News Feature | December 28, 2017

New UPS Study Highlights The Changing Channel Dynamics Of Retail

Christine Kern

By Christine Kern, contributing writer

Healthcare Study

Empowered shoppers create changing dynamics for retailers across channels.

Retail is currently experiencing a changing landscape in which online shoppers make more purchases from international retailers, shop increasingly on mobile devices and rely more heavily on marketplaces to complete their shopping. Driven by the desire for better prices, unique products and increased convenience, these behavioral shifts are also creating changing dynamics for retailers across channels, according to the third installment in the five-part series of the 2017 UPS Pulse of the Online Shopper™ study, “Channel Dynamics” which examines the ramifications of the fact that today’s shoppers are empowered with more retail choices for direct-to-consumer purchasing across online and brick-and-mortar channels.

Deloitte has stated that retail is poised to see a new digital tipping point in 2017 as ecommerce continues on its relentless growth trajectory, driven by a powerful omnichannel retailing approach. And while the growth of ecommerce has meant real challenges for brick-and-mortar, with record numbers of physical store closing projected in 2017, it also has meant a redirection and repurposing of those physical spaces through the introduction of new technologies in the omnichannel world.

According to the “Channel Dynamics” study, “Global retail brands are making their presence felt online with robust information and direct-to-consumer purchasing offered across multiple channels. Because today’s shoppers are empowered with more retail choices — from small neighborhood merchants to online marketplace giants — delivering an exemplary and consistent customer experience is essential. In fact, 68% of online shoppers rate their past experience with a retailer as an important factor when searching for and selecting products online.”

One thing is clear: Retail is now global in character. The UPS study has demonstrated that the internet has leveled the playing field, enabling many retailers to move beyond a U.S. brick-and-mortar presence and sell globally.  Marketplaces are also rising in popularity as shoppers are more willing to search in unfamiliar territory for unique products and lower prices. Marketplaces increase exposure for international retailers and improve opportunities for expanding their reach into new markets.

The study also found that the number of online shoppers who made marketplace purchases rose 12 points since last year, reaching an almost universal penetration rate of 97%. While the outlook for future marketplace purchasing is favorable, sellers should heed the warning that they will be held to the same standards as traditional retailers, including an optimal customer experience and customer service, product quality and a flexible return policy.

The rise of online commerce does not mean the demise of the physical store, however. To the contrary, the physical store has been reinvented by the rise of digital shopping. With the average percentage of purchases made in physical stores down 3 points since 2014, retailers have refocused attention onto the customer experience, which means clearly understanding shopper expectations for visiting and ideally buying in a store.

Physical stores still clearly fulfill certain shopper tactile and urgent needs that cannot be met by online retailers. In fact, the need to actually touch a product is the most important reason why online shoppers decide to visit a physical store. Yet, 33% of shoppers surveyed agree they only go to a physical store when they have an urgent need.

And since research shows that Shoppers value in-store concepts that offer exciting, interactive and educational experiences, retailers need to be open-minded and creative in their thinking while creating new in-store concepts. The study concludes that appealing concepts include pop-up stores and a variety of events such as fashion shows, private trunk shows and special member-only receptions to preview new products.

Brick-and-mortar stores can also leverage good customer associate services and employ new customer technologies from robots to virtual reality to improve the in-store customer experience and entice buyers back into the stores.

The sixth annual UPS Pulse of the Online Shopper study analyzes consumer shopping behaviors from pre-purchase to post-delivery. The study was fielded by comScore, Inc. in Q1 2017, and was based on the input of more than 5,189 qualified comScore panelists who had made a minimum of two online purchases in a typical three-month period. UPS worked with Astound Commerce, Inc., to develop questions, conduct analysis, and define retailer recommendations for the study.

The key takeaways of the study include:

  • Focus on International. Make shipping internationally a priority to expand your customer base.
  • Test the Marketplace Waters. Explore selling on marketplaces after closely evaluating the scope of opportunity for your business.
  • Elevate the In-Store Experience. Ensure your physical store remains relevant by providing an inspiring and effective shopping experience.
  • Leverage Associates. Don’t underestimate the importance of associates and how they can help differentiate your brand by providing efficient, knowledgeable service to shoppers.
  • Embrace New Technology. Take advantage of innovative technologies that to appeal to tech-savvy shoppers and enhance the in-store experience.