News from Allen Austin

The Emerging Battle Between Online and Brick & Mortar

Remember back in the late 90s when eBay first came on the scene? It was the newest form of shopping and everyone was buzzing about online auctions and this revolutionary, exciting new way to shop. You just picked out what you wanted and it was shipped to you in 7 to 10 business days! Online shopping is no longer a new phenomenon, but an established retail format that is expanding at an accelerating rate. It is without a doubt the fastest growing retail segment by far – and it is having a significant impact on traditional brick-and-mortar retailers.

 

Not surprising, eBay is still alive and kicking, though with less market share than before. Other online retailers such as Etsy for handmade items, Expedia for hotels or flights or vacations, Groupon for deals on vacations or restaurants or packaged goods, Ticketmaster for event tickets, Peapod for groceries, and Washio for laundry, just to name a few, have come on the scene since – but none is as popular in the United States as Amazon. Amazon is the second most popular e-commerce site in the world; the first being Alibaba, the Amazon of China. In two days (free and guaranteed if you pay for Amazon Prime) Amazon will have your orders delivered directly to your front door. Plus, if you have Prime, they can have it immediately ready at the nearest brick-and-mortar store when and where possible in your area.

 

Seeking Alpha recently reported that “a monthly consumer survey conducted by Cowen Research found that Amazon cut deeper into Wal-Mart and Target’s market share in the grocery and consumables category.” “The e-commerce giant showed 18% year-over-year growth, while sales at both Wal-Mart and Target fell back from a year ago,” the story goes on to say. Although online shopping is the fastest growing retail segment and aggressively taking market share, traditional brick-and-mortar stores are not in danger of being obsoleted or replaced by online e-commerce any time soon. They are, however, having to rapidly adapt to this expanding world of e-commerce in order to compete, and are enhancing their physical stores and product selections, partnering with online retailers (such as Amazon), and creating an online presence of their own with unique sales, selections, and sizes.

 

Traditional brick-and-mortar retail stores will continue to be at the center of many, if not most, types of purchases. There are many types of purchases for which buyers still need the see, touch, smell, try on, or get instructions via in-store experience in order to make an informed choice and purchase decision.  E-commerce shifts the research burden to the consumer without the benefit of having human guidance. This can result in an inexact transaction (as when you order a poorly crafted, misshapen, off-color, poorly fitting, cheap piece of apparel that looked great in pictures). Consumer confusion deepens with online stores that feature ill-worded descriptions, products photographed in a misleading manner, or confusing specifications/directions, and that can be costly when returns and emergency shipping are involved.

 

Traditional retailers are able to provide consumers with a tactile-rich form of quick gratification in a way online shoppers do not experience even with the promise of an instant “click to purchase” transaction. The human brain loves few things as much as immediate stimulation, and the traditional retailer retains the advantage over e-commerce of being able to convert a fond wish to a cherished possession in moments. Many forward thinking traditional retailers now provide an in-store kiosk whereby the brick-and-mortar customer can order online, pay for the purchase, and pick up at the store as an alternative to the normal online delivery time from most e-commerce retailers.

 

In an effort to improve their relevance and competitiveness, many traditional retailers are expanding the categories and types of products they offer, and adding interactive, informative and fun sections in their stores focused around the products they sell. Brick-and-mortar retailers will have to continue to develop, improve and enhance their omni-channel capabilities in order to compete with online retailers, and improve in-store experience and value for shoppers or risk continuing market share erosion.

 

E-commerce is here to stay and is growing in popularity based on its ability to make our hectic 21st Century daily lives simpler and more convenient. The winners will be those who can meet or exceed consumers’ needs while providing the best experience at the best value – in whatever retail format the consumer prefers.


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