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Online Shopping Surpasses In-Store

Retail MoneyTips.com

Do you find yourself increasingly buying your non-grocery items online? You’re not alone. The annual United Parcel Service (UPS) Pulse of the Online Shopper™ survey found that, for the first time ever, online purchases of non-grocery items surpassed in-store purchases (by a slim 51% to 49% margin).

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To qualify for the survey, you had to have purchased at least two online purchases in the last three months — so an argument could be made that in the total population, in-store purchases may still be ahead. Even so, the trend is clearly leaning toward increased online shopping. During last year's holiday shopping season, the National Retail Federation (NRF) found that a slim majority of Black Friday shoppers did their shopping online instead of seeking in-store bargains and promotions. That inflection point corresponds well with the steady increases in the UPS survey.

Other numbers in the survey provide insight into the future direction of the shopping experience and the factors that will drive that direction — starting with accessibility.

Going Mobile

The evolution of mobile devices and greater downloading speeds and bandwidth has led to a proliferation of top-level retailing apps. Consequently, customers are reporting more favorable mobile online shopping experiences. UPS found that 73% of respondents report overall satisfaction with mobile online shopping in 2016 compared to 65% in 2015. A steady 56% of respondents use their smartphone to research purchases, and the number completing their purchases online rose from 30% in 2015 to 44% in 2016.

What makes an app superior? Half of the survey respondents cited product reviews and high quality images that help them assess items. Relevant product searches were important to 47% of respondents, and the same percentage cited mobile coupons as a factor. However, the statistic that may hold the key to the future is the ability to check store inventory, important to 43% of respondents.

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Cutting-edge retailers understand the value of in-store beacons and messaging that can bring consumers' beloved phones into the in-store shopping experience. According to the survey, only 28% of shoppers are not receptive to mobile messaging in-store; 26% were receptive while 46% remain neutral. That big audience can be attracted to brick-and-mortar facilities by clever use of in-store notifications— if it is done correctly.

Future success on the mobile side requires three concepts: integrating the in-store and mobile experiences properly through superior apps, managing social media to attract the nearly one-third of consumers whose decisions are influenced by social media input, and adeptly incorporating e-mail/text alerts on price and delivery issues based on feedback from the customer base.

Execute this properly, and the survey results imply that the in-store and online shopping experience become integrated in a way that attracts a loyal customer base. In marketing-speak, we are becoming "omnichannel" shoppers, and stores must provide these multiple channels to thrive.

The UPS survey shows that 38% of us are omnichannel shoppers (meaning that we use both online and in-store methods in our shopping decisions). That is less than the 42% who exclusively research and purchase online, but more than the 20% who do so only in stores. In essence, 80% of consumers use online shopping methods for product research, purchases, or both.

Taking it Back

For consumers, "Take it Back" is more than an Ed Sheeran song. The online shopping experience can be ruined without the ability to return items easily. Clothing is an obvious example. The same size does not guarantee the same fit across retailers, and without the ability to try clothes on in-store, an efficient return system is essential (not to mention reliable delivery and the ability to expedite shipping for a price).

More people expressed a preference to return an item to the store than to ship it, by a 60% to 40% margin. However, 69% of respondents actually had shipped a return item, compared to 52% using store return. The UPS survey found two relatively consistent key elements in defining thebest returns experience for consumers: free return shipping and a "no questions asked" policy.

Make the return process simple and relatively inexpensive to the consumer and you have a powerful tool to attract and keep customers. This approach, which Amazon helped pioneer and perfect, requires considerable resources and infrastructure, and that’s where the large third-party marketplaces of the world highlight their advantages.

The Logistics Squeeze

Third-party marketplaces such as Amazon and eBay are challenging retailers at all steps of the buying process. 50% of survey respondents started their search at a third-party marketplace or a generic search engine while only 31% started at retailer's sites. Those who prefer marketplace purchases cite better pricing (65%), free/discounted shipping (51%), lower total costs (49%), and speed of delivery (39%). Price and logistics (which also affects the price) define the advantage.

Those who can't deliver promptly and for free are left behind. Since 2014, at least 90% of the consumers in the UPS survey have abandoned an online shopping cart during the year. Why? Higher-than-expected shipping costs are cited consistently by over 50% of respondents. In all 5 years of the survey, 73% or more consider free return shipping as an important checkout option — higher numbers than those for guaranteed delivery dates or early notice of shipping costs.

Many retailers are now offering free shipping for in-store pickup as an alternative. Consumers' acceptance of alternate delivery locations has been increasing each year (29% in 2016), in part because of the possibility of extended hours — for example, you can swing by the store to pick up your package after work if the store is conveniently located. Retailers may have to consider the convenience factor along with in-store sales numbers when deciding which facilities to close or where new ones should be built.

When you do pick-up in store, you are likely to buy added merchandise. The UPS survey shows a steady increase in consumers making additional purchases while in store to pick up a delivered item (46% in 2016). The extra sales are critical in providing the economic cushion to absorb the extra costs of free shipping for other items.

The Takeaway

Brick-and-mortar stores are not going away, but their roles and purposes are changing. Larger retailers must optimize their pattern of stores, and turn them into as much showrooms and logistics centers as they are retail outlets. Instead of complaining about "showrooming" where customers review items in store and buy elsewhere, retailers must use that contact time to entice shoppers with their own total package of online options: in-store beacons and messages to engage the tech-savvy, simple and efficient return procedures, and logistics that allow them to provide all this at a reasonable price.

Ernst and Young cites the need to focus on shopper loyalty through exclusive brands, unique in-store experiences, or innovative loyalty rewards programs. Online shopping platforms and social media management will be an important part of creating such loyalty. Retailers must follow the rule of all complex ecosystems — adapt and evolve, or die. Those who are just now applying this principle to online shopping are probably already on their way to joining the dinosaurs.

This article was provided by our partners at moneytips.com.

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