December 16th, 2019 by I Nyoman Yuliarsa
Just a decade ago, many people believed that the future of retail was online. Now, it seems like e-commerce needs brick-and-mortar to fly higher.
In 2017, Amazon, the world’s biggest e-commerce player took a surprising move. It acquired Whole Foods and hence controlled more than 450 physical stores. It was enough to raise analysts’ eyebrows: where is the online “game” heading? For example, Warby Parker has also been opening more physical stores. Personally, I thought these physical stores would be a complete failure, particularly because at the beginning Warby Parker said that they would only focus on online channels.
These efforts may seem counterintuitive, especially because online channels themselves are still growing significantly. Driven by my curiosity and simple logic, there are 3 key reasons why companies are heading back into the brick-and-mortar ecosystem.
Physical Experiences Matter
Let’s imagine that you have a holiday party coming up and decide to buy a new outfit at an online channel. Naturally, someone will get worried whether the size will exactly match their needs or not. That’s one of the critical pain points (a.k.a unsolved gap) in the online shopping experience.
Regardless of how sophisticated and convenient online channels are, consumers still miss certain elements from the in-person experience. As an example, my cousin still wants to hear advice from store assistants regarding which outfit to choose. She is willing to sacrifice a big online discount and come directly to the store to experience the product first hand.
As a PWC report argues, human interaction is the key of consumer experience. An NRF survey shows that 60% of shoppers are driven into physical stores to try out products and see product demonstrations. They would rather have the option to test equipment before purchasing than return it for a full refund after the purchase online.
Scott Tanner, CEO of Boll & Branch confirmed this rationale and said, “The main reason consumers wouldn’t buy our product online was because they wanted to be able to feel it themselves. We are remedying that with our physical locations.” This trend is real and not just an attempt to test the waters.
A Halo Effect from Omni-channel
As for the previous generation, my parents are less confident in online channels that have no physical stores; they simply worry they might get fooled. LandUseUSA discovered that consumers are most loyal to brick and mortar stores with an online presence. With so many players in the online space, it is getting more challenging to stand out from the crowd.
A combination of e-commerce capabilities and a brick-and-mortar experience results in omni-channel experiences that solidifies brand loyalty. This approach allows shoppers to order products online, pick them up at stores, and even try them on before they commit to the purchase. Some argue that they may even end up buying additional items in the physical store, although their initial trip was just to pick up online purchases. Through discrete observation, I’ve noticed that more often people end up buying additional items when picking up their online orders at retailers such as Target. It starts by finding interesting products in the entrance and culminates in being tempted by other sections of the store.
Building physical stores comes with a significant investment. However, businesses always find a way out. Marc Jacobs, a recognized fragrance brand tested the water by opening pop-up stores and accepted “social currency” in exchange for its product. This pop-up tactic promotes brand awareness while gauging performance before committing to a long-term store lease. More brick-and mortar locations mean more people talking about your brand since they have seen it in real life. Visit CNU for additional data.
The E-commerce Game has One Prize: Efficiency
All businesses are oriented towards creating value, and e-commerce is no exception. Back to my cousin’s story: if she has to buy a product online, she will pick it up at the store. She wants to check it directly and make a quick decision whether she wants to take it or return it. Amazingly, big e-commerce captures my cousin’s behavior within their consumer pool and monetize that insight. Amazon claimed that by bringing a return locations within 15 miles could lower its per-package shipping cost roughly from $10 to $2.
According to Salesforce, the majority of people still start product searches online but buy the products at the physical stores. If consumers are buying at stores, then they don’t need to pay the shipping cost, which helps save money in the expense equation. Target CEO recently said, “When Target fulfills an online order through in-store pick up, about 90% of the order cost goes away.” Both savings are achieved by leveraging a brick-and-mortar approach. It absolutely leads to a huge amount of potential savings for brands.
At the end of the day, brick and mortar is something that can’t be avoided by e-commerce business. Both channels exist to complement each other, not to kill one another. 2020 is around the corner, and businesses are starting to set up battle strategy for the upcoming season.
If you have an online business and are curious about how to equip yourself with the most relevant channels and go-to-market strategy, our team will be happy to help — Message us at firstname.lastname@example.org and let’s talk.
Cover picture by Blake Wisz via Unsplash