As of a few years ago, pure-play online retail was anointed as the most efficient mode of doing business. Lower costs, greater flexibility, ability to capture information through the customer journey trumped the costs and liabilities associated with physical stores – major store-based retailers like Macy’s, JCPenney announce store closing on most quarterly earnings calls and prioritize e-commerce.
As online retail has become crowded and hyper-competitive, more pure-play online retailers are setting up physical stores to complement their online operations. Established online retailers, like Warby Parker, Zappos, and Bonobos have long used their physical stores as an important customer touchpoint to reduce consumer purchase uncertainty, help customers identify their preferences and select products online, and process customer returns.
2018 has been a blockbuster year for clicks-to-bricks strategy. Amazon, the biggest online retailer owns Whole Foods and sells its products through its 460 stores. According to Warren Shoulberg reporting in Forbes, Wayfair, the online home furnishings retailer is shelving its “no store” mantra to open its first physical store and distribution center in Cincinnati, OH in 2019, and two pop-up shops in NJ and MA for the 2018 holiday season.
Reid Greenberg, e-commerce lead researcher at Kantar retail in a report by Ilyse Liffreing on DigiDay observes, “Roughly 85-90 percent of retail takes place in brick-and-mortar locations.” Mall-type department stores are challenged “because they aren’t connecting with shoppers in the way they want to be connected with. Consumers already know what to expect when walking into one of these stores.”
E-commerce brands are redefining the in-store experience by interconnecting digital touchpoints and mobile apps with their physical experience. Instead of traditional mall-based focusing on stocking products, display and checking out, the focus on providing the customer with a branded experience, visualize and experience products (as Boll and Branch does for their premium bedding) or helping the customer interact with technology to help in product discovery and use.
Boll and Branch store at Short Hills mall, New Jersey. Photo courtesy: Digiday
Online commerce is approaching maturity in its life cycle. Incremental growth in e-commerce revenues will be driven by older, risk-averse customers cautiously making purchases from online retailers. Having a positive shopping experience at a store of an online retailer will go a long way in reducing the uncertainty associated with the process. Having a retail location provides other benefits – conversion rates are higher in stores and Google SERPs (Search Engine Results Page) ranks merchants with physical locations higher than online-only merchants, another win for retailers selling online.