Contrary to popular belief, in-person retail isn’t dead. Despite a pandemic-induced boost for ecommerce in 2020, U.S. retailers opened twice as many new stores in 2022 as the ones they closed. Forrester Research went so far as to predict a retail “e-pocalypse” for online-only retailers, suggesting that to survive long-term, online brands will also need a foothold in the physical world.
The dominant retail narrative is no longer about the decline of in-store sales and the rise of ecommerce. Today, it’s about omnichannel strategies that make the most of both offline and online opportunities.
So, what do these retail trends mean for SaaS leaders?
As omnichannel commerce continues to grow, retailers are increasingly relying on the technical and CX expertise of SaaS companies to help bridge the online/offline gap. The need for relevant SaaS products is only getting bigger—as is the size of the market opportunity for SaaS leaders.
The Challenge Facing Today’s Retailers
Sears filed for bankruptcy in 2018. JCPenney collapsed in 2020. Shopping malls, once a thriving hub of consumerism in North America, are becoming increasingly vacant—68% of Americans live near an empty mall.
Brick-and-mortar retailers have been under pressure for decades with ever-squeezing margins, the rise of Amazon and ecommerce, and changing consumer behavior.
Today, retailers face a new challenge as the distinction between online and offline blurs: omnichannel commerce. To survive, retailers must “go omnichannel” by unifying their online and in-store experience, giving customers the ability to buy wherever and however they want.
But making the move to omnichannel commerce is a big task:
- Silos between digital and physical store operations cause disconnects.
- Customers get frustrated by disjointed experiences.
- Lack of connected data limits visibility into inventory, pricing, orders.
- Difficulty centralizing customer data hampers marketing and loyalty programs.
For retailers to bridge the online/offline gap, they’re increasingly dependent on SaaS products that simplify checkout, unify inventory, and personalize the customer experience across channels.
As SaaS leaders consider how to help, they’re increasingly dealing with two types of businesses: brick-and-mortar businesses going online, and digital-native businesses going offline.
Brick-and-Mortar Retailers Are Going Offline-to-Online
For years, brick-and-mortar retailers have heard about the need to build ecommerce capabilities as well as modernize their back office, inventory management, and payments.
As a result, there’s been a significant upswing in the number of offline-to-online businesses: over two million merchants use Square’s point-of-sale software, and over four million websites are built with Shopify’s ecommerce solution. All that effort is paying off: retailers unifying their online and offline shopping with Shopify see a 30% increase in revenue.
Despite this progress, there’s still plenty of room for SaaS products to help. For example, one of the key ways smaller retailers have succeeded against Amazon is with “click and collect sales,” also known as BOPIS (Buy Online, Pick Up In Store). Transactions like these are forecast to grow at a rate of at least 16% a year through 2025—and a tight omnichannel integration is required to make them work.
Online Retailers Are Going Online-to-Offline
81% of retail sales still happen offline. That means for online direct-to-consumer (DTC) brands, expanding their footprint into the physical world is a massive opportunity.
Brands like Casper, a mattress company, and Warby Parker, which sells eyewear, have had a physical presence for years. That trend is growing. In 2021, activewear brand Vuori announced it would open 100 new locations; Fabletics, also an activewear company, said it would launch 24; and Parachute, a home-furnishing brand, planned 20 new stores.
Each of these brands started online, then expanded. And for good reason: not only is it getting more expensive to acquire customers digitally, there are certain things—like feeling a product or testing its size—that simply can’t be done online. This dynamic is one reason online shopping sees a 3.3x higher return rate than purchases from brick-and-mortar retail stores.
So what kind of support do DTC brands need from SaaS companies? Online DTC brands tend to already be more tech-savvy—by necessity—than their counterparts in the physical retail world. But as they enter the world of in-store sales, they need SaaS solutions that help customers buy in-store and ship to their home, empower sales reps to make personalized recommendations to customers, and unify their digital and physical storefronts.
The Features Retailers Need From SaaS
In her 2021 book “The Shopping Revolution,” Wharton professor Barbara Kahn explores the retail disruption of recent years, describing four elements that today’s customers expect: product superiority, customer experience, low prices, and convenience.
SaaS can help influence two of these: customer experience and, to a certain extent, convenience.
On a more granular level, here are some of the many areas in which retailers need help when bridging the gap between online and offline:
- Streamlined backend operations:
- Demand forecasting, stock adjustments, and real-time inventory data.
- Integrated point-of-sale (POS), CRM, and order management.
- Unified reporting across in-store and online.
- Flexible fulfillment:
- Buy online, pick up in store (and vice versa).
- Link digital and physical stores:
- Equip sales reps with mobile point-of-sale.
- Omnichannel loyalty programs and promotions.
- Create a seamless customer experience:
- Centralized customer profiles.
- Easy exchanges and returns (the ability to return online purchases in-store).
- Follow up in-person purchases with online upsell and cross-sell suggestions.
- Support industry-specific needs:
- Curbside pickup and order online/pickup in-store for grocery.
- Virtual try-on and AI suggestions for seasonal “looks” for fashion.
- Telehealth integrations, prescription delivery, and refill pickup options for healthcare.
Examples of SaaS Brands That Bridge The Online/Offline Gap
Shopify is the ecommerce engine behind millions of brands and powers 10% of the US ecommerce market. Brands from 170+ countries run Shopify stores, including Sennheiser, Huel, Crate&Barrel, Anker, and Allbirds.
While Shopify is best known for ecommerce, its platform and point-of-sale system create a comprehensive bridge between offline and online retail. And this seamlessness is key to more sales—according to Shopify user Michelle Cordeiro Grant, the CEO of LIVELY, a lingerie brand:
“Most of our in-store customers become repeat customers online. It’s much easier to repeat a purchase online once you’ve come in, done a fitting, and know your bra size.”
Shopify’s platform offers features like:
- Omnichannel selling: Local pickup, buy in store and ship to customer, buy online, exchange and return in store, local delivery.
- Smart inventory management: Purchase orders, demand forecasting, product transfers, low stock warnings, sale suggestions, inventory tracking.
- Loyalty: Customer profiles, SMS integration, order history, loyalty rewards, customer tags.
- Payments: Gift cards, credit cards, charge-backs, auto-reconciliation.
If you’ve ever seen a barista flip around a tablet so you could select a tip, it was probably a Square POS.
Square was one of the original SaaS companies making a push to modernize the back office and payments infrastructure for brick-and-mortar businesses. It continues to be one of the most popular, with millions of businesses using the company’s software and hardware. Square is particularly popular with small business retail, restaurants, and salons.
Square’s platform unifies online and offline operations: its hardware facilitates in-person payments, while its software allows businesses to manage inventory and customer data between locations and online. Order pickup and delivery are two examples of features that bridge the digital/physical divide—Square makes it easy for customers to make a request online and execute it in the physical store.
SaaS products don’t have to serve the entire retail industry (like Shopify and Square do) in order to be effective. Paloma is a SaaS startup that does one thing, but does it exceptionally well: it helps convert customers during sales on Instagram Live, Instagram Stories, and the Instagram Feed. (Paloma can even guide customers toward sales via Instagram DMs).
For brick-and-mortar and online stores that run live Instagram sales, Paloma is a self-contained ecommerce platform that offers customers instant checkout and manages invoicing—so brands can focus on selling.
NewStore serves some of the biggest brands in the world, including Billabong, Birkenstock, Champion, LEGO, and Quiksilver.
Despite the comprehensiveness of NewStore’s omnichannel platform—which includes features like clienteling tools, endless aisle, and order fulfillment—salespeople and managers can access everything they need from their smartphones.
According to Anders Lindberg Madsen, Solution Architect for the fashion brand GANNI:
“An iPhone is the only device we need for point of sale, inventory management and store fulfillment. Using the NewStore Omnichannel Platform allows us to operate stores on the lightest tech stack I’ve ever seen.”
Even if you haven’t heard of Fivestars, you might have used their product. 1 in 6 Americans earn reward points from local businesses using the Fivestars platform, and Fivestars works with 12,000 local businesses to “automatically bring in more customers and keep them coming back.”
Fivestars solves a common pain point for local businesses: marketing.
When customers check out in-store, they’re encouraged to sign up for a brand loyalty program via mobile or using the store’s POS. Once businesses set up their digital incentives program, marketing campaigns happen on autopilot—the Fivestars platform sends regular messages to customers to bridge the physical-digital engagement gap.
Building The Future Of Retail With Omnichannel SaaS
Few industries have gone through more seismic changes than the retail industry has over recent decades. But while it was technology that disrupted brick-and-mortar retailers in the first place, technology is now helping some of those same retailers succeed in a new omnichannel environment.
Creative SaaS solutions are needed now more than ever, not only for physical retailers going digital but for digital-native brands establishing their first real-world footholds. As new distribution channels rise and new buying patterns take hold, SaaS leaders who stay on top of retail’s needs will be well-placed to help create the next-generation retail tech stack and define the future of omnichannel retail.
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