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The State of Omnichannel Retail: Retailers Playing Catch-Up with Consumers

“Omnichannel” has become a buzzword in retail for good reason. New technologies and better data bring the longtime dream of a unified cross-channel shopping experience within reach. In practice, however, most retailers still fall far short of achieving this vision.

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THE STATE OF OMNICHANNEL RETAILRetailers Playing Catch-Up with Consumers

Yory Wurmser

Contributors: Christine Bittar, Rimma Kats, Stephanie Kucinskas, Martin Utreras

THE STATE OF OMNICHANNEL RETAIL: RETAILERS PLAYING CATCH-UP WITH CONSUMERS ©2014 EMARKETER INC. ALL RIGHTS RESERVED 4

CONTENTS2 Executive Summary

3 The State of Omnichannel Retailing

4 Roadblocks to Omnichannel Integration

7 The Omnichannel Consumer

11 Omnichannel Innovations

14 Conclusions

EXECUTIVE SUMMARY

“Omnichannel” has become a buzzword in retail

for good reason. New technologies and better data

bring the longtime dream of a unified cross-channel

shopping experience within reach. In practice,

however, most retailers still fall far short of achieving

this vision.

Consumers, on the other hand, have already embraced seamless shopping across channels. Armed with smartphones and tablets, shoppers go back and forth effortlessly between the real and digital worlds. They’re using their phones while in stores to research products and compare prices. They’re ordering online and then picking up in person. And they’re consulting friends near and far wherever they may find themselves contemplating a purchase. Every day, more of them come to expect an omnichannel experience.

Why are retailers lagging behind consumers? First, most sales still happen in brick-and-mortar stores, hiding the revolutionary effect mobile devices are having on the shopping experience and lulling some retailers into complacency. Second, omnichannel is hard. Not only does it require retailers to adjust business operations and link databases, it’s very difficult to judge which innovations make a difference. Retailers are far from mastering cross-channel attribution.

This report looks at the current state of omnichannel marketing and the transformation of the consumer into an omnichannel shopper. It also examines some responses to omnichannel shopping that enrich the in-store experience with digital integrations.

KEY QUESTIONS ■ How close are retailers to providing an

omnichannel experience?

■ What are some factors inhibiting

omnichannel adoption?

■ How are consumers using media to shop

across channels?

■ What are some omnichannel innovations

gaining traction?

% of respondents

US Mobile Wi-Fi Users Who Use Their Mobile DeviceWhile Shopping In-Store*, Q1 2012 & Q2 2013

Q1 2012

64%

Q2 2013

80%

Note: *to enhance their shopping experienceSource: JiWire, "Mobile Audience Insights Report Q2 2013," Aug 20, 2013162656 www.eMarketer.com


THE STATE OF OMNICHANNEL RETAILING

Retailers have long reached customers through a

variety of sales channels, but digital commerce is

making that task more difficult than ever. Today’s

challenge is creating a consistent experience across

these channels—an “omnichannel” experience. More

revolution than evolution, omnichannel requires a

rethinking of every part of the retail model, which

may explain why most retailers remain far from

achieving it.

VISION VS. REALITYNearly all retailers aspire to creating an omnichannel experience for their customers. In a June 2013 survey conducted by Retail Systems Research (RSR), 84% of retailers worldwide said that creating a consistent customer experience across channels was very important, and the remaining 16% described it as somewhat important. In fact, a clear majority of retailers found most aspects of an omnichannel strategy very important.

% of respondents

Important Aspects of a Company's OmnichannelStrategy According to Retailers Worldwide, June 2013

Consistent customer experience across all channels

Inventory visibility acrossall channels

Fulfillment

Customer order visibilityacross all channels

Digital marketing (ecommerce,mobile, social media)

Pricing strategies

Loyalty management

Store operations

Customer segmentation

Demand forecasting

Procurement/assortment

Customer call center

Traditional advertising

Veryimportant

84%

80%

75%

73%

64%

53%

52%

50%

46%

44%

42%

33%

13%

Someimportance

16%

16%

19%

21%

36%

43%

41%

47%

44%

49%

55%

48%

54%

Little to noimportance

0%

4%

5%

6%

0%

4%

7%

3%

10%

7%

3%

19%

33%

Note: numbers may not add up to 100% due to roundingSource: Retail Systems Research (RSR), "Omni-Channel 2013: The LongRoad to Adoption," June 11, 2013160911 www.eMarketer.com

Yet when it comes to implementing this vision, few retailers are accomplishing it. In the same survey, RSR asked retailers the extent to which they had synchronized their channels across different areas of omnichannel strategy. In all 13 areas, less than one in five respondents reported full synchronization. In no area did more than half report full synchronization or full synchronization in progress. Perhaps most notably, only a third of companies had or said they would soon have a fully synchronized customer experience across all channels.

% of respondents

Aspects of Omnichannel Strategies that Are CurrentlySynchronized According to Retailers Worldwide, June 2013

Fulfillment

Pricing strategies

Procurement/assortment

Customer order visibilityacross all channels

Traditional advertising

Consistent customer experience across all channels

Digital marketing

Inventory visibility across all channels

Loyalty management

Customer call center

Store operations

Customer segmentation

Demand forecasting

Full synchronizationin progress

20%

25%

23%

29%

17%

22%

32%

33%

18%

28%

31%

28%

36%

Fullysynchronized

17%

15%

15%

14%

14%

11%

11%

11%

10%

8%

8%

7%

7%

Note: numbers may not add up to 100% due to roundingSource: Retail Systems Research (RSR), "Omni-Channel 2013: The LongRoad to Adoption," June 11, 2013165898 www.eMarketer.com


At its core, omnichannel is about bridging online and offline experiences. In an April 2013 survey of ecommerce and digital professionals worldwide, IBM Tealeaf and Econsultancy found retailers lagging in this area. Some 63% of respondents said they provided online content about their offline stores, including locations, store hours and contacts, but far fewer had more advanced ways of linking mobile directly with the in-store shopping experience. Slightly more than a quarter said they were using QR codes and mobile coupons, but fewer were using other techniques.

% of respondents

Ways in Which Companies Integrate Digital andPhysical Customer Experiences According to BusinessProfessionals Worldwide, April 2013

Website information about offline locations, contact detailsand opening hours

Social presence for offline products/services

Mobile/local search engine optimization

QR codes

Coupons/vouchers

Click-to-call

Reserve and collect (in-store)

In-store or in-branch Wi-Fi

Kiosks and tablets for in-store or in-branch ordering

Location-based apps

Third-party listing sites and apps (e.g., Yelp and Qype)

Barcode scanners

Pop-up stores

Personalized digital signage

Near field communications (NFC)

Other

63%

38%

31%

28%

26%

23%

18%

17%

16%

15%

13%

12%

11%

9%

4%

6%

Source: IBM Tealeaf and Econsultancy, "Delivering a seamless experienceacross every channel," Sep 16, 2013165899 www.eMarketer.com

ROADBLOCKS TO OMNICHANNEL INTEGRATION

What has kept retailers from plunging into

omnichannel more quickly? A lack of urgency is

partially to blame. In-store sales still dominate overall

retail sales, which may lull some into putting off

omnichannel implementation efforts. Compounding

this, implementation requires a series of difficult

steps, including inventory, data integration and

revamped business operations. Without a sense

of urgency and adequate customer intelligence to

guide them, many retailers may hesitate in their

commitment to make the changes necessary to offer

an omnichannel experience.

PHYSICAL STORES STILL GENERATE MOST SALES Despite ecommerce’s seeming pervasiveness, the vast majority of retail sales still happen in the physical world. eMarketer estimates that even with the steady growth of ecommerce, the channel will still account for less than 6% of total US retail sales in 2013.

% of total retail salesUS Retail Ecommerce Sales Share, 2009-2013*

2009

3.95%

2010

4.33%

2011

4.69%

2012

5.18%

2013*

5.78%

Note: excludes financial brokers and dealers, ticket sales agencies andtravel; *estimateSource: US Department of Commerce; eMarketer calculations, Aug 15,2013165992 www.eMarketer.com


For many subsectors of retail, such as food and automobiles, the numbers are even smaller. “That’s why the retailers have not felt the need or the necessity to change yet,” said Marshal Cohen, chief industry analyst at The NPD Group. “They’re exploring with it. They’re dabbling with it. They’re recognizing the future of it. But they’re not rushing to change. That’s OK for the moment, but very quickly that’s going to become a necessity.”

Numbers from A.T. Kearney confirm the continued importance of the physical store—not just in sales but also in time. The consulting firm found in February 2013 that 61% of the time consumers in the US and UK spent shopping occurred in a physical store.

% of total

Share of Time Spent Shopping According toConsumers in the UK and US, by Channel, Feb 2013

Store61%

Online31%

Catalog4%

Mobile4%

Source: A.T. Kearney, "Recasting the Retail Store in Today's OmnichannelWorld," Oct 14, 2013165905 www.eMarketer.com

And not only does it account for the most time: The experience of physically browsing in a store leads many shoppers to buy more than they planned. Some 40% of consumers in the survey reported making unanticipated impulse buys while shopping in-store, compared with 25% of online buyers.

% of total

In-Store vs. Online Spending According to Consumersin the UK and US, Feb 2013

Shopping in-store40% 60%

Shopping online25% 75%

More than planned The same or less than planned

Source: A.T. Kearney, "Recasting the Retail Store in Today's OmnichannelWorld," Oct 14, 2013165906 www.eMarketer.com

Even so, ecommerce sales growth continues to eclipse sales growth for brick-and-mortar stores. Some industry experts go so far as saying that ecommerce represents the only growth. Wayne Kulkin, CEO of footwear retailer Stuart Weitzmann, argues that virtually all retail growth is attributable to online channels. Among multichannel retailers, he said, “I could almost guarantee you that their business [in physical stores] would be flat to down 5 percent.”

INTEGRATING AND ANALYZING DATA REMAINS A CHALLENGE A second major challenge for companies is tracking the effectiveness of omnichannel strategies, especially in light of the continued dominance of the physical store at the end of the purchase path. Bridget Dolan, vice president of interactive media at personal care and beauty retailer Sephora, said, “You wish that the client walked around with a barcode on her forehead, but she doesn’t. So it’s really hard to track a client as she goes through different channels.”

Sephora attempts to get around this problem with a loyalty program called Beauty Insider, which is easy to join and personalized to the consumer. Sephora has integrated the program into its own app and Apple’s Passbook app. By tagging all of the products it sells from a list of 25 attributes—“good for dry skin,” for example—Sephora can provide very detailed recommendations and offers. “Beauty Insider really is the glue to our omnichannel strategy,” Dolan said. The company’s clients have found the program compelling, having adopted it at very high rates, according to Dolan. Sephora, however, is the exception rather than the rule.


In a Q1 2013 survey of marketers worldwide by CMO Council and SAS, only 3% of respondents reported their companies had completely integrated their online and offline analytics capabilities. A further 8% said their companies were well integrated in either online or offline, but not across all functions. Nearly nine out of 10 companies were described as having incomplete integration in either online and offline analytics, let alone having integration across all functions.

% of respondents

Level of Integration of Company's Online and Offline Analytic Capabilities According to Marketers Worldwide, Q1 2013

Completely integratedacross all functions

3%

Well integrated online,not well integrated offline5%

Well integrated offline, not well-

integrated online3%

Getting better across the board, but still room for improvement46%

Struggling to integrate online with offline23%

Not integratedat any level

20%

Source: CMO Council and SAS, "Aligning the CMO & CIO," March 28, 2013154783 www.eMarketer.com

Right now, according to industry insiders, the biggest bottleneck to such integration is mobile. Scott Zalaznik, vice president of digital at Sprint, said, “The hard part is going to be attribution from desktop to mobile, and then from desktop and mobile to retail.”

In a May 2013 survey of client-side marketers worldwide, Econsultancy and Responsys found only 17% of marketers reporting that mobile was “very integrated” into overall marketing strategy, compared with more than 50% saying the same for their website and email channels. This has an effect on the amount of investment made in mobile, according to Zalaznik. “It’s really about proving that media consumption behavior is worth it at an impression level for your brand to actually drive both [digital] commerce and retail purchasing,” he said. This is true both for paid media as well as costly-to-produce owned media, such as apps.

% of respondents

Level of Integration of Select Digital MarketingChannels with Overall Marketing Activity Accordingto Client-Side Marketers Worldwide, May 2013

Email55% 37% 8%

Paid search44% 45% 11%

SEO (natural search)38% 47% 16%

Online display advertising38% 47% 15%

Social media marketing35% 52% 13%

Web retargeting34% 51% 15%

Mobile messaging (SMS/MMS)23% 43% 34%

Mobile web20% 56% 24%

Mobile17% 51% 32%

Very integrated Quite integrated Not integrated

Note: n=363; numbers may not add up to 100% due to roundingSource: Econsultancy and Responsys, "Cross-Channel Marketing Report2013," Aug 28, 2013163504 www.eMarketer.com

Website58% 39% 4%

The slowness of data integration is in part a result of the way ecommerce has developed among already-established retailers. “When ecommerce emerged on the scene, most retailers built their online initiatives independently from brick-and-mortar stores, setting them up as separate businesses with separate technology, sales goals and initiatives,” said Ed Stevens, founder of ecommerce platform Shopatron. “Now, all of a sudden, omnichannel is bringing those channels back together. Closing the loop on the ‘silo effect’ requires merging technologies and figuring out how to efficiently execute fulfillment efforts from stores.”

In order to create an omnichannel experience, retailers need back-end systems to integrate and manage all types of data, including inventory, customer analytics and fulfillment. “Pulling all of that data together in order to build a comprehensive consumer profile requires creative and flexible tools and technology, which most retailers don’t yet have in place,” Stevens noted.


THE OMNICHANNEL CONSUMER

Whereas retailers have to overcome a variety of

hurdles to create an omnichannel experience, their

customers already have made the leap. Consumers

still make most purchases in a physical store, but

they’re shopping everywhere and in every way,

hopping from device to device as they gather product

information and recommendations before leaving

home. Moreover, even while in a physical store, many

augment their shopping by looking for information

via mobile devices.

More than any other technology, smartphones and tablets are changing the shopping experience for consumers, letting them bridge the online and offline experience—even when stores fail to make it easy for them to do so. “Consumers are a couple of steps ahead of the brand,” said Tony King, founder of luxury retail consultancy King & Partners. “People will check something seven or eight times online before they actually buy … [using] several devices. They are experiencing the brand across all those different channels.”

While King was talking specifically about consumers of luxury goods, his point applies more generally as well. Consumers of all financial strata increasingly expect a consistent brand experience as they shop across a variety of channels.

MOBILE: THE BRIDGE BETWEEN ONLINE AND BRICK-AND-MORTAR STORES The relatively small portion of overall retail transactions that occur via mobile devices masks mobile’s true impact. Consumers are using smartphones throughout the shopping experience, and often while in a store. Mobile advertising and data platform JiWire surveyed US mobile Wi-Fi users in Q2 2013 and found that 80% used their mobile devices “to enhance their shopping experience” while shopping in-store, up from 64% in Q1 2012.

% of respondents

US Mobile Wi-Fi Users Who Use Their Mobile DeviceWhile Shopping In-Store*, Q1 2012 & Q2 2013

Q1 2012

64%

Q2 2013

80%

Note: *to enhance their shopping experienceSource: JiWire, "Mobile Audience Insights Report Q2 2013," Aug 20, 2013162656 www.eMarketer.com

The ubiquitous internet access that smart devices provide has bridged the virtual and physical shopping experience. “Mobile is kind of this seamless glue. This purchase process and consideration has become more meandering, and we’re using mobile as the thing that jumps into those places,” said Johnna Marcus, director of mobile and digital store marketing at Sephora. “The big thing is not to think of mobile as just shopping on the go. Mobile is a tool for in-store.”

CHANGING BUYING PATTERNS Consumers are constantly innovating in their uses of mobile. They already are omnichannel browsers and buyers, using a slew of channels to make a single purchase and rewarding retailers who empower them to do so.

JiWire’s survey revealed just how convoluted the purchase path has become. Out of the 68% of mobile Wi-Fi users who did retail shopping research on a smartphone, only 35% went on to make the purchase using that device. In contrast, of the 60% who researched in-store, 57% ended up making the purchase in the store. Furthermore, nearly every combination of research and purchase on smartphones, tablets, laptops and in-store garnered significant responses.


% of respondents

Cross-Device Retail Shopping Research & PurchaseBehavior of US Mobile Wi-Fi Users, June 2013

Research on laptop 74%

—Purchase on laptop 52%

—Purchase in-store 37%

—Purchase on tablet 21%

—Purchase on smartphone 16%

Research on smartphone 68%





Research on tablet 67%





Research in-store 60%





Note: read as among the 68% of US Wi-Fi users who researched on theirsmartphone, 37% purchased in-storeSource: JiWire, "Mobile Audience Insights Report Q2 2013," Aug 20, 2013162653 www.eMarketer.com

Showrooming According to a Harris Interactive survey from April 2013, 40% of US adult internet users said they had showroomed—that is, looked at a product in a store and then went online to find a better price. This was statistically unchanged from five months earlier. However, as not all respondents in the study were necessarily smartphone owners, the percentage of US adults who showroomed was likely even higher among smartphone owners. eMarketer estimates that smartphone penetration among the US population will reach 50.1% in 2014, so showrooming is likely to continue rising as a consequence of more shoppers having the ability to do so.

% of respondents

US Internet Users Who Have Ever Showroomed*, Nov 2012 & April 2013

Nov 2012

43%

April 2013

40%

Note: ages 18+; *visited a brick-and-mortar store to examine a productbefore purchasing it elsewhere onlineSource: Harris Interactive, "The Harris Poll" as cited in press release, June 4,2013158626 www.eMarketer.com

With consumers taking on the responsibility of finding product information from competing merchants online, retailers have lost the ability to win on price alone, industry experts say. “The ability to differentiate yourself by price has clearly diminished,” The NPD Group’s Cohen said. “If you’re Wal-Mart, yeah, maybe you are the lowest price. Somebody’s got to be the lowest price, but there’s always somebody else who may come along and undercut you because they’re hungry for the business.”

Parago, a company that specializes in driving engagement, breaks showrooming down by retail subsector and by shopper income. In a June 2013 study, it found that US smartphone owners were more likely to showroom for apparel and entertainment purchases, and less likely to do so when shopping for appliances, building materials and automotive purchases.

% of respondents

Frequency with Which US Smartphone Owners ViewItems In-Store and Then Buy Online, by Category, June 2013

Often Sometimes

Entertainment 54% 40%

Apparel 50% 47%

Electronic & mobile technology 50% 46%

Housewares 42% 51%

Office supplies 39% 50%

Appliances 31% 58%

Building tools & supplies 30% 45%

Automotive 20% 47%

Source: Parago, "Dynamic Pricing in a Smartphone World: A ShopperShowrooming Study," July 19, 2013162277 www.eMarketer.com


Perhaps reflecting different smartphone ownership trends, the more affluent a US internet user is, the more likely they are to use a smartphone to check prices while in a store, according to Parago.

% of respondents in each group

Ways that US Internet Users Look for Deals, by Income, March 2013

Researches for deals and bestprices before shopping

Looks for deals in circulars andprint ads

Search for deals online beforegoing in-store

I shop where I can gain loyaltyand rewards

I use my smartphone to checkprices while in store/shopping

<$50K

97%

92%

86%

54%

30%

$50K-$100K

99%

94%

96%

66%

51%

$100K-$200K

99%

98%

96%

78%

81%

$200K+

97%

90%

90%

73%

76%

Note: respondents who almost always/sometimes engage in each behaviorSource: Parago, "Shopper Behavior Study 2013: Let's Make a Deal," May 21,2013157904 www.eMarketer.com

In February 2013, market research firm TNS Global delved deeper into what mobile phone owners in North America did when they used their phones in stores. The study found 32% were in fact looking at prices from a competitor. An even larger percentage researched products in various ways, while only 7% actually went on to purchase the product via an app or website while still in the store. Showrooming, therefore, is a threat, but a smaller one than often portrayed.

% of respondents

Ways that Mobile Phone Owners in North America and Latin America Use Mobile Devices While Showrooming, Feb 2013

Compare prices with another retailer

Take a photo of the product or note down product details to help me remember it for later

Look up product information or comparisons

Check product availability at another retailer

Ask my friends or family what they wouldrecommend buying

Check if it was easier/more convenient to orderthe product onlineCheck the range of products at another retailer

Receive advice or information from another retailer

Purchase the product via an app or websitewhile I was still in the store

LatinAmerica

23%

24%

13%

15%

26%

12%

13%

14%

9%

NorthAmerica

32%

22%

18%

18%

16%

15%

14%

8%

7%

Source: TNS Global, "Mobile Life," April 24, 2013156536 www.eMarketer.com

Among the 93% of showroomers who said they did not buy on their phone while in a store, showrooming may in fact be an opportunity. Nick Hodson, partner at Booz & Co., noted: “The key is to kind of try and get away from price checking and get it … to be a kind of engaging experience on the smartphone before, during and after the shopping experience.”

Sephora does just that. The cosmetics retailer actively encourages consumers to use their phones in-store and makes it easy by providing free Wi-Fi. “[Our] mantra is that ‘a phone in her hand is worth two in her handbag,’” Sephora’s Dolan said. “We want her to get that phone out … to read reviews, scan products. Having that additional access to the information that you wouldn’t normally have is the true power of omnichannel in my mind, and I do think it’s the opposite of showrooming.”

‘Webrooming’ For many shoppers, online shopping is a prelude to a store visit. In September 2013, consulting company Accenture surveyed US internet users about their shopping plans this holiday season and found that 20% expected to follow an online browsing session by going to a store and buying the product, with a further 45% saying such a path was somewhat likely. This pattern of buying in-store after going online to search for an item has been dubbed “webrooming,” or “reverse showrooming.”

% of respondents

Likelihood that US Internet Users Will Webroom* ThisHoliday Season, Sep 2013

Very likely20%

Somewhat likely45%

Unlikely21%

Not atall likely14%

Note: *defined as looking online for an item before going in-store to makea purchaseSource: Accenture, "Holiday Shopping Survey 2013," Oct 7, 2013165436 www.eMarketer.com


Why do shoppers head to a store after doing research online? The most common reason cited in a November 2012 study by Columbia Business School and Aimia was speed. Some 59% of mobile shoppers querried in the US, UK and Canada who said they didn’t showroom said that they needed the product right away, while 53% said they didn’t want to wait for online shipping. Moreover, 51% said they found it more convenient to buy in-store.

% of respondents

Reasons that Mobile Shoppers in Canada, UK and theUS Do Not Showroom, Nov 2012

Needed the product right away59%

Don't want to wait for online shipping53%

More convenient to buy in the store51%

Prefer to buy from local stores19%

Great customer service at the store17%

Better return policies from the store15%

Store membership rewards14%

Trust store more than online retailer14%

Personal connection with store staff7%

Store had free same-day shipping6%

Dislike online shopping experience4%

Source: Columbia Business School and Aimia, "Showrooming and the Riseof the Mobile-Assisted Shopper" conducted by Harris Interactive, Sep 12,2013163737 www.eMarketer.com

Accenture found a broader set of concerns driving consumers’ webrooming. In its survey, the leading response was cost: Among US internet users polled, 47% didn’t want to pay for shipping. Nearly as many, 46%, said they liked the tactile experience of shopping in a physical store, while 42% said they visited a website to check on a product’s in-store availability before venturing out for it. Only 23% said that waiting for delivery was a major reason for webrooming.

% of respondents

Reasons that US Internet Users Will Webroom* ThisHoliday Season, Sep 2013

Don't want to pay for shipping47%

Like to go to a store to touch and feel a product before I buy it46%

Want to check online first if the item is available/in-stock beforeI go to the store to purchase it

42%

Like the option of being able to return the item to the store if Ineed to

37%

Will ask the store to price match to a better price I found online36%

Don't want to wait for the product to be delivered23%

None of these3%

Note: among respondents who are "very/somewhat likely" to shop online,purchase in-store; *defined as looking online for an item before goingin-store to make a purchaseSource: Accenture, "Holiday Shopping Survey 2013," Oct 7, 2013165437 www.eMarketer.com

The contrast between the Columbia/Aimia and the Accenture studies may in part be explained by better same-day or next-day delivery options that have become available recently through major retailers like Amazon and Wal-Mart. But more likely the difference has to do with the Accenture study’s focus on holiday shopping. Last-minute shopping notwithstanding, people often plan their holiday shopping weeks or months ahead of the season. Their concerns more often revolve around affording everything rather than fulfilling an immediate need.


OMNICHANNEL INNOVATIONS

Consumers are already using their phones to get

around the constraints of shopping in either the

physical or the virtual world alone, and they reveal

an unsatisfied appetite for omnichannel solutions.

Some retailers are beginning to provide tools that

simplify and replace the workarounds consumers

already employ.

WISH LISTS AND PERPETUAL SHOPPING CARTS As consumers move between digital platforms, they want to keep track of products they may want to buy. In Bronto Software and Magento polling from August 2013, 71% of US digital buyers indicated that they would use a wish list if an ecommerce platform had one. With more people using smartphones to link to the web quickly, wish lists and perpetual shopping carts are becoming more important. Jed Paulsen, director of ecommerce and marketing at bohemian-inspired apparel retailer Free People, said: “We have a shopping cart that’s integrated across the mobile site, the app and the site, and a wish list that’s also integrated. One of our goals was to have the app that could facilitate transactions online, but then also be something that was useful for our customers when they go into stores.”

% of respondents

US Digital Buyers Who Would Use Wish Lists orShopping Carts if a Brand Offered Both, Aug 2013

Use wish list instead of shopping cart24%

Use both the wish list and shopping cart47%

Won’t use the wish list29%

Source: Bronto Software and Magento, "Why We Don't Buy: ConsumerAttitudes on Shopping Cart Abandonment" conducted by Ipsos, Oct 8, 2013165894 www.eMarketer.com

In September 2013, a study from MarketLive and the e-tailing group found that 75% of US digital shoppers believed perpetual shopping carts were important when buying gifts online. In fact, it was one of the most important customer assistance tools for them. As consumers shift between online platforms, they want to be able to add items to their online shopping cart and use it as a wish list that they can access when they visit a store and want to see items that piqued their interest online.

% of respondents

Most Important Features on a Customer AssistanceWebsite When Buying Gifts Digitally According to USDigital Shoppers, Sep 2013

Customer service representatives77%

24/7 customer service access77%

Accessible contact information (phone, email)75%

Perpetual shopping cart (ability to add an item to your cart orview cart contents)

75%

800 or toll-free telephone number67%

Click-to-chat (live text chat help available)57%

Chat on mobile phone39%

Note: "most" or "somewhat important" featuresSource: the e-tailing group and MarketLive, "It's the Season... A Practical,Tactical Guide to a Brighter Holiday Season," Oct 29, 2013165893 www.eMarketer.com


STORE AS ONLINE FULFILLMENT CENTER Better integration of ecommerce platforms with store inventory also opens up new possibilities for purchase fulfillment. A study by Edgell Knowledge Network (EKN) found that 34% of retailers in North America currently offer online shoppers the option to pick up their orders in a store. A further 41% expected to offer that ability within the next two years. This option links a retailer’s inevitably more expansive online inventory to the physical store, giving consumers the certainty of knowing what they want will be waiting for them when they visit the store. It also enables merchants to satisfy customers who visit an establishment but find that a product is out of stock. The same systems that track products so they can be delivered to a specific store after an online purchase can also tell a store associate whether a particular out-of-stock item remains for sale in another store, or is available in a warehouse. A consumer can then order it in the store and have it delivered to their home.

% of respondents

Retailers in North America that Use Their Stores as aDelivery Hub for Online Orders, 2013

Currently offer34%

In the next 12 months26%

In the next12-24 months15%

No plans25%

Source: Edgell Knowledge Network (EKN), "State of the Industry ResearchSeries: The Future of the Store," July 1, 2013161603 www.eMarketer.com

Holly Devine, executive director of planning at apparel and lifestyle products retailer Urban Outfitters, noted that ominchannel’s benefits are mutual. “We want the customer to be able to shop any way they choose to shop and satisfy them,” she said. “From a business perspective, every time we get you to come in the door, we have another chance to convert you, another chance to say, ‘Oh my goodness, this accessory would look so wonderful with this item that you just bought.’”

SOCIAL INTEGRATION WITH THE PHYSICAL STORE Mobile has allowed consumers to reach out to their friends and family for advice while they shop. The social aspect of shopping, reinvigorated by mobile and social networking platforms, offers another opportunity for retailers. “Look at how teenagers shop,” The NPD Group’s Cohen said. “Before they make a purchase, they’re taking a picture and sending it to their friend for approval. So, what you’ve got now is a very different dynamic in the conversion factor.”

Retailers are responding by creating store-specific social media initiatives. More than half of the retailers in EKN’s survey said they offered or would offer within 12 months store-specific social media initiatives. This was the leading digital initiative offered in-store.

% of respondents

Digital Initiatives Offered In-Store According toRetailers in North America, 2013

Store-specific social media initiatives31% 26% 11% 31%

In-store media content31% 25% 8% 36%

Use of QR codes31% 13% 16% 39%

Providing digital receipts18% 33% 15% 34%

Mobile POS18% 20% 25% 37%

Endless aisle*15% 10% 20% 54%

Currently offerIn the next 12 months

In the next 12-24 monthsNo plans

Note: numbers may not add up to 100% due to rounding; *selling itemsthat aren't actually located in the storeSource: Edgell Knowledge Network (EKN), "State of the Industry ResearchSeries: The Future of the Store," July 1, 2013161605 www.eMarketer.com

Mobile charging stations

2%

10% 2% 86%


Target recently introduced its Cartwheel app, which allows consumers to save discounts they find as they browse through a menu listing product categories and deals. Once in the store, shoppers can look up the deals, go to the checkout and get the discounts all by scanning a single barcode on their phone. Not only do consumers get an easy way to collect and redeem app-specific coupons, they can also share the coupons with their social networks. “We knew Target shoppers love finding deals and also sharing those finds with friends, so we designed Cartwheel so people could share savings with friends and on social networks,” Target spokesman Eddie Baeb said.

Efforts like Target’s highlight the degree to which mobile is becoming intrinsically tied to social. “So much of the reach of social is on mobile,” Sprint’s Zalaznik said. “People were missing SoLoMo [social-local-mobile]. You know, the definition I think is evolved to not being just about those things in a Venn diagram, but really thinking they’re all part of this kind of mobile confluence.”

IN-STORE APP FUNCTIONALITY Apps such as Cartwheel give retailers new ways to deepen the shopping experience and fully integrate phone functions with that experience. By linking apps to inventory systems, purchase history and any number of interactive phone elements, retailers can give richer information to their customers as they need it. Most retailers, however, are not taking advantage of this opportunity. EKN’s study found that only 13% of retailers had an app with in-store functionality, although a further 48% expected to have one in the next one to two years.

% of respondents

Consumer Mobility Initiatives Offered In-Store byRetailers in North America, 2013

Free Wi-Fi for customers22% 25% 12% 42%

Exclusive store-only mobile coupons17% 19% 21% 43%

Mobile app features useful in the store13% 25% 23% 38%

Currently offerIn the next 12 months

In the next 12-24 monthsNo plans

Note: numbers may not add up to 100% due to roundingSource: Edgell Knowledge Network (EKN), "State of the Industry ResearchSeries: The Future of the Store," July 1, 2013161606 www.eMarketer.com

Consumers seem ready to use apps that ease in-store shopping. Free People added a catalog at its stores’ checkout counters to tout the full assortment of jackets the retailer carries. Each of the jackets in the book has a barcode, which consumers with the app can scan to make a purchase, use to access reviews or to upload photos to Instagram. So while the catalog lets customers see the full assortment of jackets at a convenient location, it also leads them to a richer and more social shopping experience.

Home improvement chain Lowe’s also created an app that addresses one of its customers’ major challenges: how to find the right tools and accessories for items that they bought in the past. The app tracks this history and contains a code that allows associates within a store to pull up a customer’s history and see possible complementary products. It’s instant, personalized customer-relationship management.

“To the extent that we can tie the customer with the associate, it’s really, really powerful for the overall relationship,” said Sean Bartlett, director of mobile strategy and platforms at Lowe’s. “Associates love it for the interaction in the aisles. So it’s really a win for everyone involved.”


CONCLUSIONS Virtually all retailers aspire to providing an omnichannel experience, but far fewer currently deliver it. As RSR’s survey on key measures of omnichannel retailing found, fewer than 20% of retailers reported full synchronization.

Implementation challenges, the complexity of attributing effectiveness to cross-channel techniques and complacency with the status quo have hindered omnichannel retail adoption. Ecommerce only accounts for around 6% of total retail sales in the US, so there may be a false sense that consumer behaviors haven’t changed enough to make omnichannel seem like a must-do.

Consumers are ahead of retailers in their omnichannel behavior. The majority of US consumers who connect to a store’s Wi-Fi use their devices while they shop. By giving consumers access to information and friends, internet-connected mobile devices have created a purchase path with many side-passages and feedback loops.

Consumers express strong interest in retailer innovations that add to the omnichannel experience, including wish lists, shopping carts, social integration, variable fulfillment and in-store apps. Apps that combine simplicity of use and utility add the most to the shopping experience.

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To learn more about Forrester’s mobile strategies for new realities, visit akamai.com/mobile



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