November 19, 2014

Slowly Leaking Out Into E-Commerce

I've talked about this before, but it is important to share with you once again.

Catalogers went through this change, from 1995 - 2005. The majority of sales happened in the call center. And then, over a ten year period of time, sales leaked out. Slowly. Customers shifted online. By the time The Great Recession arrived, the customers who were inclined to shift online had done so, leaving the call centers "as is", serving a different customer demographic.

This same dynamic is happening in retail, albeit much slower, and with very different consequences.

Run this query. Identify all customers who bought in a retail store in 2013 (year ending November 19, 2013). Then, among all customers in this segment who purchased in 2014 (year ending November 19, 2014), calculate the percentage that also purchased via e-commerce. Re-run this query for the past decade.

Your results might look something like this:
  • 2014 = 29%.
  • 2013 = 27%.
  • 2012 = 26%.
  • 2011 = 24%.
  • 2010 = 19%.
  • 2009 = 17%.
  • 2008 = 14%.
  • 2007 = 10%.
  • 2006 =   9%.
  • 2005 =   8%.
Now, the omnichannel community loves seeing metrics like this. To them, it's proof that omnichannel works ... customers are migrating online, and that has to be a good thing.

Well, there's nothing wrong with channel shift. Customers should do whatever they want.

The problem, of course, is that when you review your customer file in total, you notice that annual purchase frequency is not increasing. By and large, we're just moving customers back and forth across channels, spending more money to do so. Worse, we're driving less traffic into stores, meaning that long-term, the stores are going to appear to be unprofitable.

Run the query. Tomorrow, we'll talk about another query you should run. Combined, the two queries help us understand whether our omnichannel efforts resonate with the customer, or with vendors.