As the world continues to grapple with Covid-19, and many consumers remain under various levels of restrictions, picture this scenario. A consumer heads into a bricks-and-mortar store to pick up toys or activities to entertain their kids at home, only to find that the store is out of stock. They search on their phone to find other possible stores, but then notice that Amazon is having a sale with discounted express delivery. So rather than look around other stores, they order online. This is kno
As the world continues to grapple with Covid-19, and many consumers remain under various levels of restrictions, picture this scenario. A consumer heads into a bricks-and-mortar store to pick up toys or activities to entertain their kids at home, only to find that the store is out of stock. They search on their phone to find other possible stores, but then notice that Amazon is having a sale with discounted express delivery. So rather than look around other stores, they order online. This is known as cross-channel switching, and it’s a problem for retailers. Covid-19 has amplified cross-channel switching due to a combination of logistics challenges and forced store closures around the world. However, this is a challenge that has plagued retailers for some time. Even as early as 2003, a prominent article in the Harvard Business Review stated that ‘the customer has escaped’. Now, cross-channel behaviours are commonplace, with showrooming and webrooming particularly popular examples.While there can be benefits for consumers from these behaviours, they create multiple challenges for retailers. First, when consumers cross channels, it can be harder to track their movements and match their behaviours. Second, with every channel switch comes a risk that the consumer will also switch to a competitor; sometimes referred to as channel free-riding. Remember too that consumers utilising multiple channels have less benefit on purchase value than initially appears due to a self-selection effect.Given the prominence of channel switching, and the challenges it brings, a range of academic and commercial studies (including some of our own) have sought to better understand why and how consumers switch channels. However, it is often assumed that consumers switch channels intentionally. For instance, in the case of showrooming, it is often assumed that consumers deliberately go into stores to try on a product before buying online because it is cheaper. However, in a recent study* we conducted with colleagues from ESCP Business School, Swinburne University and Monash University, we found this is often not the case. In fact, less than a quarter of channel switching behaviour is planned. The rest is, at least partly, due to the retailer. Let us explain how we go to that conclusion before we elaborate on the potential solutions.Investigating cross-channel behaviourWe set out to understand cross-channel behaviour in more detail, and particularly what causes these behaviours. To do that, we conducted an advanced form of customer segmentation based on three key functional aspects: Channel choice behaviour;Functional and economic outcomes; Fonsumer-specific psychographic and demographic variables. Importantly, we distinguished between intentional behaviour, which is unlikely to be changed through retailer engagement (i.e. planned showrooming), and unintentional behaviour that could be influenced by a retailer.What we found is that approximately one-fifth (22 per cent) of consumers engage in cross-channel switching in an intentional or pre-planned manner – a segment we label as ‘planned channel switchers’. For these consumers, most cross-channel switching is driven by price, and they tend to be younger and have a high degree of in-store mobile use.‘Forced channel switchers’, our second identified segment, represent 20 per cent of shoppers and engage in cross-channel switching behaviour when driven to do so by influences outside of their control, such as out-of-stock products. We found that most ‘forced channel switchers’ are female, with respondents in this segment also most likely to represent households with young families or single parents with young children. We know a lot of families with young kids (ourselves among them) that have been in this situation recently, even before retailers faced forced store closures, who went looking for toys or educational tools for home schooling, only to be met with empty shelves. This can lead to a lot of frustration for consumers, and often the only option is to then look for products online. Finally, we found a segment of consumers we labelled ‘opportunistic channel switchers’. This final segment is largest (58 per cent) and represents consumers who display a low-to-moderate propensity to intentionally exert cross-channel behaviour. For these shoppers, the decision to engage in channel switching is more in-the-moment, or opportunistic, driven by environmental factors and often cherry-picking reasons for channel switching behaviour; including price reductions, free shipping or home delivery. It would also appear that when these consumers interact with a retailer (online or in-store). They have high deal sensitivity and are likely at a tipping point where promotions could have an impact on their decision to switch. A comparison across product categories showed this opportunistic cross-channel switching occurs most often for clothing, footwear and accessories, consumer electronics and cosmetics and toiletries.We then went a step further and looked at the psychographic drivers of channel switching across the three segments. At this personal level, the desire for information and one’s perceived in-store savviness are critically important determinants. In contrast, price- and brand-consciousness didn’t really affect which segment a consumer belonged to, possibly because price- or brand-conscious shoppers generally pre-select their preferred channel (cheapest or brand-specific) and remain with it. It would also appear that cross-channel free-riding is not impacted by time pressure, meaning these consumers generally have enough time available to switch channels (i.e. wait for delivery or postpone the purchase).Reducing unplanned channel switchingGiven the challenges channel switching brings, and the insight that this behaviour is largely unplanned, a natural and highly valuable question is to consider what retailers can do to stop forcing consumers to switch channels. The good news is that in most cases, the answer simply comes down to getting the fundamentals right. One of the most common drivers of channel switching, particular from store to online, is products simply not being available in store. This leads to a few fundamental strategies that retailers should consider adopting to reduce unintentional channel switching behaviour:1. Ensure key products are in stockWhile this may sound simple, products being unavailable either online or in-store was by far the most common reason consumers unintentionally switched channels. Ensuring popular products are always available is a simple way to mitigate a lot of this unplanned behaviour.2. Offer alternative purchase and delivery options in-storeAn alternative to keeping products always in-stock is to offer consumers an easy streamlined process to still purchase and access products if they are not currently in stock. For instance, rather than requiring consumers to drive to other stores (or order online), retailers should facilitate consumers to complete their purchase while still in store. This could be achieved through endless aisle technology, or simply placing an order for the product to be delivered to a consumer.3. Training staffAn often-overlooked component of channel switching is the role staff play, particularly in physical stores. Training staff to identify the potential for these behaviours, and to minimise their impact, could go a long way to helping keep consumers within a channel, and therefore within a brand.While cross-channel behaviours are undoubtedly challenging, and even more so now due to Covid-19, it is important for retailers to acknowledge that these behaviours are often unintentional. In fact, there are often simple reasons that consumers are forced to switch channels that are easily avoidable. Retailers that can get these fundamentals right can minimise the risks of cross-channel behaviour, while leveraging the benefits of an integrated omni-channel retail strategy.Dr Jason Pallant is a Lecturer in Marketing, and Dr Sean Sands is an Associate Professor. Both are part of the Department of Management and Marketing in Swinburne Business School.*The study is titled Consumer cross-channel behaviour: is it always planned?, and appears in the International Journal of Retail and Distribution Management