May 4, 2023
Becoming genuine omni-channel players is the key aspiration of department stores, which in the past used to build their reputation within their walls. In its latest study, the International Association of Department Stores (IADS), which brings together 12 chains from all over the world*, has found that department store customers who buy both online and in-store spend on average three times more than those who use only one shopping channel. Hence the need for a strategy offering a range of solutions to facilitate the consumers’ purchasing journey.
The omni-channel transformation of department stores is an ongoing process, said IADS: “After testing many services in constant work-in-progress mode, it is now a matter of adjusting them and possibly concentrating them in a ‘super-app’, provided it improves the financial bottom line.”
Rather than innovation at any cost, the watchword is effectiveness. For example, click & collect purchases now account for up to 41% of all omni-channel transactions at Swiss department store chain Manor. “While early on some department stores located this service on their upper floors to prompt customers to wander through the store, the consensus now is that the best location for this service is on the ground floor, especially near the entrance, in the customer service area or close to the car park,” said IADS.
An optimised version of the click & collect service, click & express refers to products ordered online and stocked in a given store, which means they can be made available to customers in two hours at Spanish chain El Corte Inglés, and in one hour at Manor. Considering in-store stock as a warehouse of sorts for web purchases enables for example German department store group Breuninger to ship 15% of its online orders from its stores.
E-bookings, which do not guarantee a sale, are instead less popular with department stores “due to the high risk of cancellations or customer no-shows.” Customers also have the option of ordering in-store items not available on the shelves, broadening the chain’s physical catalogue.
Deploying an e-marketplace model, which consists in hosting on a department store’s site products by third-party vendors, which then take care of shipping, is another way of making more items available to customers. To make things easier, “Breuninger now accepts returns for merchandise ordered from third-party brands on their marketplace to their own warehouse, considerably simplifying the life of their customers,” noted IADS, also citing a test by Galeries Lafayette, which is offering an in-store pick-up service for products ordered by customers on three different marketplaces.
Department stores are also tackling issues like home delivery and free returns, which constitute additional costs. The click & collect service is instead more economical for chains, and could be encouraged by offering benefits. Regarding returns, “Manor has already taken steps towards cost efficiency, as returns in-store are free but returns to the warehouse aren’t. As a result, 66% of product returns are made in-store.”
Department stores are focusing on services with proven results, abandoning others, and sometimes combining them with each other, like an online personal shopping solution linked to e-booking. According to the study, mobile apps seem to be the key tool for harmonising omni-channel services. At Manor, for example, 70% of online sales are generated from smartphones.
Department stores are looking to add new features to their apps. Augmented reality and virtual reality services are said to be under development, designed for example to guide customers across a store’s various floors through an interactive map, and offering personalised discounts as customers pass by a certain stand.
In conclusion, IADS noted that “retailers are now focusing on fine-tuning the most relevant [sales channels] while maximizing their ROI, be it to enhance the customer experience or to maximize the business. This doesn’t mean that new services and sales channels won’t be developed in the future, but that the current strategy adopted by department stores is to harmonise the relevant [channels] to provide a truly seamless omni-channel experience, possibly through a super app, in order to capture the complete customer journey, with cost optimization always firmly in their sights.”
* The members are Centro Beco (Venezuela), Beijing Hualian Group (China), Breuninger (Germany), El Corte Inglés (Spain), El Palacio de Hierro (Mexico), Galeries Lafayette (France), Lifestyle International Holding (Hong Kong), Magasin du Nord (Denmark), Manor (Switzerland), The Mall (Thailand) and SM Store (Philippines).
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