What is the halo effect and why is it so important for retailers?

The combination of online and physical is particularly powerful. The closer customers live to a physical store, the greater the likelihood that they will shop online with you. So you sell significantly more online in areas where you have a physical presence. We call this extra online revenue, which comes predominately from your primary and secondary catchment areas, the halo effect.

There is a logical explanation behind this effect: proximity means greater brand awareness! Furthermore it has a psychological effect: proximity creates a positive vibe and generates trust. Does a customer require a service from you, want to return something or wish to make a claim on a warranty? Then the physical store is always close by.

“The halo effect is a very important weapon in the tough battle with the purely online players. So as a retailer you need to fully capitalise on this!”

There is a reason why companies such as Amazon, which used to be solely online, are opening more and more physical stores. With great success! Purely online players such as Bol.com lack this important complementarity, so they are missing out on extra revenue. That makes the halo effect a very important weapon in the fierce battle with the web giants. As an omnichannel retailer, make sure you get the most out of that advantage!

Since the coronavirus pandemic, the halo effect has increased even further, according to a data-driven analysis by RetailSonar. You can read the full trend report here.

How big is the halo effect for your retail network?

Do you still lack a clear picture of the halo effect within your retail network? Like rapidly growing bathroom specialist X2O, start by identifying the sources of your online sales. This allows you to find out how much revenue can be attributed to each store, and you get a good picture of the halo effect.

Is the halo effect noticeably low, or is the effect lacking around certain stores? Then it's time to take action. In particular, look at how you can stimulate in-store interaction. Your online store is your ally, not your enemy!

Combine the power of the online store with the advantages of the physical store. Stimulate visits to physical stores online, and simulate online visits from physical stores. Physical retailing offers many possibilities. Companies that can really inspire you here include Domino's Pizza and Starbucks.

What role does the halo effect play in network optimisation?

Be aware that every property intervention influences your customers' buying and travel behaviour, both offline and online. Whether you open, move or close stores or reduce their size, be sure to leverage these changes with the halo effect! It's key to your optimal future-proof store network and a big advantage over purely online players: you are close by, and they're not!