When working on retail projects, I repeatedly see three trends.
- E-Commerce is 30% to 40% of total sales (J. Crew).
- E-Commerce is 7% to 17% of total sales (Nordstrom).
- E-Commerce is 7% to 17% of total sales because the e-commerce experience isn't very good.
Both J. Crew and Nordstrom have credible e-commerce efforts.
Why the difference in performance?
The answer becomes obvious when you look at share of sales by store distance.
Go into your database, and look at % of sales derived via e-commerce, by store distance. Your trend might look like this:
- 0 to 5 miles = 10% via e-commerce.
- 6 to 25 miles = 30% via e-commerce.
- 26 to 99 miles = 50% via e-commerce.
- 100+ miles = 80% via e-commerce.
Or your trend might look like this:
- 0 to 5 miles = 3% via e-commerce.
- 6 to 25 miles = 7% via e-commerce.
- 26 to 99 miles = 15% via e-commerce.
- 100+ miles = 68% via e-commerce.
The in-store experience is key, folks. If customers love the in-store experience, then two things happen. First, customers who live near the store almost exclusively shop in the store. Second, customers who live an hour from a store are very likely to make the hour-long drive to a store. When you see this happening, you know your in-store experience is very, very credible!
If you have a good (not great) in-store experience, and you have a very credible online experience, then the trend looks like the first example. Near a store, you have a huge share of business happening in-store. But as soon as you get a few miles from the store, the customer shifts over to e-commerce - online convenience outweighs driving to the in-store experience.
Retailers that have a high percentage of e-commerce within five miles of a store (30% or more) have an opportunity to look carefully at the in-store experience. Here, customers like the brand, but not the in-store experience. Retailers really, really want to have customers in the store, right? Well, if the customer lives 1 miles from the store and won't go to the store, that means something.
I get tired of hearing folks beat retailers up about e-commerce penetration. The best retailers have such a sensational in-store experience that the customer actually wants to get in a car, drive to a store, and experience the buzz. Imagine that?