How to Make the Most of Omnichannel Retailing
One of the biggest challenges for brick-and-mortar retailers is competing with online-only sellers such as Amazon. The conventional "omnichannel" strategy is to encourage consumers to shop across channels. But few retailers have closely examined the profitability of such efforts, and they typically pay little attention to how far a customer lives from the store. New research led by Temple University's Xueming Luo shows that distance is a crucial variable. Working with a Chinese department store on its coupon strategy, the researchers found that the most profitable promotions coaxed distant online shoppers (ones who lived more than five kilometers away) into physical stores, where they were more likely to make impulse purchases and to buy "experiential" goods such as apparel and makeup. Luring distant in-store shoppers online was actually counterproductive--profits from those customers fell. (Coupons made no significant difference when customers lived close to a store.) Retailers should also consider giving online customers incentives (such as free shipping) to have orders sent to a local store for pickup rather than delivered to their homes, the researchers say. And they should reduce the real or perceived costs of traveling to a store--for example, by locating stores near public transit or ensuring ample parking.