Harnessing Digital and Physical Channels to Maximize Retail Growth
At Seaker, we know you’re busy so here’s the TL;DR:
Due to rising online advertising costs, DTC brands are finding physical stores cost-effective.
Brands experience a boost in sales by having both online and offline channels.
Seaker clients report +20% increase in ecomm sales after opening a physical location in that market.
A recent Coresight Research study reveals a strong post-Covid recovery in U.S. shopping malls, surpassing pre-pandemic levels. This resurgence is attributed to the "halo effect," where brands benefit from having both online and offline channels, leveraging omnichannel strategies.
First, what is the concept of the "halo effect?" It's akin to a magic touch for brands, where they experience a surge in sales by having both physical stores and a digital presence. Think of it as a two-stage customer journey. First, consumers venture online to conduct research, gathering information and comparing products. Then, equipped with knowledge, they step into a physical store to make an informed purchase. This synergy between the digital and physical realms is what gives rise to the halo effect.
For direct-to-consumer (DTC) brands, physical stores offer a cost-effective means of supporting discovery due to rising online advertising costs. Meanwhile, established brick-and-mortar chains rely more on online presence for discovery and sales.
This paradigm shift is a direct response to the surging customer acquisition costs, which have become an admittedly formidable hurdle for 61% of retailers and 66% of digital-first retailers according to a 2022 study from CommerceNext.
Investing in profitable physical stores allows e-commerce brands to harness the halo effect, driving online traffic without extra costs. This blended approach to customer acquisition is crucial for brand and product education.
Digitally native vertical brands or DNVBs (be sure to add that fun new are increasingly expanding offline due to changing investment landscape, with 45% of DNVBs opening physical stores according to The Coresight Research DNVB Databank.
DNVBs like Untuckit are opening physical locations to attract existing customers and introduce new ones to their brand. As a result, they have observed that physical locations boost online revenue by over 10%, as customers often shop across both channels.
Travel DNVB Away plans to expand its physical retail footprint in 2023, citing a 150% lift in e-commerce markets served by physical stores. This staggering statistic underlines the potent halo effect that physical retail locations can wield across a business.
Even retailers with a strong brick-and-mortar presence report reduced customer acquisition costs and increased profitability by investing in both online and offline channels. Express, for example, has found comparable customer acquisition costs between e-commerce and physical locations post-pandemic, making a dual strategy beneficial.
At Seaker, we love working with DNVBs because they are no strangers to collecting data and using those insights to drive strategic direction for digital strategies. We are able to leverage that same data and apply it to retail expansion strategies.
Part of Seaker’s approach is to understand our DNVB client’s target personas and identify the markets that most purchases originate from. Then, we help them locate centers and districts that their target personas are currently visiting which also exposes them to new, desirable consumers. Our clients have reported over 20% increases in digital revenue in those markets as a result of those store openings indicating that physical locations can too be a channel for product discovery.
In sum, the halo effect of physical stores, combined with a robust online presence, is undeniably a recipe for success in today's retail landscape. The data, along with these real-world examples, paint a vivid picture of how brands can thrive by strategically balancing their digital and physical footprints.
Now we want to hear from you! How are you thinking about the Halo Effect and what results is it leading to in your business?
Let us know in the comments below.
Find out how Seaker can help your brand tap into the Halo Effect to guide site selection and improve performance by reaching out to questions@theseakergroup.com.
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