The Supply Side: Hybrid shopping experience ‘is not going to go away’

Five years ago, omnichannel — multiple methods to reach consumers — was a retailer’s choice. Still, following a pandemic that changed the landscape for many economic sectors, the hybrid shopping model has become table stakes.

Rick West, CEO of Field Agent, a research and retail data collection firm in Fayetteville, said omnichannel retail is here to stay, and retailers have to make room for omnichannel and the hybrid shopping experience because customers expect it.

“Specifically, from the retailer perspective, the omnichannel experience will shift again in 2024,” West said.

He said shoppers want every option and to be served efficiently whether shopping online, in physical stores or some combination of both. He said that in 2022 and 2023, many top retailers moved their staff from front checkout lanes to accommodate online pickup and delivery. West said retailers saw that as temporary, and many still needed to change their backrooms.

“And now, based on the work we’re seeing at Field Agent, many retailers are coming to the conclusion that the hybrid shopping experience is not going to go away,” West said.

He said shoppers expect stellar customer service and short wait times in line while shopping in stores, and they also want quick pickup service and convenient delivery options. West believes retailers who have yet to make structural changes to backroom staffing will do so this year, impacting labor and staffing shortages. He said customer experience will also be affected as more retailers move to self-check while reallocating employees to pickup and delivery.

He said that increasing minimum wage rates means the fast food industry is moving to kiosk ordering and payment, eliminating the need for designated cashiers. McDonald’s, Taco Bell and Panera Bread have embraced this move. West said that while it can be frustrating for the customer who only wants to order a soft drink, this is how the industry moves.

Even small retail stores like Dollar General and Walmart convenience stores offer self-check options and a smaller human staff.

West said retailers can’t fight how consumers want to shop and must meet the shoppers where they are. He said shoppers now play a more significant role in the retail experience as they check out and bag their purchases.

“We will start to notice in local Walmarts, Targets and Costcos an upgrade in technology to make way for a faster, easier, more reliable self-checkout experience,” West said. “One thing that retailers have not yet found is a perfect solution for the impact of theft at each self-checkout station. What will be the impact on the overall shopping experience, and will prices also start to reflect the impact of theft at retail.”

West said there may be no real solutions, only trade-offs for the most complex problems. He said shoppers will likely have longer waits, higher prices and still have to do more of the labor on their shopping trips in exchange for the convenience of pickup, delivery and online shopping.

Consulting firm McKinsey & Co. reports that while offering a compelling omnichannel experience used to be the bleeding edge of retail, it is now a requirement for survival. McKinsey reports that 63% of consumers expect omnichannel purchases to continue. McKinsey also warns that retailers must embrace omnichannel and try to find a way to pay for it. McKinsey said retailers must prioritize one business that serves customers in stores and online.

McKinsey spotlighted three models that retailers are tackling omnichannel. The models include a traditional commerce option focusing on personalization and an ecosystem model. McKinsey said retailers must decide which model provides the best chance to drive long-term value.

“At the most basic level, the commerce option allows retailers to meet the minimum threshold for omnichannel performance. However, retailers with more advanced capabilities can take it to a different level. Best Buy, for instance, has burnished the in-store experience with curated offerings that allow customers to explore smart-home technology solutions, which they pair with free in-home advisory services,” McKinsey noted.

The Best Buy mobile app also allows customers to scan to shop from catalogs and curbside and offers the ability to buy online, pick up in-store and quickly add tech support service.

Walmart has also invested in its omnichannel offering with connected stores, AI-driven smart search online and numerous backend updates such as more fulfillment from stores that helped improve profitability by lowering e-commerce losses by 40% in the recent quarter. Walmart also shaved 20% of last-mile delivery costs using more in-store fulfillment.

McKinsey said retailers must also evoke personalization to improve consumer engagement across shopping modes. McKinsey highlights beauty specialty retailer Sephora’s ability to message customers with push notifications and book in-person beauty consultations with their phones.

Sephora store technology allows employees to access a customer’s favorite items and suggest new products that align with their profile. Customers can use scanners to match products to their hair color and skin type. Sephora’s loyalty program taps unified customer data and links offers across email, web, and mobile to drive online and in-store purchases. By achieving this level of personalization, Sephora can capture greater value from its rich customer data. Sephora reports that customers who visit the retailer’s website within 24 hours of entering the store are three times more likely to purchase at an average of 13% higher than other customers.

McKinsey said another way retailers can delve into omnichannel is to build or join an ecosystem that allows customers to participate in community-based interactions that are extensions of the brand. McKinsey highlights Nike, which uses Run Club apps to foster in-person meet-ups, running groups and events for customers. Nike also offers a training club app that delivers individual workouts and multiweek fitness programs.

McKinsey said Nike’s investments in the ecosystem model allow the brand to create experiences far beyond their show and apparel lines to fold the brand into an individual’s day-to-day routines.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.