We might look, but we really like to touch

“The internet didn’t get invented on its own. Government research created the internet so that all the companies could make money off the internet. The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.” Barack Obama

I was fascinated recently to observe the average online conversion rates, coming from the United States top 500 retailers report, showing an average conversion to actual sales across 15 retail categories at 3.46%. These categories ranged from apparel/accessories through to toys and hobbies. (Please call me if you wish to compare your category).

Perhaps a slightly less charitable perspective might be that 96.54% of us don’t actually buy online at present on average across the year, i.e. convert the research to an actual online purchase.

Perhaps the point can be made by comparison to our current physical store conversion rates where we see an average of between 15-25% conversion (in some cases skewing significantly lower and higher depending upon individual circumstances).

Despite this marked difference in conversion, I hear that many more millions of dollars are being invested into online growth projections above the recapitalisation so urgently required in some of our physical store networks. Yet does the business case, based purely on conversions, actually cut the mustard?

Candidly, in the short run, we might argue that this investment is not justified on this basis, although the broader view would be that there is no more powerful advertising and consumer touch point than online.

What is primarily relevant to the online business case, aside from acquisition cost per unit sale, is that we see that over 80% of big ticket items are researched online and interestingly, according to Google, we find that currently 40% of shopping-related searches originate from smartphones or tablets.

So although we are still seeing comparably lower conversion, internet/online/virtual retail or whatever we may call it has a very dominant role as a research and convenience tool. The number of unique visits/hits, etc, is interesting and important primarily for understanding the power of the brand site to attracting people to the site, but these do little to explain anything about the customer’s actual behavior with regards conversion to sale.

Of course this online research plays a significant role in the path of purchase to the physical store sale and therefore it further supports the power of having an integrated cross-channel offer.

Our own RDG Insights research into this topic shows us that 63% of those that prefer to shop in store than online say it is because they “like to see, feel and touch the product before buying it”. We like to have our five senses stimulated in extraordinary ways as we see highly successful retail brands reflecting in their newer ‘fitter’ retail formats and, of course, we increasingly research online before experiencing “the real thing” within the physical shops.

It becomes more apparent why we see globally that success for “pure play” online retailers, minus the ‘”Amazons” of this world, is particularly narrow, because the volume numbers game to a narrower conversion. In isolation, an online differentiated play is extraordinarily challenging without the truly differentiating characteristics that a physical shopping space provides.

Is this difference the sole reason why physical conversion from online ‘researcher” and in-store shopper to customer is so marked, or is the difference so fundamentally embedded into the central difference between the channels themselves?

One channel is about process and convenience, the other channel is about people and experience. Clicking to convert is not enough, we need to engage further with the customer and touch them in a more meaningful way.

The answer for a “fit” retailer is the merging of both channels. It’s not about a single metric in a single channel, rather both touch points working together in accord that will lift conversion for the business as a whole.

Brian Walker is founder and CEO of retail consulting company Retail Doctor Group. He specialises in the development and implementation of retail and franchise strategies.