Why Offline Retail Has Better Data Than Online Retail


This article originally appeared on PSFK and is written by Healey Cypher, co-founder and CEO of Oak Labs.

“When Tesla began in 2003, its founders centered around the reinvention of a traditional industry, they looked past Maranello, Stuttgart, and Detroit. They looked to an alternate reality. One where the touch of a button could change the entire interior of a vehicle. One where making cars drive autonomously was as simple as a software update sent over the airwaves. One where more than 400,000 customers would willingly wait in line for the next model.

In the same way that Tesla sparked an acceleration within the automotive industry, the retail industry is on the precipice of tremendous change. In the United States, we have the most “over-retailed” country on the planet: 46 square feet per every man, woman, and child. This saturation means that today retailers cannot fuel growth solely by opening more stores. Competing on proximity, selection and price alone will no longer win. Retailers must compete on experience.

Anyone in e-commerce has their ‘conversion funnel’ metrics memorized. What percentage of people advance from landing pages to product pages? From product pages to the cart? From the cart to checkout? Is each drop-off point analyzed? And are sites rapidly launched, tested, and refined?

For example, e-commerce giants spend tens of millions to make pages load milliseconds faster. Because it pays off almost immediately.

Because of this, there is a popular myth that online has better data than offline. And while it is often better instrumented, e-commerce is limited to a string of binaries: black-and-white pieces of “click” data. The physical world, however, contains all the shades of grey that are truly valuable. For the last 15 years, online commerce has leveraged data to ruthlessly optimize. It is time for retail stores to follow suit.

When a customer walks into a store they are doing one of two things: 1) looking for something specific, or 2) hoping for some inspiration: They’re searching and browsing. Like a real-life homepage! If you extend the ‘conversion funnel’ metaphor to the physical store, it gets interesting.

Here are the four main takeaways from viewing the physical store as an e-commerce site:

1. “Product Pages”
Customers walking around the store perusing shelves and mannequins are looking at the ecomm equivalent of product pages. They are gathering data. The more compelling the info the better. Retailers have found that ‘hanging’ garments sell up to 60 percent better than ‘folded.’ When customers see an item they like but the size they want isn’t physically present, 47 percent of customers won’t ask for help. In fact it’s estimated that items not being in stock lose the sale 50-60 percent of the time. [Kurt Salmon]

2. Checkout Line
In the same way ecomm users will bail if they have to take the time to enter in their credit card number, if customers perceive a line to be over 7-minutes long, 79 percent will abandon the line. [WSJ: “Find the Best Checkout Line”] We’ve all done this: walk in, see massive lines, walk out. Over the last few years, several massive grocers have begun ‘queue optimization’ to find amazing results. In a private meeting, one grocer revealed they took their wait time down from 7-9 minutes to 5-7 minutes and saw a 9 percent sales lift. [“Why Waiting in Line is Torture” NYTimes 2012]

3. Fitting Room
In apparel, this is basically the ecomm ‘cart.’ There is no stronger indicator of intent than a customer going into a fitting room. Typically a 2/3 chance a customer will convert, but 40 percent of the time in a fitting room is wasted today… people don’t love that. Fitting rooms, by the way, are also an amazing source of data: what UPCs are just going in the most, but what are converting the highest and lowest? And for the low converters, what are they asking for? Bigger sizes? Darker Shades?

4. Speed
Similar to the metric earlier about page-loading times, it doesn’t matter if you’re a high-touch/lower-velocity store (ultra-luxury) or a low-touch/higher-velocity (fast-fashion), no one wants to wait. Some recent analysis we have done at Oak Labs has shown conversion likelihood can be tied to the level of service a customer receives. Okay, maybe “duh” but what if you knew the exact cutoff points? Bring that ‘size medium’ in less than two minutes and a 50 percent higher chance they’ll convert… How fast do customers receive an item they’ve asked for? How available are staff that are knowledgeable on their specific area of interest?

As a retailer you’re going to be tempted to invest in technology gimmicks: buzz-worthy flashes in the pan for a marketing splash. And while it might be an interesting idea to slap VR goggles on everyone who walks in, before you invest in technology, approach it with the acute mind-set of determining what customer pain point it’s solving. No tech for the sake of tech. Think of the ROI beforehand: does it increase customer acquisition, conversion, or retention? And perhaps most importantly, assign Key Performance Indicators beforehand so you can make tweaks, feature updates, and changes to improve those KPIs. Realize the initial launch of an experience is simply the beginning—you should treat your stores like living and breathing, hyper-intelligent software. Because they will be.”

Read the full article on PSFK.

Tamara Gruzbarg
Tamara Gruzbarg
Head of Insights and Strategy
Expert analytics executive with 20+ years of experience, guiding organizations through rapid data transformation and growth. Designed and implemented ML-powered solutions in areas of Customer Acquisition, Personalization, CRM and Campaign Management across Financial Services, Omnichannel Retail and Media.
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