Leveraging ecommerce data for physical store success

In recent years we’ve seen a boom in digitally native retailers opening physical locations to complement their online offerings. Large online brands such as Casper and Warby Parker decided to leave the safety of their digital ecosystem in search of additional revenue opportunities and brand development power that can usually only come from stores in the real world.

As an ecommerce retailer, you’re bound to have questions when it comes to opening your first physical stores. In our work supporting our clients – some of whom were only online – here’s some of the most common questions we hear.

How can we best leverage my ecommerce data to help identify physical store opportunities?

Your ecommerce data is a goldmine for identifying potential physical store locations. Here’s how to utilize it:

• Develop strong customer profiles: Your ecommerce data includes valuable information like demographics, income level, education level, customer addresses, transactional spend and more. By utilizing this data, you can create detailed customer profiles to help identify trade areas within markets that closely match your core customer base.
• Identify high-priority locations: Areas with a high concentration of ecommerce customers are often prime candidates for physical stores. These locations indicate a strong existing customer base and can be top priorities for new store openings.

How well will our stores draw customers?

To assess the potential customer draw for your stores, consider the following:

• Customer profiling and trade area analysis: Leveraging your customer profiles, we can determine the likely trade area extents for your new stores. This analysis helps in understanding optimal store spacing and planning a long-term buildout strategy. The goal is to ensure your stores are conveniently located for your target customers and have room for growth.
• Competition: In a well-developed market, businesses commonly have loyal customer bases and will actively move to keep others from taking their market share. Creating marketing strategies and in-store promotions to entice new customers and show appreciation towards your current customers is a great way to both maintain your position in the market and take new customers from your competitors at the same time.

What happens to our ecommerce sales in markets where we open stores?

Opening physical stores will impact online sales – here’s how to approach quantifying the interaction between channels.

• Channel performance analysis: By analyzing customer behavior across channels, we can gain insights into performance. Typically, customers who shop both online and in-store are the most valuable. Interestingly, we often observe an improvement in ecommerce performance when physical stores are added to the market. Physical stores can enhance brand presence and customer experience, driving more online sales.
• Positive impact on ecommerce:, It’s uncommon for physical stores to negatively impact ecommerce performance. In fact, the presence of physical stores usually boosts online sales due to increased brand visibility and customer trust.

What challenges should we anticipate?

Opening physical stores introduces new challenges. Here’s what to prepare for:

1. Supply chain and inventory management: Managing a network of physical stores brings complexities related to supply chain logistics, inventory management, and shrinkage. Efficiently coordinating the movement of goods to and from multiple locations requires robust systems and processes. Additionally, physical stores necessitate effective inventory tracking to prevent stockouts and overstock situations.
2. Operational costs: Running physical stores involves significant operational expenses, including rent, utilities, staff salaries, and maintenance. Budgeting for these costs is crucial to ensure profitability. Developing a detailed financial plan can help manage these expenses and avoid financial strain.
3. Staffing and training: Hiring and training staff for physical stores is another critical challenge. Unlike ecommerce operations, physical stores require a team of well-trained employees to provide excellent customer service. Investing in comprehensive training programs ensures that staff are well-equipped to handle customer inquiries, manage inventory, and maintain store standards.
4. Customer experience consistency: Maintaining a consistent customer experience across both online and physical channels is vital. Discrepancies in service quality or product availability can lead to customer dissatisfaction. Establishing standardized procedures and regularly monitoring performance can help maintain consistency.
5. Marketing and brand awareness: Promoting your new physical stores requires targeted marketing efforts. It’s important to create buzz and attract foot traffic to your stores. Leveraging your existing customer base, social media, and local advertising can help drive awareness and engagement.

Clicks to bricks

Your ecommerce data is a powerful tool for identifying physical store opportunities and understanding potential outcomes. While there are challenges, the benefits of increased brand visibility, enhanced customer experience, and improved overall performance make the endeavor worthwhile. By leveraging your data effectively and planning strategically, your venture into physical retail can be a successful extension of your brand.

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