How Brick-and-Mortar Retailers Can Thrive in the Digital Age

The continued growth and popularity of online shopping is creating new challenges for brick-and-mortar retailers. However, by making use of the right analytical tools, there's no reason why these stores should feel threatened. Physical stores continue to be a valuable channel for retailers because they offer something online retailers can't: a tactile experience.

Even Amazon.com, the world's premier online retailer, sees the value in having physical storefronts. With the right approach, online and physical retailers can be complementary, boosting sales and engaging customers in new and exciting ways. As traditional retailers grapple with increased competition from online shopping, here are three strategies for bridging their physical-digital divide:

1. Capitalize on your high-value customers.

People who buy online and in-store are the most loyal and valuable customers to a retailer. These consumers like trying products in-store as well as the flexibility of buying them in the comfort of their own home. These same consumers are also more likely to attend special events at physical stores to learn about new products, which create excellent opportunities to further build brand awareness and deepen the emotional engagement with customers.

Retailers need to capitalize on this high-value consumer segment, but they need more data beyond what they can mine from their customers’ transaction histories to do it effectively. Combining data collected from online and in-store customers is a good start, but it still leaves blind spots. One of the most effective and efficient ways to alleviate these blind spots is to use a third-party segmentation system.

By linking your customer data with a proven segmentation system, you can gain insights about customer demographics, lifestyles, preferences, attitudes and values, as well as insights on where they live. This will not only help inform the way you engage those customers, but also find more customers like them and highlight opportunity gaps for local marketing efforts or developing new stores. This information can inform your marketing campaigns and allow you to reach customers more effectively through their preferred modes of communication.

2. Capitalize on the BOPIS trend.

Consumers who are buying online and picking up in-store (BOPIS) are another important segment physical retailers can’t afford to ignore. These consumers not only take the time to read product reviews and compare prices, but they also tend to have a high affinity for the retailers they purchase from. They want the convenience of picking up their purchases right away in a nearby store rather than waiting for the products to arrive by mail and dealing with delivery complications. However, nothing frustrates customers more than learning that the item they want is out of stock at their preferred store or knowing they will experience long lines when they pick up their online purchase.

A trusted third-party segmentation system can help identify these customers, ensuring that retailers are adequately stocked and staffed. By segmenting your customers and using "geodemographic" data, retailers can research what customers in their trade areas like to buy based on their lifestyles, spending habits and behaviors. This approach helps you identify where BOPIS customers tend to cluster, then you can highlight physical stores (and any potential store layout changes) that best match this local clientele. This information enables retailers to tailor their product selection and staffing volumes to accommodate this segment of consumers.

3. Analyze shopping patterns.

To optimize the merchandising of a new store location, a retailer needs to account for not only the preferences and spending habits of the consumers in the trade area, but also their shopping patterns at its competitors’ stores. In the past, this level of analysis would be cost prohibitive, but new mobility analytics services offer an affordable way to reveal the movement patterns of your store’s visitors and your competitors’ visitors over the course of a day, week or year. Mobility analytics allow you to analyze the size and shape of your trade area, especially in contrast with your other stores or with your competitors.

As an added advantage, with mobility analytics retailers can identify where a visitor was before and after their visit to your store, enriching your analytical view of the shopping journey and providing potential opportunities for engagement. Integrating these insights with geodemographic data, retailers can identify the segments of their customers who are likely to defect to their competitors. This can jump-start a campaign to retain them with products that they value.

Credit: Environics Analytics

The growth of online shopping will not be the demise of physical stores, but it will require brick-and-mortar retailers to change their thinking. With the right mix of data, insights, strategies and actions, physical retailers can still thrive. Some of the most valuable customers are highly engaged at brick-and-mortar stores. It’s up to those retailers to respond by identifying and targeting them with appropriate messaging and product selection.

Tracey Matchett is a group account director at Environics Analytics, focused on U.S. retail and consumer packaged goods.