Point Of Sale networks: the solutions geoptimization can bring to the omnichannel challenge

From the middle of the 1990’s onwards, traditional retail outlets responded to the first offensive on the part of e-commerce pure players by creating their own shopping websites. They did this as part of a move towards multichannel operating logistics. Multichannel ran the various sales channels in parallel, and so e-commerce effectively became a separate activity, and very often one that was in direct competition with the established business model: the brick-and-mortar store chain network. It was to be nearly 15 years before this dichotomous, even conflictual, approach was challenged by the reactions of consumers, disappointed when expectations for a consistent brand experience from one sales channel to another were not fulfilled.

While cross-channel was the buzz word then, the model now emerging as number one on the lips of retailers is without doubt that of the omnichannel – requiring not just unification of strategies and information systems, but also a restructuring around the customer to hear their wishes and accompany them seamlessly via whatever point of contact they choose, and at whatever stage they have reached in their purchasing journey.

The physical network is regaining its advantage

The harbingers of the end of physical commerce can no longer be heard. For sure, the share of e-commerce in the retail sector is increasing relentlessly: in France, it rose from 3.4% in 2010 to 9.1% in 2018, with a 92.6 billion euro turnover, as against 30 billion 8 years earlier (source Fevad). The first mistake one could make is to attribute this growth to pure players alone: the major physical store brands – whether alimentary or non-alimentary – are contributing more and more significantly because they now all have their own shopping sites and are de facto contributors to the growth of e-commerce. The second mistake would be to believe that the growth of online sales for any one chain is necessarily at the expense of its sales in-store: the store chains that have invested most in an omnichannel strategy are, on the contrary, seeing footfall and turnover at their points of sale bounce back, and even growing – notably thanks to click-and-collect services.

For example, in Paris, the store Fnac at the Gare de l’Est receives nearly 40% of its revenue from the collection in-store of articles ordered via the fnac.com website. More surprisingly, at least for those continuing to compare and contrast web and store operations: “when the Fnac constructs a new store in a territory where it had no presence before, this has a very positive impact on the frequentation of the website by local inhabitants” asserts the ‘Commerce’ director of business property agents Cushman & Wakefield.

Here is the proof that, far from being competitors, website and physical networks are complementary, and more so than ever before. It also reveals the reality of omnichannel behaviours as regards consumer purchasing and – something we tended to downplay in the past – the fundamentally local dimension of their activities and practices that so strongly anchors major stores within their physical territory. Pure players have already grasped this vital point: the advantages offered by the physical network are now appreciated, and back in favour. When Amazon bought Whole Foods in 2017, it was with the aim of gaining a foothold in the alimentary sector with a network of 460 stores providing as many local logistics intermediaries, close to the point of consumption, and through which it can develop its other activities.

Rethinking both the grid and operating formats in the light of omnichannel

Traditional retailers have an advantage over pure players in that they dispose of a point of sale network. It remains the case that this precious asset has to be profitable – and continues to be so! – in an omnichannel world and this, in a socio-economic context where powerful adverse trends are at work: dwindling in-store consumer traffic and falling yields are the reality, as well as the trend to move business premises outwards to the periphery of town centres, lower prices per square metre and a lot more space further out offering obvious advantages over scarcity of surface area and rising property prices in city centres.

Maintaining profitability for a store in such a context means rethinking network development strategy, territorial grid, and how to best use existing surface areas while taking into account not only territorial dynamics, but also the weight and influence of digital channels in steering behaviours of local consumers.

For our partner DIAMETRIX, data analytics specialist for the retail sector, “only an approach based on data and advanced modelling techniques, using analysis and spatial representation can unravel these complex interactions and influences in sufficiently fine detail to allow decisions to be made that will shape the future of our retail outlets.” This is why DIAMETRIX has chosen to integrate GEOCONCEPT geographic optimization APIs in a new geomarketing solution, providing retail outlets with the tools they need to:

• Take the relevant sales results into account when assessing site potential, before deciding whether or not to open or close a point of sale. As we have seen, the presence of a physical store can significantly increase turnover generated by an e-commerce site in its catchment area, nonetheless without putting the frequentation of the store at risk as soon as a click-and-collect service to pick up goods ordered on line is put in place. Where you site your click-and-collect points within a territory then becomes a straightforward question of strategy.
• Improve and rationalise geographic coverage thanks to a new format typology. The diversification of sales formats – in terms of scope, breadth and depth of an offering – allows the chain to maximise its presence in the territory, to ward off the pure players and protect profitability by bringing each zone a tailored response to local economic potential and consumer behaviour. This is what some toy store chains knew how to do, in a market where pure players and discounters make particularly fierce competitors, reinvesting in town centres with new store concepts or by developing e-reservation to boost footfall and transformation rates. Higher rates of digital utilisation, notably as part of a strategy to extend an offering via smallscale points of sale, is one of the most effective drivers retailers have at their disposal to consolidate network profitability.
• Optimizing logistical pathways. Points of sale become points of service delivery, and logistics services (drive, ship from store, etc.). Calculating for each command placed online the most pertinent logistical route (delivery straight from the central depot, from a store, etc.) and optimizing delivery routes is critical to profitability for an omnichannel chain.

From geomarketing to real and indoor geoptimization

To ensure profitability in an omnichannel world, major chains will not only have to rethink the geography and typology of their network, but also adapt their “indoor” operations to the constraints of real time and continuous improvement. As they become more accessible, tracking and visual recognition technologies along with real time sales analysis will increasingly be deployed inside the store, for example to:

• Detect that a product has run out on the shelves and immediately trigger restocking via an alert sent to the shelf manager;
• Identify warmer and cooler areas in the store so the arrangement of shelves and circulation schematics can be optimized to the benefit of crossed sales, or deployed to choose the best possible position for any promotional events or special offers, and this at different times of the day;
• Offer exclusive promotions to customers who accept being identified (via their smartphone or fidelity card) at the shop entrance;
• Create seamless shopping pathways so a customer does not have to exit via the check-out desk thanks to automated customer identification and visual recognition of articles in their shopping basket or trolley.

In parallel to geomarketing, used periodically by stores to take strategic decisions and optimize the targeting of marketing campaigns, tracking and real time geo-analytics will become a completely separate component in relation to the main store operation. The challenge posed by this daunting task of integration is to increase responsiveness, pertinence and precision of action in relation to any customer identified as being definitively omnichannel, so their shopping experience becomes completely seamless and continuity is ensured between shopping online and in-store.