2 Retail Brands Ahead of the Curve

Omnichannel sales are the new online sales; Gap and Macy's are head and shoulders above the competition.

Apr 24, 2014 at 9:35AM

The frustration of shopping in a store these day is that you have to shop in a store. With the ubiquity of online shopping, browsing and buying in a physical space can feel limiting. Where are the endless options, the shiny interface, and the easy shipping? Companies like Gap (NYSE:GPS) are trying to break down the barriers of selling, implementing omnichannel shopping options, allowing customers to extend their shopping experience across different platforms.  

For Gap, omnichannel revolves largely around connecting online shoppers to the stores near them. Gap currently offers customers the option to reserve in-store, find in-store, and ship from store. The basic idea is that, no matter where you are, you can get Gap clothing anyway you want it. 

By now, it should be clear that any company not embracing online sales is just not going to make money. We increasingly shop online. During 2013, online retail revenue reportedly grew by 14%, while overall retail revenue grew at a single-digit rate. Gap's investment in omnichannel is like a hedge against the death of the American mall.

With omnichannel, Gap gives customers a new path into the store. There's clearly a benefit to shipping from stores and cutting down on shipping times, but the real strength of the program is that shoppers can reserve items in-store, or make purchases online and pick them up in-store. Both methods give customers a way to make impulse purchases online, while still getting them into stores.

Once they come in, Gap can rely on its sales force to generate cross-sales to increase the average ticket. Management made that a focus earlier in the year when it announced a basic pay-rate increase for 65,000 of its employees. In an interview given alongside the announcement, Gap's CEO Glenn Murphy said that the investment in the frontline was an investment in its omnichannel strategy. In order to make it work, Gap needs good salespeople, and paying more money is a good way to attract those sellers.

Another omnichannel hero
Gap isn't the only retailer moving heavily into omnichannel sales. Macy's (NYSE:M) has been pushing its MOM strategy recently -- no, MOM has nothing to do with mothers. The "O" in MOM stands for omnichannel, which is similar to Gap's strategy, but with a different driving force. (The "M"s stand for "My Macy's" and "Magic Selling.")

For Macy's, the problem is that people are coming into the store, browsing, but not necessarily buying anything. To solve that problem, Macy's is working on making it easier to shop online while you're already in the store. It is, of course, also doing some ship to/from store, but getting shoppers who have already come through the doors to buy something is the new big focus.

For instance, Macy's is now able to keep more of its stock in its stores as opposed to in its distribution centers. The back-end order processing system can pull products from local stores to fulfill online orders. As a result, the stores have more stock than before, and orders can be fulfilled faster. The company's CFO referred to the system as "the omnichannel dream." 

The bottom line
Gap and Macy's are making omnichannel one of their main drives, and it's going to pay off. As customers cut back on trips to the mall and foot traffic falls, companies are going to have to make more and more from each customer who comes in. At the same time, brands that fail to give buyers a wide choice of how and when to buy products are going to suffer. The goal of omnichannel is to make it as easy as possible for people to give you money; Gap and Macy's are well on the way to success on that front.

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Andrew Marder has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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