Brandon Isner on whether the word “omnichannel” is losing its meaning and may be retired in favor of simply “retailing.”
Although there may have once been a distinction between the two, omnichannel sales have become synonymous with “retailing.” Given that the trend for several years was to pit brick-and-mortar retail against e-commerce, smart retailers have always known that the mastery of one makes them better at the other.
The savviest retailers, those who have mastered multiple sales channels, are experiencing significant growth. For example, Lululemon is enjoying double-digit growth in both same-store comps and e-commerce business. But how exactly are these companies doing it? Here are three ways that omnichannel retailing has accelerated over the last three years.
1. Mobile App Concentration
We’ve seen mobile app use rise sharply in recent times. Shoppers realize that they have more information and choices than ever before and have the freedom to shop whenever and wherever they want. By providing different touch-points, retailers are able to provide the ideal shopping experience for a range of shoppers. For example, if a retailer schedules a special “discount day” at their store location, they can launch a similar offer on their local app, providing the same opportunity to consumers who might not be able to make it to the store that day.
Companies expect app usage to accelerate. People now spend over four hours a day on mobile apps—so much so that m-commerce is forecasted to be the dominant share of digital sales within the next five years.
2. Drive-Thru Expansion
The popularity of drive-thrus among quick-service restaurants exploded during the pandemic. According to a study by the NPD Group, orders at drive-thrus in the United States grew by 20% from February 2020 to February 2022. Irving, CEO and founder of Fingermark, estimated that drive-thrus accounted for up to 90% of a restaurant’s revenue following the initial COVID-19 outbreak and recovery.
Long gone are the times when drive-thrus simply served on-site customers. Now, people use drive-thrus in multiple ways: on-site ordering, ordering through mobile apps in the form of click-and-collect, or ordering through a third-party delivery service.
Many QSRs, which were traditionally not drive-thru-oriented, have adapted by building out sites with multiple drive-thrus to handle various connection points. Panera, Shake Shack and several others are mostly seeking drive-thru-ready sites.
"The term 'omnichannel' may be retired in favor of simply 'retailing.'"
3. Expansion of Logistics Networks
Retailing is more than selling goods on store shelves. To be successful, a modern warehouse network must be in place in order to fulfill orders from all channels. The industrial real estate sector has recently been one of the biggest stories in commercial real estate, with record-low availability, prodigious rent growth, and a robust development pipeline. The primary driver of this performance has been retailers occupying more warehouse and fulfillment space. Retailers have been responsible for 35% of industrial leasing in 2022, year-to-date, when factoring in the food and beverage and general retail and wholesale categories.
Some retailers have mastered their supply chain to the point of marketing their services to others. Gap Inc. has begun offering its logistics network to others as an additional source of revenue, which they call GPS Platform Services. With 13 distribution centers and more than 9,000 employees in their network, they can fulfill same and two-day delivery, as well as international shipping. In addition, they offer reverse logistics services, which is critical around the holiday season as detailed in CBRE’s 2022 Holiday Trends Report.
Looking Ahead
Although many still aren’t sure of the metaverse as a sales channel, several retailers are investing in virtual worlds to plant strong roots for what could emerge as the next step in the evolution of the omnichannel process. We have already seen music events, fashion shows and the release of branded virtual goods in the metaverse, so what will be the next step?
Retailers are building metaverse-based touchpoints through activities such as games and meet-ups. Some may view these efforts as a novelty, but retailers are viewing them as a critical foundation to establishing their next-generation digital presence. McKinsey & Company predicts that the metaverse could generate $5 trillion in value by 2030.
Conclusion: Although not all retailers will master the omnichannel approach, the term “omnichannel” may be retired in favor of simply “retailing.” As we observed during the pandemic, retailers that master the multichannel approach will find themselves more resilient to market conditions and more successful in the long run.
Brandon Isner is head of Retail Research for the Americas at CBRE
