Retailers have a new, mouth-watering reason to chase after omnichannel consumers. According to a new study, omnichannel shoppers spend three to four times more than other customers.
Some of that rich opportunity is buried beneath the growing pains of retailers transitioning to a new business model. Nordstrom is one such company: Amid a 30 percent decline in its shares and projections of grim earnings in the immediate future, the clothing retailer might look to be a brand that is struggling to adjust to a transition from in-store selling to increased online sales.
In reality, the opposite is true: Nordstrom is starting to realize that the long-term costs of online shopping aren’t as attractive as in-store selling. That has inspired the company to re-commit to physical stores as a hub for showrooming and omnichannel strategy.
In other words, the company is transitioning its strategy for all of its sales channels. That will cause some short-term headaches, but the changes will make for a much brighter future.
The Economic Advantages of Physical Stores
Internet Retailer paints a compelling picture of the financial comparisons between physical stores and online retail websites. As Nordstrom CFO Mike Koppel explains, the low-cost appeal of online selling isn’t everything it’s cracked up to be.
While online selling avoids the expensive overhead of physical stores to house and showcase products, online sales presents much higher variable costs that start eating into profits as a retailer’s sales volume increases. Packaging and delivering is a cost applied to every single purchase, for example, and that added per-purchase cost isn’t reflected by sales executed in a retail store.
At a certain point, the cost of that packaging eclipses the cost of running a physical store. Between 2010 and 2020, Nordstrom believes online selling will increase its share of total revenues from eight percent to a projected 30 percent.
To address these cost concerns, the company is taking a harder look at the showroom approach to in-store selling. It is also determined to strengthen its omnichannel shopping experience, recognizing that in-store sales and online retail must co-exist and help one another secure transactions from a fickle shopping base.
And with omnichannel shoppers spending three to four times more than single-channel shoppers, there’s plenty of incentive to do so — even if the company’s short-term performance is a bit dim.
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