Is there a future for brick-and-mortar retailers?


mobile-e-commerce-strategy

E-commerce is a big threat to physical stores. The brick-and-mortar retailers are losing market share to webshops every year. The percentage of online shopping increased from 5% in 2007 to 9% in 2012 in the United States (Economist, 2012).

I think most retailers don’t invest enough effort in building a relationship with their customers. The main things that allow brick-and-mortar retailers to differentiate from online retailers is service and the shopping experience (Trafsys, 2015). So brick-and-mortar retailers should focus more on those things, such as expensive clothes and gadgets, that customers will want to try before they buy them. With these products the price isn’t the most important thing. More important is that there is a good relationship with the customers. A good relationship with the customers will also prevent against showrooming. Showrooming is that shoppers try products in physical stores before they buy them online for a cheaper price (Economist, 2012). This is a really big problem for physical stores who sell consumer electronics. Many people can acknowledge that they tried a laptop or mobile phone in a store before buying it online for a lower price.

So brick-and-mortar retailers should deliver a better service or shopping experience to compensate the higher price. In my opinion, the Apple store is one of the few physical stores in the Netherlands that deliver something extra. I bought my Mac Book in the Apple store The Hague last month. I didn’t buy it online because I like the experience of an Apple store and prefer the service of the physical store. Especially with these kind of prices, it gives a better feeling that you can go to a store when there is something wrong with your product. In conclusion, I think that brick-and-mortar retailers should focus more on service and shopping experience, instead of trying to compete with the low prices of online shops.

References :

Trafsys.com, (2015). Trend report: Why Personalized Retail Is the Future of Brick-and-Mortar Stores [online] Available at: http://www.trafsys.com/trend-report-why-personalized-retail-is-the-future-of-brick-and-mortar-stores/ [Accessed 30 Sep. 2015].

The Economist, (2012). Clicks and bricks. [online] Available at: http://www.economist.com/node/21548241 [Accessed 20 Sep. 2015].

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12 responses to “Is there a future for brick-and-mortar retailers?”

  1. 373456sj says :

    It would be interesting to see what a world without physical stores would look like. Simply imagining the coolsingel in Rotterdam without stores is very hard to do. You’re right that the service experience is one of the biggest advantages physical stores have.
    Furthermore I think that being able to touch, and try the product is something that will never be able to be imitated by the internet. I had never heard of the term show-rooming, quite an interesting concept. Perhaps physical stores should then start charging simply for the trying-experience, and handle all purchase transactions online. Perhaps the future of stores lies in no longer selling products…

  2. 366867ms says :

    Hi,

    This is an interesting topic, which relates to a huge problem in offline commerce. I agree on the fact that brick-and-mortar firms should make better use of their ability to personalise service per customer and exploit the overall “shopping experience”.

    However, I think you should bear in mind that clothes, even expensive clothes, are commodity goods. In the coming years the e-commerce market will grow, and customers will be buying these commodity goods online in an increasing trend. As for 2011 the total e-commerce market only totalled 792.6 million buyers, this number is expected to grow to an amazing 1,321.4 million in 2016. Meaning, the total number of online shoppers have increased.

    Furthermore, clothes are very easy to return and compared to, for instance, MacBooks relatively cheap. People feel comfortable in buying these relatively cheaper products online as they have the ability to return them relatively easy. For more expensive goods, people tend to be more reticent in buying them online. Customers appreciate the expert opinion and advice while searching for the laptop that will best suit their needs and specifications. After all, clothes will be clothes where every one knows its’ features, whereas more complex goods need further description than provided to the customers online.

    I believe that brick-and-mortar firms should further examine the possibilities on online customer engagement. These firms must leverage their data they have on their customers; firms need to examine what makes their customers buy online or offline and offer these customers a personalized experience with the perfect mix of online and offline services.

    http://www.statista.com/statistics/251666/number-of-digital-buyers-worldwide/
    http://www.wsj.com/articles/SB10001424127887324063304578523112193480212
    http://www.forbes.com/sites/lisaarthur/2013/03/12/which-is-better-for-retail-sales-online-or-offline-customer-engagement/

  3. lhendrickx says :

    Personally I’m a big fan of both brick-and-mortar stores and online shopping. But I use them in a different way. Usually when you buy something relatively expensive it feels better to buy it in a brick-and-mortar store instead of an online shop. In a brick-and-mortar store you can get additional advice about the product, you have the feeling that when something is wrong you can always go back and the service will take away your concerns and doubts buying something relatively expensive. As a brick-and-mortar store owner it is, in my opinion, really important that you differentiate with service. I go to brick-and-mortar store to have a better shopping experience and am willing to pay a little bit more for that. If you receive bad service, people are not coming back.

    I think the brick-and-mortar shops have a lot of competition from online shops, but just on really general products. Brick-and-mortar shops are ideal to sell very personalized goods, because you want to see them first before you buy them. I believe brick-and-mortar stores should focus less on mass products and more on personalized products. Usually with mass products you are indifferent about the place you buy them, you just want to get them at the right point in time and at lowest cost.

    SSID: 345222lh

  4. 356175jh says :

    Good morning!

    Nice thoughts about the brick-and-mortar stores. I have to align with the fact that there is a ‘change’ in the way business do business. It is true that companies are changing the product mix available in store, more high-end products are present. The trends in the market about losing market share are undeniable, though I foresee this is a temporary trend.

    The reasoning:
    Let’s see the difficulty from the online-retailers point of view. Yes they have lower prices than brick-and-mortar stores as a result of a lower cost structure. Yes, they can offer a wider product mix, and have a geographically wider market. But what they do not have is direct customer contact. In response to this, online retailers are opening stores in order to increase revenues. Retailers are experimenting with programs as BOPIS (buy-online-pick-up-in-store) and SFS (ship-from-store) to either change their business model or increase their store productivity. To be more specific, retailers are trying omnichannel strategies, not solely online strategies.

    Additional, during the crisis (2008-2009) low cost brick-and-mortar stores as Action gained market share. Action is a cost-leader, their strategy is being the absolute cheapest retailer for a wide segment of products. As a result of the crisis several buildings had cheap space to open stores at. Action used this opportunity too grow businesses like mushrooms and gained more customers than ever before.

    Conclusion:

    As a result of omnichannel retailing, economical fluctuation and changes in strategy I feel that the drop in brick-and-mortar stores market share will stagnate. In fact, the trend might be reversed and more brick-and-mortar stores might appear as a result of online-retailers opening up a store to apply BOPIS or SFS. Unfortunately, a lot of hardworking entrepreneurs will turn bankrupt before the market share numbers of brick-and-mortar stores will reverse.

    Sources:
    McDonald, C. (2015), Are bricks-and-mortar stores the next step for online retail? Available at: http://www.computerweekly.com/feature/Are-bricks-and-mortar-stores-the-next-step-for-online-retail [accessed: 2/10/2015]

    Lal, Alvared, Greenberg (2015),The Scale of the Ecommerce Threat Available at: http://hbswk.hbs.edu/item/7719.html [accessed: 2/10/2015]

    Beuters, P. (2013), Zo maakt Action Blokker gek,Available at: http://www.sprout.nl/artikel/sales/zo-maakt-action-blokker-gek [accessed: 2/10/2015]

  5. 371212vs says :

    The online shops are able to develop large competitive advantages over the brick-and-mortar retailers, they are able to make use of the long tail and offer a lot of additional information which creates a very transparent market. Showrooming is one of the main problems and threat for the brick-and-mortar retailers as announced before. One of the solutions for this problem is that brick-and-mortar retailers should focus more on service and shopping experience, instead of trying to compete with the low prices of online shops. In my opinion, another important factor is that combining brick-and-mortar retailing and online retailing could lead to a better performance. I believe that using an online store to support the brick-and-mortar store could increase the overall performance. A brick-and-mortar store should therefore not only look at online shops as competition but also as a possibility.

    For example H&M is growing successfully and this expansion takes place both trough the physical stores and online. Their target is to increase the number of physical stores by, 10-15 percent each year. And in 2014 they have opened four new online markets. Together these online and offline expansions have increased profitability with almost 17%. (H&M, annual report 2014)

  6. deikem says :

    I think Brick and mortar stores only have a future if they reinvent themselves beyond optimizing service. Good service is nice, but the truth is that you are most likely an exemption as someone who is willing to pay more for a good shopping experience and good service. Personally I believe brick and mortar stores will never offer me the information an online store or the internet could. I could never get as many reviews and detailed information from several viewpoints and not just the one from the salesperson that happens to be in the store.
    Looking at history you can see that brick and mortar stores have reinvented themselves once before, when malls became popular. The allocation of stores in one position made shopping much more efficient and was a major game changer in the industry. The new reinvention that brick and mortar stores are facing is the Omni-channel experience: bringing together offline and online shopping experiences. Shoppers will be able to make use of advantages from both ways of shopping.

  7. 371908jg says :

    I think brick and mortar stores will have a future. In my option, the shopping experience can make the shopping experience even more good, but in fact without this experience people are still willing to go shopping. For example, I bought shoes last week. Normally, I have got size EU41. Because of the fact that I went to the shoe shop, I got my pair in size EU39,5. As if I bought them online, I have had to send them back.

    I think people remain being able to try and touch products and they are not willing to wait one or more working day for the delivery of ordered products. And overall, I appreciate some good shopping advice.

  8. 370033ss says :

    Personally, I feel like brick and mortar stores have to step up their game, now that e-commerce is growing continuously. Physical stores have to provide a better service and become more innovative.

    A well-trained sales assistant in a store can advise customers well on what to buy and which items will meet their exact needs. It will be difficult to replicate this online. There might be customer reviews and product descriptions online, but some customers might need further advise, which can be given more easily in person than through chat, email or telephone calls. Even through a live video conversation, this could not be replicated properly, as the customer is not able to try out what he is buying beforehand. Furthermore, many physical stores can offer a more personalized service. Clothing stores can offer tayloring services for clothes that do not have the perfect fit.

    As for becoming more innovative, brick and mortar stores have to become more creative. All physical stores have to be appealing and well-designed. The customer experience should be the main focus here. This could happen through for example offering complementary drinks and snacks, personal shopper appointments, and special events for loyal customers. Physical stores could also install touch screens in the changing rooms and at several locations in store, in order to help customers find their way around.

    I do disagree with your point that physical stores should only focus on the pricier products. This will create stores for the richer part of the popluation and might send the wrong message. It might be easier to provide exciting customer experiences for the more upscale stores, but nevertheless it is possible for the budget stores to provide the customer with a good experience as well. I think that depending on which products are sold, different strategies are needed, but physical stores will work for all price ranges. What is important though is that the customers are very price sensitive, so the articles available in physical stores should not be considerably more expensive than online.

    To conclude, I do not believe that brick-and-mortar stores will disappear. I would not necessarily separate online and physical stores, but claim that more companies will go for an omnichannel strategy. The overall marketplace is likely to converge. I do not believe that either of the both can completely replace the other. They should be seen as complements.

    http://www.trafsys.com/trend-report-why-personalized-retail-is-the-future-of-brick-and-mortar-stores/

    http://www.retaildive.com/news/11-perspectives-on-the-future-of-brick-and-mortar-retail-stores/391136/

    http://business.financialpost.com/news/retail-marketing/online-retailers-need-bricks-and-mortar-stores-in-all-channel-future-hbc-chief-says

    http://techcrunch.com/2014/10/31/why-online-retailers-continue-to-open-brick-and-mortar-stores/

  9. thommenju says :

    What you state in the article is exactly what brick-and-mortar store should focus on more: Close Customer Relationships and a special Shopping Experience.

    More intense customer relationship could mean:
    More personal service – Many people still prefer a physical person to talk to when seeking for help.
    Value added services – You get what you pay for. Online is often cheaper for a reason. You might not have the same warranty conditions or different return policies than in a physical store but therefore you can pay less. But if these differences aren’t there then there is no reason to stop at the physical store.

    A special shopping experience could include bolder ideas in in brick-and-mortar stores:
    Self Scan Stores – You can take a look at all the products, touch and feel them and maybe even try them on/out. Then you scan what you buy, pay on a terminal and the products will be set home to your address. That way the whole warehousing and fulfillment can happen off-site in a cheap location outside the city center and the customer doesn’t need to carry the goods back home.
    Pop-up Stores – Retailer could experiment with more short-term and event based shops. Why not having a store where the assortment changes once a month? Amazon could open a pop-up store and one month fill it with books and another with electronics followed by home appliances in the third.
    Blurring on-& offline boundaries – Many brick-and-mortar stores have online stores as well. Why not coming up with creative concepts to combine both worlds? eBay could offer the display of auctioned good in an ebay store where potential buyer could look at the product for instance.

    Personally I would like to see bolder attempts at integrating both worlds: Online and brick-and-mortar.

  10. 439206ma says :

    This is for sure one of the most interesting topic, especially regarding how traditional brick-and-mortar stores should respond to the pure e-players in the market. I believe a good example can be drawn from how the traditional grocery retailers have responded to their e-commerce counterparts. Tesco in UK for instance are fighting the battle through relentless integration between the two channels, and utilize their network of stores as pick-up points, warehouse/distribution center (i.e. picking the order) and of course branding. Traditional brick-and-mortar players must embrace the online channel by identifying how the two channels can interact and reinforce each other. For instance, like Tesco, traditional players can utilize their huge network of stores to strengthen their online channel and expand rapidly. The problem for grocery players is when the online channel is interfering with the offline channel in which customers in the store might be interrupted by employees who are picking online orders. So yes, I believe there´s a future for the brick-and-mortar store.

  11. 440015ms says :

    I am very interested in this topic, in fact, last year for a group work we analysed the situation of an Italian clothes retailer. The project, done within a course of IT consulting, was developed in collaboration with managers and experts of Hewlett-Packard (HP) Italy. We have analysed how a brick and mortar retailer can survive to the challenges of the digital era using tools such as Big Data analysis. OVS sells relatively cheap clothes, but nowadays is facing a strong competition coming from multination giants such as Zara and H&M. Despite everything, OVS is experiment a rapid growth thanks to great management choices, but is clear how this source of competitive advantage is not sustainable in the long term. Understanding that the IT infrastructure is more critical than ever in order to create value in both back-end activities (operations and supply chain) and front-end ones (merchandising and marketing), OVS has subscribed a partnership with Google in order to create a new concept of store. Without any doubt, the most interesting features that the partnership has created are the google shop view (similar to street view, but inside the shop!) and a virtual fitting, which allow customers to have a digital avatar and try clothes on a screen placed in the store. However, this is not enough if OVS wants to become a market leader. Thanks to Google, OVS now provides clients with experience-Rich stores, but, thanks to more complex technology, it will be able to become an Omni channel retailer. Examples of these new technology are the Big Data, which are now accessible to every kind of company thanks to specific services offered by firms such Hewlett-Packard. Thank to instruments such HP Vertica and HP idols (they are incredible! I will insert a link at the end of this comment for whom is interested) firms can have real time data analytics and other very useful features.
    Concluding I believe that the simple brick and mortar concepts is going to die, but I believe that physical stores are still a great assets that need to be transformed in order to keep creating value

    HP Idol
    http://www8.hp.com/us/en/software-solutions/information-data-analytics-idol/
    HP Vertica
    http://www.vertica.com/wp-content/uploads/2014/05/VerticaOverview.pdf

  12. 357272rd - Roeland Diks says :

    This topic is interesting indeed, no wander it received so many comments already.

    Through reading and thinking, also as a bol.com intern, I developed thoughts on this matter as well. I personally believe there are many reasons why brick-and-mortar stores (BNMS) would not survive, but there is one solid reason why it, being the minority of all BNMS, will survive.

    In general, it is common knowledge that people are social creatures and therefore enjoy walking around in the city centre. They like to be surrounded by others and therefore don’t mind walking around just for the fun of it. This made ‘window shopping’ into a popular and widely-used term.

    When BNMS want to survive, they should integrate the convenience of online shopping and the social aspect of shopping in BNMS.

    One cool example is Virtual Shopping, where stores incorporate walls with images of products and/or show models. Products can be ordered by scanning a QR code with mobile phones and will shipped to your house on the same day. This still is quite a un-personal and sub-optimal version, but I believe conceptual improvements could make such stores into booming business!

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