Does Your Brand Know the Value of Omnichannel Retail?

Photo by Joshua Rawson-Harris on Unsplash

Omnichannel customers buy three times as much as single-channel customers. It’s time for e-commerce brands to reach out to brick & mortar retail.

Starting a company from scratch and growing it is an exciting adventure, but it isn’t exactly easy to do. If it were, everyone would do it and be successful. And such is not the case. In the past, the default mode was for brands to begin selling to natural retailers and, eventually, as the brand gained traction, to broaden out to direct to consumer (DTC), Amazon and mass retail.

More recently, things have switched around, and it is increasingly common for founders to establish their brands online through DTC and Amazon et al. The COVID pandemic certainly played an important role in accelerating this trend, especially with younger people who are comfortable with online relationships.

However, the company Don co-founded, Pharmaca, studied the shopping behavior of 500,000 of its Loyalty members and found that an omnichannel customer—one who bought online as well as at brick-and-mortar retail—was three times more valuable in terms of sales and profits than a customer who bought only online or only at retail. For example, retail-only customers generated about $225 per year in sales; ecommerce only customers averaged about $115, and omni-channel customers averaged $550 a year worth of product sales.

The lesson is clear: going omnichannel does not cannibalize your sales when it's done correctly. To the contrary, it increases the performance of all your channels. So, how should a founder who launched her company approach a retailer with partnership potential?

Know thy customer

Having a successful DTC business helps a retailer understand whether your business can be successful in a store. While millennials, Gen Z and Gen Y are perfectly comfortable with ecommerce, Gen X and Baby Boomers often prefer to have personal interaction by going into a store. Your customer data gathered electronically can help you position your brand on a retail shelf and determine the kinds of marketing and educational support you need to offer a retailer.

Use your customer data to develop a growth plan that begins with small, independent retailers in your densest markets. Gradually introduce your brand to larger regional retailers and, if this proves successful, think about rolling out your brand at the larger national companies. Resist the urge to overreach and tax your resources by trying to dive immediately into the national chains for reasons explained here.

Remember, in addition to added costs involved with manufacturing and operations, expanding your reach requires larger investment in sales staff, warehousing and distribution. For example, a company should have at the very least $20 million in sales before thinking about talking to Target!

Channel strategy counts

Market and sell your brand to play to each channel’s strength, which often means selling different products through different channels. For example, premium products that are new or highly innovative may require considerably more education than many people are comfortable getting online. If you’re trying to sell a $15 hamburger to someone who is used to paying $5, you’re more likely to want to offer a retailer live, in-store demos to explain why you have the best bun, best burger and best condiments on the market.

Conversely, products offering retailers lower margins—gummies come to mind, since they are very popular right now in the natural and conventional spaces—may be something you keep on your e-commerce site or, if you do find yourself in the position to do so, sell through the larger regional or even mass retail chains. These typically operate on thinner margins that just don’t work at the indies.

Some brands even offer the same product with different ingredient panels depending on the channel in which they’re being sold! The point is that if you want to be competitive in all your channels, you have to know who shops there and what they value the most.

Manage your presence

A natural retailer will be more likely to welcome you with open arms if you come prepared to succeed in his store. Prior to coming into the store, do an audit of competitive labeling, pricing and messaging to ensure yours will stand out from the others in your category.

Be prepared to educate store staff by offering them samples, white papers with expert insight on your product and even microsites that retail staff can refer to when an in-store customer whips out her phone to learn more about your product or compare it with others.

When it comes to managing price, have a minimum advertised price (MAP) policy at the ready. With supply chain issues and inflation still making pricing less than predictable, there will always be the temptation to offer steeper discounts to loyal customers. We have found that the ideal discount price at retail shops is 20-25 percent and up to 30 percent for premium, high-priced products.

Finally, have a year-long promotional plan in place for the retailer to implement at once. This would include a 60-90 day plan that really drives sales during the first quarter trial, followed by quarterly reviews and reassessment of cost, store placement, messaging and other factors.

Remember, while there can be no doubt that e-commerce and mass retail have been putting a ton of pressure on smaller, independent retailers, making it hard for them to compete, the indies are an invaluable channel for purpose-driven brands. Their customers are loyal and willing to spend more for a brand they believe in.

In other words, a great retailer can be a wonderful partner for your brand and help you reach more people to do the thing that got you into your business in the first place—and that’s to change the world.

Sincerely,

Rob Craven & Don Summerfield

Robert is the founder of ScalePassion and the Managing Partner of Findaway Adventures. He has served as CEO of MegaFood, NewOrganics and Garden of Life. Learn more at scalepassion.com/about. 

Don Summerfield was Co-founder & Vice President of Pharmaca Integrative Pharmacy,  America's leading integrative medicine retail chain pharmacy.  Don has been providing consulting services to the natural products industry for over 2 decades on product development, business development, branding, marketing and market research for North American, European and Asian manufactures. For more information contact: donsummerfield9@gmail.com.Have you noticed how many marketing campaigns look the same and don’t differentiate the company? The products, images, videos, ads etc. all blend together. I think the reason for this lies in the absence of fully developed brand and business strategies–or rather, the integration of these strategies with marketing.