Redirecting resources from increasing advertising and marketing budgets to improving the customer experience and building a multi-channel capability can help retailers significantly increase sales and earnings, according to a new study from Deloitte & Touche USA LLP.

"Today, most retailers have a digital landfill of transaction data from their purchasing customers, but they need to look deeper at non-purchaser behaviour -- especially since non-purchasers are three times as likely to permanently abandon a retailer," says Pat Conroy, national managing principal of Deloitte's Consumer Business practice. "Retailers continue to devote substantial resources to traditional marketing vehicles, despite new communication mediums, demographic shifts, and a lack of proven return on investment. By looking at what converts a shopper into a buyer -- and, conversely, what keeps a shopper from buying -- retailers can direct their efforts in a more positive manner."

More than 4,400 consumers were asked about their shopping behaviour through an online survey commissioned by Deloitte & Touche USA LLP and conducted by an independent research firm.

"By talking to consumers who did buy as well as those who did not, our study found that the most direct way to turn shoppers into buyers and increase share of wallet is not through traditional marketing -- but by enhancing store navigation, improving customer service and ensuring a seamless multi-channel experience," said Conroy. "Our findings make clear that every retailer has significant opportunities to improve conversion by delivering a better customer experience."

Traditional Marketing Doesn't Drive Purchases

Eight out of 10 of those surveyed said that their most recent store visit was not prompted by advertising or marketing, including television, radio and online ads, direct mail, coupons, and displays and signs. In fact, these marketing vehicles had relatively low penetration and did not increase the probability that shoppers would make a purchase once they went to the store.

"In this age of information overload, marketing messages aren't getting through. Brand recognition, past in-store experiences, and consistent fulfilment of the brand promise are driving many more store visits and driving the conversion of shoppers to buyers," said Scott Bearse, leader of Deloitte's Retail Stores practice. "Consistently managing a successful series of customer purchase experiences is what creates a strong retail brand and ultimately increases shareholder value."

Service and Store Navigation Key to Conversion - Customers Can't Buy What They Can't Find

Consumers who went to a store intending to buy an item but did not purchase it said that the number one reason was that they could not find the item (16 percent), either because they could not locate it, it was out of stock, or help was not available to find it. In fact, of the consumers that said they received service in the store (31 percent), the majority (55 percent) did so to get help locating an item.

"The message is clear: customers cannot buy an item if they cannot find it. Stores need to be easier to navigate and more intuitively organized; for example, a store that is designed like a valley -- with a lower centre and higher sides -- makes it easy to see what you want and therefore makes the store easier to shop," continued Bearse. "In addition, putting service where and when it is needed is mission critical. Retailers who direct resources to screening, training and compensating helpful and knowledgeable sales associates will reap the rewards with increased conversion, as well as opportunities to cross-sell and up-sell."

Multi-Channel Strategy is Essential to Success:
Online Shopping Gets Improved Marks; 91 Percent of the Survey Group "Pre-Shop"

Online shopping is acquiring customers at a far greater rate than store shopping and losing fewer customers than in the past -- with a 15 percent net acquisition rate for online versus a two percent net acquisition rate for stores. In addition, the online shoppers surveyed were more frequently satisfied with their shopping experience than the in-store shoppers, with 55 percent of online shoppers saying their experience was better than store shopping, versus 25 percent of store shoppers stating that their experience was better than online shopping.

The study also indicated that "pre-shopping" is becoming far more pervasive, with 91 percent of our surveyed shoppers researching items and comparing prices online before heading to a store, and one in three doing so frequently. Pre-shopping was most popular for big ticket purchases, raising the average spend for the sample from $65 to $151 for those that engaged in pre-shopping research. This suggests that certain categories and higher price points are benefiting from pre-shopping activities, but also that pre-shopping is raising spending during the subsequent store visit.

"Online shopping and pre-shopping continue to improve and increase penetration, and brick and mortar retailers with no online presence risk disintermediation," added Conroy. "Successful retailers are building diverse multi-channel positions that provide a positive customer experience that is seamless across different channels. They are also developing more consumer touch-points and translating single transactions into broad and deep relationships, through brick and mortar stores, websites, warranties, financing, loyalty clubs and other programs."

Methodology

The surveys were commissioned by Deloitte & Touche USA LLP and conducted as an online questionnaire by an independent research firm between May 18 and May 26, 2006. The survey solicited customers to evaluate their "last shopping experience", both in a store and online. The survey of shoppers polled a nationally representative sample of 2,337 online consumers and 2,113 store consumers between the ages of 18 and 74. The margin of error for each entire sample is +/- two percentage points.