1911: The Birth of Omnichannel

In 1911 Leon Leonwood Bean became an early pioneer of multi-channel retail. Bean, who was orphaned at age 12, spent most of his early adulthood doing door-to-door sales and other odd jobs, and didn’t become the name we know today until he was 40. To sell his Maine Hunting Boot, Bean turned to a mail-away flyer, which later became his famous catalogue. By focusing on multiple transaction channels, Bean turned his rural Maine hunting equipment store into the first semblance of the internationally recognized L.L. Bean. Between 1967 and 2001 the company leveraged multi-channel marketing and retail methods to grow from a $4.75 million establishment to a billion dollar enterprise. Today L.L. Bean combines its online store with co-branded credit cards, and brick and mortar shops, among other channels, to entice customers.

Seamless Shopping

Mail-order catalogues may be a bit outdated, but the practice of driving retail sales via a number of different channels continues to grow in prevalence. United States Census data suggests e-commerce accounted for 6.5% of all retail sales in 2014. But there is a clear upward trend. Today’s retailers would do well to leverage their omni-channel presence to drive sales.

To be clear, there is a distinction between L.L. Bean’s multi-channel shopping experience and today’s omni-channel strategies. Multi-channel retailers allowed customers to purchase goods through a variety of channels. Those channels, however, weren’t always seamlessly connected. A catalogue buy or e-purchase might not be returnable to brick and mortar stores, for instance. Omni-channel retail strives to unify the myriad channels available to shoppers and retailers. Omni-channel retailers don’t just offer two or three purchase methods. They use the channels available to them to develop a holistic view of customer preferences, and turn that information into a seamless shopping experience.

Mobile is the New Mail-Away Flyer

It’s a trend that is poised to continue to grow. Retail Online Integration found in 2013 the top 100 omni-channel brands improved their year-over-year sales anywhere from 2.3% to nearly 70%. Much of that growth comes from digital channels, particularly mobile. According to Deloitte research, in 2012 mobile influenced 5.1% of all retail store sales in the United States. That figure represents about $159 billion in total sales. Deloitte forecasts that mobile will eventually influence 17–21% of all retail store sales — up to $752 billion — by 2016. The firm also believes “smartphone shoppers are 14 percent more likely than non-smartphone shoppers to convert in store.”

An L2 Business Intelligence report found that digitally influenced retail sales have risen from 14% in 2012 to nearly 50% today. Not surprising given 72% of customers “showroom,” or buy online after browsing in-store, while 78% of shoppers “webroom,” that is, they buy in-store after browsing online. The message? Digital and physical purchase channels are becoming increasingly intertwined. This means retailers must create a seamless shopping experience between all of their channels.

The 2 F’s of Omni-Channel: Fast Fulfillment

Research suggests the omni-channel experience goes beyond a unified return policy. A Retail Systems Research report, commissioned with SPS Commerce (a supply chain management solutions company), points to something called the “Amazon effect.” Because of Amazon’s quick fulfillment capabilities, customers are increasingly concerned with how quickly their retail purchases arrive. The retailers surveyed believe three of the top four actors on the retail supply chain in 2014 were: rising consumer expectations for item information, inventory availability, and rapid fulfillment. To drive sales, omni-channel strategies will need to address those concerns.

Big box retailers and smaller companies alike are turning to omni-channel methods. Crate & Barrel leveraged a hybrid experience to address customer concerns. The company first updated their online product descriptions — thereby addressing consumer expectations for item information. Then, they implemented a seamless purchasing program by which customers may buy products online and pick them up at a nearby store. In two maneuvers, the furniture and home goods giant addressed the three main customer concerns. Crate & Barrel’s total year-over-year web sales grew 5.1% in 2013, thanks in part to their omni-channel focus.

Warby Parker Goes Omni-Channel.

Warby Parker made their omni-channel name by addressing customer expectations for item information. Especially with retail verticals that require a touch-and-feel component to collecting information, a list of product details on a website often isn’t enough. Warby Parker offers a program called “Home Try-on.” With this program they ship customers five different frames free of charge. After five days, the customer must return the frames, with free shipping. This allows potential customers to generate the tactile product information they desire, and then easily complete the purchase online.

The eyeglasses retailer took their omni-channel strategy one step further. Warby Parker also opened a number of showrooms. These showrooms give potential customers a view of the company’s entire inventory. Customers may order the pair of their choice, and Warby Parker then ships the selected frames, as if the customer completed the order online. In this manner, Warby Parker is also able to address consumer concerns about inventory availability.

MIT Sloan studied Warby Parker’s omni-channel initiatives. They found a 9% increase in total sales in areas near Warby Parker showrooms. Online sales to customers in zip codes surrounding showrooms also grew by 3.5%. It’s why sales per square foot is the wrong metric. MIT found that while Warby Parker’s Home Try-on program decreased in overall sales, the initiative’s try-on-to-purchase conversion efficiency increased. (Full disclosure: Storefront is mentioned in one of MIT’s reference links).

Easy on the Wallet

Renting a showroom isn’t exactly within the budget of smaller operations. Luckily brands like Warby Parker have shown expansive showrooms aren’t the only option for retailers looking to embark on an omni-channel strategy. Warby Parker’s Class Trips utilize a bus in which representatives drive to a designated location with a vehicle full of frames. Bonobos, an online fashion retailer, uses what they call “guideshops.” Guideshops offer inventory shoppers may try on, but must order for delivery later. These options provide a glimpse at ways companies have found creative methods to expand their offerings, without breaking the bank. And, they allow Bonobos to test a hypothesis.

Even if retailers opt to go after a more traditional model, many are discovering the costs are not as prohibitive as they thought. The current real estate climate is ripe for retailers looking for shorter-term fixes. Jones Lang LaSalle found that in 2014, 55% of all retail building projects were “single-tenant, freestanding general purpose commercial buildings.” Meanwhile projects like shopping malls and retail centers built around massive anchor tenants made up just 41.7% of all retail construction projects in 2014, down from 67.6% in 2008. And tenants are finding that short-term rental rates for those smaller buildings are far lower than traditional long-term commercial leases. More commercial real estate is available to retailers with shorter lease terms and lower rates. For example, the Westfield mall in San Francisco recently opened a space dedicated to making it easy for emerging brands to pop-in for a short term.

It’s important to smaller retailers that they are able to find ways to develop a physical showroom-type space. Despite the overwhelming presence of e-commerce plays like Amazon and Overstock, the majority of consumers still make their retail purchases in physical stores. While the e-commerce slice of the retail sales pie is growing, it is clear consumers still value the ability to touch and explore merchandise in person.

L.L. Bean and other large retailers — think Macy’s, Crate & Barrel, Starbucks, even — began as brick-and-mortar shops that expanded into the world of e-commerce. Warby Parker took the opposite route, and turned their online shop into an experience with a physical presence. In either case, the company was able to address customer demands by melding two once-independent methods of purchasing retail goods.

There are more pieces to the omni-channel puzzle than simply establishing a physical store and complementary online presence. Drop shipping and supply chain rearrangements, updating back-end tools like CRM software, and mobile application and website development, are also important devices needed to drive omni-channel retail sales. If L.L. Bean’s Maine Hunting Boots are any indication, sometimes a little creative thinking goes a long way.

Commerce as Creativity
“We guarantee them to give perfect satisfaction in every way.” — Leon Leonwood Bean Credit: L.L. Bean

Leon Leonwood was farther ahead of his time than even he could realize. His mail-order, brick-and-mortar hybrid addressed the three major concerns today’s retail customers have: transparency into product information, inventory, and rapid fulfillment. There is no quick fix to developing an omni-channel strategy. The barrier to entry is not as low as a snail mail catalogue. Yet the cost to establish a physical location in tandem with an e-commerce site isn’t as high as it has been in the past. Small retailers looking to make a big footprint need just a dash of creativity, and to remember the story of the Maine Hunting Boot.