Many businesses pursuing multi-channel retailing are doing it wrong, Ikea Canada president Stefan Sjostrand said in a recent interview with The Vancouver Sun.
For one thing, online product should never be less expensive than product in physical stores, Sjostrand said. “The customer doesn’t think in channels. Why should it be cheaper to buy on the web versus in the store?”
No wonder some retailers are seeing e-commerce growth at the expense of their physical stores, Sjostrand said.
And forget about offering free delivery. Why should the customers who make the effort to drive to your physical store subsidize your online customers for free delivery? Sjostrand asked.
“They get punished. That is not fair. That’s why we in Ikea, if you want to have the lowest price, you come to the store,” he said. “If you would like to order on the web, you pay for the work we do for you.”
Ikea charges $20 for customers who order online, then come to a pick-up point to collect their goods.
Of course, getting a customer into an Ikea store means Ikea can sell inspiration and design ideas. Selling inspiration online just doesn’t work as well.
“It’s not real,” Sjostrand said. “That’s why we believe ecommerce will never be bigger than 15 per cent of our sales. We think 85 per cent is still going to be in the stores.”
Navigating the multi-channel environment is a challenge for many retailers, whether they started as online or physical businesses. Multi-channel is probably better referred to as omni-channel retailing. While the terms are often used interchangeably, omni-channel better emphasizes the complete integration of all retail channels. Here’s how Ikea, Clearly and Indochino are approaching omnichannel retailing this year.
Ikea will build 12 more Canadian stores over the next 10 years and expects to double its 5000 employees, Sjostrand said.
“The store’s going to have another role in the future. Tomorrow, we’re going to sell even more services and that’s going to happen in the store,” Sjostrand said.
He would not describe formats or locations, but said Ikea intends to become “much more” accessible and will also increase its pick-up and order points, small locations where customers who have shopped online or in a store can pick up product closer to their homes. The store has opened four pick-up points since the fall.
Half of the visitors at its new Quebec City and London pick-up points order online, and half in person. “We thought it was going to be more people ordering online,” Sjostrand said, but customers want to touch and feel. Ikea’s 30,000-square-foot pick-up points are one-tenth the size of a normal Ikea and 40 per cent of the space is showroom.
In Canada, 6.5 per cent of Ikea sales come from e-commerce and 93.5 per cent still comes from bricks and mortar. In fiscal 2015, Ikea Canada’s bricks-and-mortar sales grew 10.1 per cent, compared to ecommerce’s 25 per cent. Ikea Canada saw 27 million visits in stores and 76 million visitors online last year.
While web visitation is up 15 per cent, store visitation is up 8 per cent “so it looks like the customer likes to come to our stores and also likes to come and visit our web(site),” Sjostrand said.
Sjostrand’s biggest ecommerce challenge is logistics. Transportation costs are “the biggest barrier today for buying on the web,” he said. At the same time, customers travelling several hours to a store need accurate product availability information before and after they arrive.
At Clearly, the giant Vancouver-based online eye-wear company that has just three physical stores, the emphasis this year will be on continuing to improve ecommerce.
“We are going to be making some big moves online and with the three stores we have, two in Vancouver and one in Toronto,” chief marketing officer Nancy Richardson said. “What you’ll see is a transformation of our overall brand identity and feel, enhanced shopping experience online as well as in our stores, and also new product.
“You won’t see different pricing in-store and online. When you’re in-store, you would go to our site to purchase online. It’s one experience,” Richardson said.
The key to omnichannel retail success is to “put retail stores under your head of commerce,” Richardson said. Ecommerce leaders understand how to connect with people, build relationships and build an eco-system fast. The digital ecommerce mindset believes that “if you can dream it, you can build it and it doesn’t have to take 10 years to build.”
“One thing that doesn’t really work is building from where you are. If you’re a bricks-and-mortar retailer and you go ‘OK, I need to be online’ and you incrementally build from there, you create a fragmented experience,” said Richardson, who has also worked with Starbucks and lululemon.
Two keys to success are keeping the customer’s experience human and authentic, and making sure the experience is simple. “At the core of it is valuing people’s time. In a lot of cases, time and convenience is actually more important than money to a lot of people,” Richardson said.
Meanwhile, Indochino, the online men’s suit retailer, intends to open 150 retail locations by 2020.
“What we’ve found is when we had an online market and put in a retail store, the combination of the two was beyond accretive. One plus one equals three,” Peter Housley, Indochino chief marketing officer said.
Although Indochino started with ecommerce, in-store sales have grown very rapidly. Its seven retail stores (Vancouver, New York, Boston, Philadelphia, San Francisco and Beverly Hills), all under two years old, already account for 50 per cent of gross sales. The physical locations are essentially measurement showrooms where men can be measured for their suits and feel and touch fabrics.
While Indochino will bear the cost of leasing physical locations, it will not have inventory costs in the showrooms and, as most customer visits are appointment based, labour costs are efficient, Housley said. Once a man has made an appointment to be measured, he’s likely to buy, Housley said.
Prices are the same online or in-store and Indochino offers free shipping on any order over $150. Online data allows the store to drive customers already on file to their new retail outlets.
The key opportunity is “understanding the customer data and the migration between online and retail, and how to facilitate that customer journey,” Housley said.
Earlier this month, Indochino secured a $42-million investment from China’s Dayang Group, a major suit manufacturer. “We have a supplier, now part owner, which is fully invested in product quality and, of course, there are huge efficiencies in that,” Housley said.