Target’s Plans Highlight the Importance of an Omnichannel Strategy

Target recently announced that it will expand the functions and capabilities of its physical stores. As e-commerce continues to reshape the retail landscape, every legacy retailer has to adjust and adapt its strategies in order to attract and retain a sizable audience. Providing an optimal omnichannel experience for customers will soon be a prerequisite for any company with a brick-and-mortar presence — if it isn’t already.

Target’s plans include giving mobile devices to “a select number of associates” in each store before the 2017 holiday season. The devices will allow associates to place online orders for customers who can’t find exactly what they want in stores. Longer term, Target is also refining its buy online, pick up in-store service (BOPIS), and it will redesign its backrooms so that, by 2019, digital orders can be shipped to customers from almost every store. Target estimates that 75 percent of Americans live within 10 miles of one of its stores, so these efforts should enhance the shopping experience for its customers while expanding and accelerating delivery options.

Target is implementing these moves both to build loyalty and in response to its customers’ changing behaviors:

• In last year's fourth quarter, Target's online spending grew 30.2 percent year-over-year, but its in-store spending fell 6.1 percent.
• Overall in 2016, Target’s online sales rose 21.9 percent, while its in-store sales fell 6.8 percent.

Although just 4.4 percent of Target’s revenue last year came from online orders, the trajectory is unmistakable: Customers are increasingly spending time and money on Target’s website. This mirrors the steady rise of e-commerce activity across the industry. Indeed, online sales in North America are predicted to grow at double-digit rates through 2020.

Mobile devices are generating much of this growth. During the 2016 holiday season, for example, mobile accounted for half of all online retail visits. Smartphone usage in particular is causing retailers to focus on developing omnichannel strategies. After all, smartphones were used by 41 percent of holiday traffic, accounting for 21 percent of online sales.

Target isn’t alone in adjusting to this new reality, of course. J.C. Penney, for instance, is also enhancing its omnichannel approach — and rightly so. J.C. Penney's omnichannel customers spend double the annual amount that single-channel customers do. What’s more, a recent study found that compared to online-only or in-store-only shoppers, omnichannel customers spend:

• 4 percent more in stores;
• 10 percent more on online purchases; and
• 13 percent more in stores when they do online research beforehand.

Given the high value of omnichannel customers, it’s critical that retailers offer them easy, convenient and seamless ways to find the products and information they want. In addition to Target’s tactics, like offering BOPIS and ship-from-store services, programs that retailers employ and/or should consider include:

• customized mobile messages and proximity notifications that alert customers to deals of interest to them and/or near their in-store location;
• loyalty rewards that are easy to achieve, track and use, both online and in-store;
• engaging apps that offer users streamlined checkout flows, simple navigation and search tools that deliver relevant results quickly; and
• customer service features — e.g., wide-ranging FAQs, online chat options and prominently displayed phone numbers — that are readily accessible via any channel.

This isn’t a comprehensive list, obviously. Retailers need to find or create innovative omnichannel instruments that attract new customers while catering to their existing audience’s desires. They should also keep an eye on other stores, including their competitors, and revise tactics as required. Web-influenced shopping already accounts for over $1.5 trillion in U.S. retail sales, so it’s incumbent upon each retailer to assess its current offerings and do what’s necessary to give its customers — and prospects — exactly what they want.

Tom Caporaso is the CEO of Clarus Commerce, a provider of e-commerce and subscription commerce solutions.