An accumulation of hurdles has squeezed profit margins for retail businesses, from online competition to rising business rates, and now inflation driven by Brexit. As a result store closures of household brands used to be surprising news but have become commonplace in today’s retail climate. 2018 has seen Carphone Giant, Mothercare, House of Fraser and New Look closing stores, while figures published by the Office of National Statistics this October show that the number of physical shops in the UK has fallen by almost 3,200 over the past four years[1].

This has also shifted attention away from multi-channel communications to digital channels only, with no consideration of hard data that clearly demonstrates the downsides of this strategy. These trends suggest that retail leaders are responding to current industry challenges with a greater focus on e-commerce, turning away from the physical presence. But should retailers resign themselves to the death of the high street?

Andy Wood, Chairman GI Insight

Although online spending is growing rapidly, customers still spend more within stores than online.[2] Instead of taking a blinkered approach that centres marketing budgets on online-only communications, retailers should be assessing the intelligence they have available on their customers’ behaviour across all channels. This should involve business leaders consulting their CMOs for metrics that can be utilised to adapt offers to the customer base. It is unfortunate that many CEOs don’t trust their CMOs (80%)[3] but this can be overcome by demonstrating the concrete business benefits – increased revenues, for one thing – to be gained from harnessing marketing intelligence.

A study by the Harvard Business Review surveyed over 46,000 customers, and found that only 7% were online-only shoppers and 20% were store-only shoppers. The remaining majority, or 73%, used multiple channels during their shopping journey.[4] The findings show that omnichannel shoppers enjoy using a combination of retailer touchpoints, and crucially, they are more loyal in the long-term. In sum, the availability of multiple channels draws shoppers to bricks and mortar locations to continue or conclude their purchasing experience. Multichannel customers are therefore more valuable for the bottom-line than single-channel customers.

This multichannel approach should be used to optimise marketing, as a combination of traditional channels such as direct mail, with digital channels including email and mobile, is more effective when used intelligently. Traditional channels continue to encourage incremental spend, while digital channels may be more appropriate for introducing offers, for instance. In fact, shoppers spend 25% more when a business uses a mix of direct mail and email marketing.[5] 

Retailers have more to gain from retaining and recruiting loyal in-store shoppers that spend more, than marketing to web-only customers with a high churn rate. Our research shows that the return on investment is as much as ten-fold more, even when other costs are taken into consideration. This should be factored into business strategy, especially considering that customers who prefer bricks and mortar stores are unlikely to suddenly become online-only shoppers when stores close.

To increase revenues, retailers should be tracking and analysing how customers communicate with them by choosing from a range of GDPR-compliant tools. They can then use holistic customer profiles to tailor messaging and promotions, offering shoppers something they are actually interested in, rather than blanket promotions that are wasted on valuable customers and prospects. Rather than disregarding the worth of physical stores, individual retailers must work on finding the right balance in order to drive long-term profits for all stakeholders.

[1] Retail Sector, 3,200 stores ‘disappear’ from high street in four years, 04 October 2018

[2] Office of National Statistics, Comparing “bricks and mortar” store sales with online retail sales: August 2018, 20 September 2018

[3] Harvard Business Review, The Trouble with CMOs, July-August 2017

[4] Harvard Business Review, How to Make the Most of Omnichannel Retailing: A Study of 46,000 Shoppers Shows That Omnichannel Retailing Works; Emma SopadjievaUtpal M. Dholakia, Beth Benjamin; January 3rd, 2017


[By Andy Wood, Chairman GI Insight]


By Alison