bought on price only, with little/no loyalty to make a future purchase. So if it’s not profit, then why direct to consumer?
Misunderstanding of Consumer Shopping Journey
Many brands were lured into the consumer direct future as much of the consumer shopping journey was unknown or visible to brands. What brands could track is direct to consumer so in human nature we do more of what we can measure and optimize over time rather than invest in retailer relationships. Only now with more digital tools/infrastructure at our disposal are we are seeing the strength and necessity of physical retail to a brands success. With a physical retail presence you will sell more online and in store.
The pressure to offer online sales to consumers was immense, and brands began investing heavy in their digital teams. Not only are they siloing their sales channels to consumers, but quite often the internal organization structure is setup to pit field/outside/inside sales teams vs digital as opposed to working together to create better consumer experiences. With the plethora of click-bait, dare I say fake news, about the supposed retail apocalypse brands were putting less emphasis into supporting the brick and mortar retail channel. This despite the fact tools and systems are available and affordable to interact with this channel at scale.
Omni-channel is Now the Only Growth Channel
Most direct to consumer sales that are generated are a result of consumers discovering products at the local level in person. These consumers who search and buy online are most likely already familiar with your products because they’ve seen them before. If they became aware of your products at their local specialty shop you are now competing with, you may have a BIG problem acquiring future customers as very likely that shop could now be selling your competitor minimizing your future growth online and in-store.
Cross-channel shoppers who research online and buy offline spend more money and are not as price sensitive. Doesn’t this sound like the ideal customer every brand wants? Plus by working with an in market dealer, you can expose your brand to new consumers to even lower even online customer acquisition costs bringing stability versus the roller coaster of D2C sales.
Working with an in market retailer can better serve your shared consumer in person and grow sales together in unison while attaching better consumer experiences to your brand. Without any omni-channel platform your sales and long-term profitability could suffer.
Is Omni-Channel Right for You?
Brands are enamoured with the direct to consumer approach with the perception they can sell more on their own and make more money. But this is a myth, just the same as how consumers no longer shop in stores. Although many won’t believe us or see it until they try, bottom line is they need retail relationships to sell more or risk being isolated by the market and become less customer centric. Look no further than your Google Analytics account to the fact that shoppers often want to see a product in person before buying.
Will aggressive direct to consumer channel tactics completely disconnect this option isolating you from retailers? Neither online or offline is going anywhere, but how the channels are blended together is where the magic happens. Is it possible to be successful without brick and mortar? It’s hard to think of any brand that this has worked out for especially as digitally native brands are opening stores.
Ready to Put Your Customers First?
If you haven’t started selling online yet because of channel conflict with your accounts, let’s make it easier for consumers to buy from your dealers. Or are you selling direct to consumer and want to sustainably grow all sales channels it’s time to consider an omni-channel approach to provide consumers better shopping experiences, which is the new retail currency.
Let’s chat about giving your consumers increased convenience to shop online with the value added service of retail, please contact us to see if we can help.
