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Are You Ready for Omnichannel Retail? Find Out With Our New Assessment

November 30, 2021
Are You Ready for Omnichannel Retail? Find Out With Our New Assessment

How much would your business improve if you opened retail stores with Leap? Now you can find out, using our brand new Omnichannel Fitness Assessment.

This feature provides in-depth retail fitness insights based on your brand’s ecommerce data. These findings are directly powered by the data in your Shopify system, and is accessible after you install the Leap app in your Shopify account.

Once you’ve connected your Shopify account to the Leap App, you can see a full slate of insights on how Leap can impact your performance based on your ecommerce data. This includes:

  • Impact on your customers' purchase frequency, AOV, return rate, and LTV.
  • The potential risk of opening new stores based on your business size and profit margin.
  • Your top markets, and how they overlap with Leap's locations.

To unlock the model, you may have to complete some onboarding questions if you haven't already.

Let’s dive into some of the numbers  and insights you can learn from our Omnichannel Fitness Assessment, and how you can use them to make informed decisions about your business. 

LTV for Omnichannel Customers

Lifetime value is a fundamental metric for understanding the health of your retail operation. Increase LTV, and almost every other positive indicator rises alongside it. Our assessment looks at the current value of your ecommerce customers, and calculates the potential increase once they become omnichannel customers acquired via a Leap store based on performance across our Platform. Because omnichannel shoppers buy more and shop more often (as we’ll see), we see an average increase in LTV of over 40% for most customers.

We calculate this by combining the impact of the following metrics: 

Purchase Frequency:
How often a customer purchases, which increases when they can buy both in-person and online, and as they receive more exposure to the brand from Leap’s joint marketing efforts. 

AOV: How much customers spend at one time, which increases for shoppers buying across channels. 

Return Rate:
A major cost center for ecommerce brands, return rate decreases as shoppers are able to try on products in-store and see them firsthand. 

With access to our proprietary modeling, you can see how your customers’ behavior would evolve by integrating with the Leap Platform, based on our quantitative data from dozens of active brands and tens of thousands of customers. 

Business Size and Risk

Opening a retail store is never without some risk. However, by partnering with Leap, the associated risks and costs are significantly reduced. In fact, these costs are often as low as one fifth of opening a store yourself.

However, success will require you to invest in building your supply, developing stores, and marketing. For younger or smaller brands, they may not be fully prepared to start this process. To best ensure success, we work with brands that can make those investments and bear those risks.

Business Size: To evaluate your readiness to invest and bear the risks of launching physical retail, we compare the size of your business to those already on the Platform. As part of our Omnichannel Assessment, we take a look at your Net Sales over the last 12 months, and how they have grown year-over-year. There is no hard and fast rule, but if your business has or will soon have $3 million in annual Net Sales, that's probably big enough to take the next step.

Profit Margin: We then compare this with your profit margin. Covering the costs of running retail stores is challenging for every brand. While some brands have a big enough margin to break even or make a small profit, others run at a small but acceptable loss and treat it as customer acquisition cost. For these reasons we work with brands that can generate enough margin dollars to have an acceptable impact on their bottom line. For an average Leap store, $60 margin dollars or more per order would be enough to produce an acceptable loss.

Based on these two factors, we’ll rate your risk for opening a physical retail store for each, from low to high, so you can gauge your preparedness for opening your first or next storefront. 

Top Markets

If you’re an ecommerce brand, then it’s likely that you already have thousands of customers across the country. It’s only natural that, when launching your first retail store, you should shoot for the densest concentration of customers who already know your brand.

You can evaluate your readiness for retail by understanding the locations of your top markets. Leap has a large and growing fleet of stores in a number of attractive markets. By completing the Omnichannel Fitness Assessment, you can see the overlay of your biggest markets with Leap’s. Your best chance for success will be in a market where we already operate, but if you have a lot of sales in a market that's on our roadmap, that's a plus.

Product Mix

Every brands’ product mix is different. Some brands have only a few products, with their total sales split roughly between them. Others have a huge slate of products, with only a small percentage of those products driving the vast majority of those sales. There isn’t a “right” product mix, but in general it’s good to have a balance of core products that drive regular sales, combined with new products to keep shoppers interested and engaged while acquiring new customers. 

Our assessment can show you what percentage of your sales are concentrated among what percentage of your products, as well the percentage of sales driven by your top 5 products. It’s up to you to make your own assessment, but we’ve seen that when sales are very concentrated in a handful of products that rarely change, that can represent a risk because lack of novelty and choice can lead to stagnation. 

Conversely, when sales are spread across a huge range of products, and when those products are new and constantly changing, that can represent a risk because your brand is over-reliant on newness to bring customers back to an unsustainable degree.

Your best chance for success is somewhere in the middle, with a good balance of core products and new products including seasonal offerings, line extensions, and others.

Are You Ready for Retail?

Retail is risky. There’s no guarantee of success. You need to invest in real estate, fixtures, store technologies, hiring and training staff and supporting roles, shipping and logistics, and much more to have a shot at long-term growth. And the more you invest, the more risk you take on.

So before you take the plunge, make sure you’re ready. Try our Omnichannel Fitness Assessment and get a better sense of your readiness. You may already be fully prepared for retail success without even knowing it!

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