Ecommerce and Brick-and-mortar Retail Converge
While there may still be plenty of room for pure-play ecommerce businesses, retailers with physical stores should look to expand online as consumers stop seeing a distinction between shopping online and in a store. Increasingly, physical retail outlets are being transformed into a sort of brand-building media.
The U.S. retail industry grew 2 percent in the first quarter of 2013, according to trend-tracking firm, comScore. By comparison, online retailing in the U.S. grew 13 percent to about $50 billion for the same quarter, effectively making ecommerce the fastest growing retail segment.
This sort of data generally has online merchants happy at their prospects and store-based retailers worried about trends like showrooming — where shoppers compare prices or even make purchases on a mobile device while standing in a physical store. (See “Showrooming Challenges Brick-and-Mortar Retailers.”) But it may not be the case that the ecommerce and brick-and-mortar channels are somehow at odds, but rather that all of retailing has changed so significantly that, in a sense, there is no real distinction between channels, at least where the customer is concerned.
If, in fact, retail channels are in some way converging, it is the traditional retailer that is in for the most change. But no merchant can go unaffected.
Customers May See All Channels Simply as Shopping
“Consumers no longer see a distinction between online and offline shopping,” wrote Sridhar Ramaswamy, Google’s senior vice president of ads and commerce, in a recent whitepaper. “Whether it’s searching on a laptop, browsing main street shops, or hanging out at the mall — it’s all shopping.”
There is no fundamental difference to the shopper whether she looks at a product online and buys it in a store, or does the reverse seeing a product on a rack, only to order it from her phone because it is simply more convenient or, perhaps, less expensive.
“When something can be efficiently shipped to anyone, anywhere, the question of where the sale takes place is rapidly becoming moot,” write Doug Stephens, a retail industry futurist and the founder of Retail Prophet, in a recent issue of Retail Environments magazine.
Convergence may mean that every store must compete with every other store, regardless of format. Ecommerce businesses have already recognized this, since from the beginning every online retailer has had to compete against big box stores and local specialty shops alike. But small or even mid-sized physical-store-based retailers that have enjoyed a kind of geographic monopoly are increasingly exposed to the world wide web of retailers thanks to mobile devices and much faster Internet connections.
Convergence may also impact how all retailers provide customer service and how brick-and-mortar retailers think about their physical locations.
Convergence Impacts Customer Service
Shoppers who see no distinction between ecommerce and offline shopping may also have similar expectations for customer service in both channels.
As an example, shoppers in stores are accustomed to having an attentive clerk that they could talk to. In the same way, a shopper visiting an online store may expect to be able to contact an associate almost instantly via chat, telephone, email, or even social media.
As another example, Google’s Ramaswamy wrote that modern shoppers often know as much as a store’s salesperson about a given product or product category. In the past, “people came into stores with little to no knowledge and relied on a salesperson to advise them on what to buy.”
In contrast, “today’s shoppers have become accustomed to doing their own research to get the maximum value out of every dollar they spend, and to feel secure about the purchases they’re making. With this power shift comes a great opportunity for retailers; those that use tools and insights from the web have the opportunity to close the gap between the smart online consumer and the offline retailer, and stand out in a competitive marketplace,” Ramaswamy wrote.
Put simply, Ramaswamy is implying that traditional retailers should post good product information online so that they may continue to help inform shoppers.
Convergence Impacts Branding
The convergence of electronic commerce — including mobile — and in-store retailing may also significantly change the way that brick-and-mortar retailers think about inventory and branding, and the way that primarily online retailers look at the benefits of having a physical location.
“In the long term,” wrote Stephens, “sales of product simply can’t be the primary strategic purpose or metric for the [physical] store.”
“Until very recently the primary function, form, and purpose of stores was to distribute products. Stores were the principal and, in many cases, the only means of availing distribution of products to a given market.”
Online shopping changed that purpose. Thanks to ecommerce and carriers like FedEx, UPS, and even the U.S. Postal Service, it is almost easier to get a product from the ecommerce channel than it is from a store, where a shopper has to lug products around.
According to Stephens, this trend can be seen first hand at some brick-and-mortar retailers. “Some of the world’s largest retailers are struggling with this jarring reality already,” Stephens wrote. “‘Stack it high and watch it fly’ has abruptly turned into ‘Stack it low and hope it goes’ as big-box stores scramble to lower inventories in the face of declining sales.”
At the same time, some leading ecommerce businesses are opening physical stores. As an example, online men’s clothing retailer Bonobos has started to open physical stores.
Bonobos and other pure-play online retailers “recognize that in order to ‘fully actualize’ their brands, “ Stephens wrote, “they need to animate a physical presence and visceral experience for their customers, not to move products but more critically to move hearts and minds.”
Effectively, some online retailers are recognizing that they can expand their brands with real world shops. As an example, online merchants that open a physical store tend to see an increase in Facebook fans from the geographic area around that store. The physical shop, regardless of what it is doing to the bottom line, is building the brand.
In short, as the online and offline shopping channels converge, pure-play ecommerce retailers may look to open physical stores, and traditional stores should begin to sell online, if they have not already.