How Retailers are Shifting to Omni Channel and Instant Delivery
Over 90% of the time, the average individual researches a service or product online before making a purchase. Amazon, Uber, delivery innovation and smartphones have revolutionized consumer behavior across just about every category. As Pinterest and Instagram provide a platform for swoon worthy wardrobes, home décor and recipes for a year’s worth of family-friendly meal planning options, the physical retail space has taken a secondary role to merchandising goods and services.
In 2014, Deloitte reported that as a result, retailers were likely to downsize stores by 30-40% in the medium to long term, due to emerging mobile platforms and the fact that even consumers in rural zip codes who once had limited access to popular urban brands, now have equal access to retail offerings with the Internet.
Users check their smartphones more than 200 times every day, and it’s changing the way we discover, compare and purchase products and services. According to the Google Shopper Marketing Agency Council, 79% of smartphone users are smartphone shoppers, and the more a consumer uses their phone to research or compare products, the more apt they are to spend (up to 25% in store). This is indicative across consumer categories from groceries, to appliances and clothing, and is forcing retail brands to rethink merchandising, inventory and virtually every traditional aspect of the brick and mortar business model.
Clarifying how brick and mortar and digital merchandising can meld together successfully, Oliver Guy, retail industry director of Software AG says, “Mobile, cloud, analytics and social media will be fully integrated into a unified merchandising system designed to vastly improve customer engagement.” The evolution is happening round the clock with streamlining payment options, and same day delivery.
Mobile e-commerce also provides retailers an even more sophisticated and geo-targeted platform for market research on consumer trends and habits, further enabling shoppers to access and source desired products and services. An estimated 73% of in-store shoppers find waiting in line their least favorite aspect of shopping, making same-day delivery services all the more appealing. In a recent report by MobStac, (a cloud-based mobile commerce platform delivering apps for e-commerce sites) by 2017, nearly half of all in-store transactions will be completed via mobile point of sale or a self-checkout feature.
Clicks Are Only a Small Percentage of Retail Sales Now, But Have Exponential Growth Projections
Mass adoption of universal pay options will make it increasingly easier to purchase everything from shoes to cat food through a quick click secure transaction on a smartphone. Still, while shopping online has become a popular pastime for some, Jonathan Alferness, VP/Product Management at Google Shopping claims that, “while 87 percent of shopping research happens online, 92 percent of goods are still sold in retail stores.” And according to Women’s Wear Daily, mobile is still just a small part of most companies’ top lines.
Retailers are downsizing physical locations to devote more mindshare to digital sales points. A telling indicator of the changed psychology behind new retail development comes from a comment Denver-based developer John Frew made in the Wall Street Journal recently when referring to the new Westdale development in Cedar Rapids, IA. “The new project will include a hotel and offices…and when complete, there will be about a third less retail space than there was before. We think it fits the market.”
While online sales made up only about 7.7 percent of personal consumption expenditures for apparel, home and accessories categories in 2014, according to Goldman Sachs, that number is expected to nearly quadruple to 26.6 percent of sales by 2018, which could correlate to a further decline in brick and mortar foot traffic and in-store sales figures. Software AG’s disruptive digital trends predictions for 2016 include predictive analytics that enable stores to know what customers are going to want and when, as well as real-time monitoring capabilities that will sense, correlate and automate processes from staffing to inventory. With the precision of the metrics, excess store locations will get eliminated in the process.
The Rise of Same Day Delivery Services
What was once known as a business model for failure, same day delivery platforms have become increasingly the norm and expected for modern consumers. In 2015, Business Insider reported that same day delivery companies would partner with retailers to “grow e-commerce’s customer base, siphoning off one of brick and mortar retail’s last real competitive advantage.” According to their research, one in four shoppers said they would consider abandoning online shopping if same-day delivery was not an option, and the most common shopper demographics were urban-dwelling millennial males. However, 92% of consumers said they were willing to wait four days or longer for their purchase to arrive.
Inc. Magazine recently identified several companies that are defining the same day delivery option including, Instacart, Amazon’s same day grocery delivery platform, and Zookal, an Australian-based textbook delivery that plans to employ delivery drones using the flying-bot service called Flirtley. Most notably, San Francisco-based Postmates is positioning to compete with Uber’s market share to deliver everything from lunch to clothes and office supplies. Google Express is in on the game, launching a new grocery delivery service in 2016.
UberRush, launched in New York City, and now available in Chicago and San Francisco, is a local messenger service arm of the ridesharing company, allowing users to order local items for quick delivery. Deliv, based in San Francisco, allows retailers to offer same-day delivery to customers for as low as $6.25 per order within 15 miles. London-based Shutl, purchased by eBay in 2013, uses local courier services to deliver packages from retailers within a few hours. Amazon Prime’s same day delivery is now available in almost 30 cities nationwide, (more than double the locations available just two years ago) and has expanded delivery service to seven days a week. EBay now offers one- to two-hour delivery of products ordered from local stores to over 25 cities.
Ready to battle for part of Amazon’s customer base, Daphne Carmeli, the founder of Deliv has developed the company’s efficiency model on the idea that local businesses and retailers have inventory within a five-mile radius of their customers, which is the one thing Amazon doesn’t currently have. Potential venture partners in Silicon Valley have met her with skepticism, but she remains confident. “One way you know you are on to something is when you get polar opposite responses, that is a good sign you are on to something disruptive.”
If there’s one takeaway from the collective methodology emerging from big data, mobile access and same day service, it is that we are in an era of disruptive technology that is influencing and advancing the retail landscape at a rapid pace. Only brands that can fully employ the data on their customer demographics, streamline and automate purchasing and delivery, and develop customized, well-crafted goods and services will survive the pace of progress.