Insights | By Howard Tiersky

7 DOWNSIDES OF DIGITAL RETAILING

Having a great digital customer experience is essential for any company; customers demand it and it has other benefits like lower costs and broader geographic reach compared to traditional channels. 

But everything has downsides, including driving people to your digital channels rather than dealing with them in-person. 

Here are seven downsides to digital retailing.

LOWER CONVERSION RATES 

Conversion rates are almost always lower for e-commerce purchases than they are for in-store purchases. 

Traveling to a physical store is a much greater level of effort than navigating to a website or app. So customers initially have higher buying intentions when they go to a store.

But the flip side of that coin is that because it’s far easier for the customer to come to your ecommerce presence, you probably have more traffic than in physical stores, despite the fact that the lowered effort also means there’s less investment and, therefore, less pressure to complete a purchase in that visit.

WAITING FOR THE SALE

Similarly, because it's easy for customers to come back to the store anytime without a significant investment of effort, they are more likely to wait for items to go on sale before purchasing. 

Some digital tools, such as Honey, actually alert customers when items they have browsed in the past have price drops or go on sale, further encouraging this revenue-reducing behavior.

COMPARISON SHOPPING 

Digital shopping gives customers the ability to compare products and prices across merchants with ease

As a result, customers in the digital world are far more likely to comparison shop because you (and other competitors) have made it so easy for them to do so. 

If your products are truly a better value, then this can work to your advantage; if they are not, this transparency may cause you to lose sales.

FRAUD

Unfortunately, the easier it is for people to shop online, the easier it is for cybercrimes to occur. 

Cyber crime has many advantages to the criminal over traditional crime.

Cyber criminals don’t have to put themselves in physical danger the way they do if they shoplift in a store. They can also commit crimes such as credit card fraud from anywhere in the world. 

Digital also makes crime more efficient than in the physical world. For example, a cybercriminal can write a simple software program to attempt to make purchases using a large number of stolen credit card numbers in an automated fashion.

REQUESTING SERVICE 

In order to be competitive, ecommerce sites need to make it quick and easy for customers to get help, such as via online chat. 

This can be a far superior experience to tracking down an associate at a retail store.

Once we make it that easy for customers to request service, they are more likely to do so. 

The more service requests you get, the more staff needed to handle the additional requests.

However, digital tools also create opportunities to proactively answer customer requests via site content, reviews, or via automated tools such as chatbots, so many leading digital retailers are avoiding this downside and improving customer service while keeping costs down.

COST OF SHIPPING 

Customers have come to expect free shipping when purchasing online. 74% of online shoppers say that free shipping is one of the most important factors at checkout. On top of that, 25% of shoppers will actually abandon the items in their shopping cart if they see an unexpected shipping cost added right before check out. 

But free shipping isn't free to the retailer. In fact, ecommerce retailers end up paying almost double in both warehousing and shipping costs compared to retailers that operate primarily in physical stores.  

While the cost of shipping can really impact the profitability of online sales, there are, of course, diminished costs, such as real estate, utilities, and security.

RETURNS 

Products that were purchased online are over three times more likely to be returned compared to products purchased at a “brick and mortar” store. 

This may be for a variety of reasons. For example, if you’re shopping for apparel, you are able to try the clothing on at a physical store, whereas when you shop online, you have to wait until you receive the item in the mail to try it on at home. If the item doesn’t fit, you’ll likely return it. 

And similar to the lowered conversion downside, ecommerce returns are easier and, therefore, more appealing because they usually don't require a trip to the store, instead merely involving reboxing the item and printing out a label.

IT'S STILL WORTH IT

Today’s customers are living a digital-centric lifestyle, so few businesses will succeed without an outstanding and easy ecommerce option. 

As demonstrated, there are clear downsides to digital retailing, but creative retailers are finding ways to make ecommerce even more profitable and scalable than brick and mortar stores. 

The upsides of “Digital” include the ability to have far more selection, create a more personalized shopping experience, and sell nationally or even globally without increasing your geographic footprint. This makes it a tremendous opportunity for any retailer.

In my Wall Street Journal bestselling book, Winning Digital Customers: The Antidote To Irrelevance, I go into more detail about how to create great digital customer experiences. You can access the first chapter for free here or purchase the book here.

Get FREE access to the first chapter of FROM`s
Wall Street Journal Best Selling Book

WINNING DIGITAL CUSTOMERS


  • Learn the three patterns of all successful digital brands (including companies like Apple, Netflix and Uber).
  • Understand why many great new products fail, and the formula for building products that won’t.
  • Discover the key reasons companies resist change and how to overcome them.
Get FREE access to the first chapter of FROM's
Wall Street Journal Best Selling Book

WINNING DIGITAL CUSTOMERS


  • Learn the three patterns of all successful digital brands (including companies like Apple, Netflix and Uber).
  • Understand why many great new products fail, and the formula for building products that won’t.
  • Discover the key reasons companies resist change and how to overcome them.