Omnichannel strategy as a success factor for the retail sector

With the rise of e-commerce and the online boom during the coronavirus pandemic, some people feared the end of brick-and-mortar retail. However, it turns out that many retail companies are relying on a mix of online and offline.

Brick-and-mortar retail remains the dominant sales channel in the German retail sector, with 85% of companies operating at least one store. At the same time, the importance of online retail is increasing: 43% of retailers operate their own online store. And the proportion of retailers who sell both stationary and online has risen by 35% compared to the previous study. These results come from the current study Der deutsche Einzelhandel 2024 (The German retail sector 2024) by the ibi research Institute at the University of Regensburg, which examined sales structures in the German retail sector. Figures from Mintel also confirm this trend: in 2023, online sales amounted to just under 80 billion euros, while brick-and-mortar retail sales amounted to 629 billion euros – almost eight times as much.

The proportion of e-commerce sales in the respective retail segments varies considerably: the figures range from 58% of total sales in consumer electronics or 51% in fashion retail to just over 1% in food retail. Armando Falcao, Associate Director Retail at Mintel Germany, sees great online potential for grocery retail despite some hurdles: “The quick commerce model, exemplified by companies such as Gorillas and Flink, has flourished during the pandemic. However, it poses a major challenge to profitability, especially in markets like Germany, where customers traditionally prefer to store in-store rather than pay higher prices for the convenience of fast delivery. [...] Nevertheless, there is considerable potential to improve the grocery shopping experience by making it multi-channel and engaging.”

The trend for retailers to have both a brick-and-mortar and online presence is no coincidence. Consumers today expect seamless shopping experiences across different channels. The combination of brick-and-mortar retail and online offerings, known as an omnichannel strategy, makes it possible to meet rising expectations and strengthen customer loyalty. In addition to web stores, product availability information and click & collect services, this also includes digital customer cards, ship-from-store orders to the customer's home, endless aisle services in the store and social commerce. According to the ibi research study, many retailers are now pursuing a multi-channel strategy in order to remain competitive.

Social media play a central role in omnichannel communication, as confirmed by figures from ibi research. Over 65% of retailers use platforms such as Facebook and Instagram, mainly to increase awareness (89%), provide customer information (81%) and acquire new customers (77%). In addition, just under a quarter (24%) of retailers already use social media as a direct sales channel. “The close link between retail and social media strengthens the retail sector. Social commerce offers the opportunity to skillfully address one's own target group and enable a smooth transition from customer acquisition to the actual purchasing process,” explains Nils Deichner, Senior Consultant and responsible for the study at ibi research.

The retail sector is facing a variety of challenges. Advancing digitalization requires investment in new technologies and training. At the same time, economic uncertainties and increasing bureaucratic requirements are putting a strain on companies. More than three quarters of companies perceive increasing regulation as having a negative impact on their business model, and 62% feel restricted in their entrepreneurial activities due to bureaucratization, according to surveys conducted by the ibi research institute.

The German retail sector is undergoing a transformation in which brick-and-mortar and digital channels are increasingly merging. While brick-and-mortar retail remains the most important pillar of sales, online retail is becoming increasingly important. The future of retail lies in the omnichannel strategy, which enables both worlds to be seamlessly linked. Companies that invest in digital technologies and adapt to changing customer needs will remain competitive in the long term.

Sources: Press release by ibi research institute (German), Press release by Mintel (German)