Digital retail on the rise, but with the help of in-store

NEW YORKThere is no stopping the digital penetration of retail in 2014. In fact, e-commerce should top $300 billion in sales for the first time ever this year, meaning 10 percent of all retail sales will be done online.

And retailers certainly know the importance of digital. In the list of top three priorities in 2015, 58 percent of retailers put mobile as number one and 45 percent voted omnichannel as a top priority.

"But keep in mind that even though mobile is so critical and a significant percent of traffic and overall revenue, there are still large numbers of players that have been challenged entering the arena," said Sucharita Mulpuru, VP, principal analyst, Forrester Research, during a breakout session at NRF's BIG Show.

The panel, which featured a Q&A focused on the outlook for digital retail, included Lisa Galvales, president and CEO, Things Remembered, and Maria Thomas, chief marketing and consumer officer, SmartThings.

One of the challenges facing digital retailing, as noted by surveyed retailers, is shipping. Fulfillment costs have gone up 25 percent. And now, with the new dimensional weights being imposed on retailers and customers by carriers such as FedEx and UPS, costs may continue to rise.

Some retailers scored big with their digital platforms in 2014, especially over the holiday season. For instance, from free shipping for online orders to store pickup to deals on its Cartwheel mobile app, Target (NYSE:TGT) racked up record-breaking digital results this holiday season.

But while consumers continually tout the benefits of online—more convenient, better deals, more inventory—90 percent of all transactions are still made in-store.

Knowing the power of digital retailing, Thomas works for what is essentially a mobile-enabling company. The SmartThings platform uses a smart phone to connect hardware and software devices to control and monitor your in-home devices. For the past 18 months, the company has sold direct to consumers from their website or through Amazon. However, SmartThings plans to expand next year and make devices available in brick-and-mortar. But the product is completely mobile-facing and does not use a tablet as part of the experience.

Galvales spoke of the uniqueness of her specialty retail business, in that a large percentage of consumers buy online and pick them up in-store—a purchase for Things Remembered is a two-step process, of buying and engraving. Her company is seeing conversions in mobile rising by triple digits, but she said it still pales in comparison to desktop, where the company gets half its traffic.

When the discussion turned to digital wallets, both retailers said that the market was not quite there yet, but is sure to take off in the future. Thomas pointed out that there have been several versions in the last five years, but no one has found that "killer product" yet. In fact, she said she believes the winning currency of the future may not be an Apple Pay or other digital wallet, but may be a virtual currency.

"I do think it's in the future, anything that makes the transaction easier," said Galvales. "Somebody is going to come up with the killer app that wins."

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