Is it the end of an era for brick and mortar stores?

Will online retailers replace traditional brick and mortar stores one day? With the convenience of online shopping, do customers really need to physically go to a store? What unique value can brick and mortar stores offer to consumers? In this post, I’m going to focus primarily on online shopping for apparel and groceries, discuss barriers of consumer adoption and also look at what online retailers are doing to address these challenges.

Personally, I am an avid online shopper and believe that e-commerce has revolutionized the retail industry. E-commerce has made shopping easy and simple; Shopping can now be done from anywhere and anytime, requiring significantly less effort and time from customers. With the breadth of product selection online, customers now have access to more products than ever compared to the options available at their local store. Online retailers can also offer more competitive prices due to relatively lower capital expenditures compared to traditional brick and mortar stores. Given that online shopping is generally more convenient, cheaper and provides a greater selection, should we say good-bye to brick and mortar stores? Even with this laundry list of benefits, customers seem to favor online shopping only for certain product categories, such as books or electronics, which require less physical interaction between the customer and product in the purchasing process. However, in other areas of retail such as in apparel and groceries, online retailers are facing more challenges in terms of consumer adoption and conversion.

Apparel Shopping

I have always been skeptical about purchasing clothes online because I am someone who likes to try clothes on to ensure the proper fit. As a consumer, I typically do not have confidence in the generic size guidelines that are posted online. For this reason, I do find value in visiting a brick and mortar store for apparel shopping. To indirectly address this concern around fit, many online retailers provide free returns policies. As a result, consumers like me would order multiple sizes of the same item, fully anticipating to ship back a portion of the order.

For others, the need for fashion advice from sales associates is another reason to visit a physical store. Many shoppers will go into a store, tell the salesperson the clothing item (e.g. a pair of black jeans) they are looking for, then have the sales associate bring them a number of options leveraging the salesperson’s expertise in recommending styles and brands that work best with the customer’s particular body shape and type. To mimic this service, some online retailers such as Macy’s have started implementing clothing recommendation systems which require that the user answers a number of questions (http://www1.macys.com/campaign/social?campaign_id=36&channel_id=1).

Fit technology companies such as Styku are making advances that could theoretically change the game for online apparel retailing and solve the two barriers discussed above. Styku’s technology would enable online shoppers to build an accurate, self-scanned avatar that is used to virtually try on clothes to address the sizing issue. From the consumer’s body measurements, online retailers can also create personalized clothing recommendations for fit and style. There is certainly a lot of potential here but fit technology is still in its early stages and largely unproven.

Groceries

Can online retailers find a way to mimic the fun user experience of grocery shopping? Many consumers enjoy hand selecting their own produce and meat prior to making the purchase. People also tend to have personal preferences regarding grocery characteristics e.g. the exact color shade for meats, the firmness of fruits and the softness of baked goods. With online grocery shopping, consumers are inherently taking the risk of purchasing items that do not align with their mental preferences. With groceries, there is just no guarantee that the product will be the same as the display product image, in contrast to retail products such as books. There are also concerns regarding delivery, such as bruising of produce or melting of frozen foods in transit. Lastly, there is typically no pricing advantage when it comes to online groceries, as the grocery business is already low margin.

Given these disadvantages, is the online grocery business destined to fail? Not necessarily, there has been a trend toward retail giants investing in this area with the introduction of online grocery services such as Amazon Fresh. Amazon has been trying to refine the online grocery shopping experience with a user-friendly interface to emphasize the value of convenience and simplicity. For example, from suggested recipes on the site, the consumer’s shopping cart can be auto-populated with the recipe’s ingredients. Amazon Fresh also offers an “Expert Pick” section which provides customers with news about which produce are most in season, with real customer product reviews. Lastly, most online grocers provide a product freshness/quality money-back guarantee, which certainly helps with consumer adoption.

So where does this leave us – will online retailing take over the need for brick and mortar stores? The possibility is certainly on the horizon, though I do not think this paradigm shift will occur in the immediate future. There is an important social element to shopping and human/product interaction that online retailing has not been able to capture…at least not yet.

 


3 Comments

  1. Hollace Alspach

    Kayley, the question you posed is one that I think about often. Is there an end in sight to the brick and mortar store? Your last comment concerning the social aspect of shopping I think is the most compelling reason why brick and mortar stores are here to stay…at least for a long, long time. To paint a picture, imagine a family of four on a vacation to Chicago. Sure, their itinerary will most likely include the Shedd Aquarium, The Field Museum of Natural History, the Art Institute of Chicago, and the Museum of Science and Industry. They may even go to a showing at the Lyric Opera of Chicago, depending on the attention span of their children. But, I can almost guarantee an afternoon will be spent weaving in and out of the stores on Michigan Avenue. They will probably go into the Water Tower Place, and maybe even fight the throngs of tourists to get into the unique “foodlife” restaurant. And even knowing that they are paying a premium for their shopping excursion, plus the exorbitant Chicago sales tax, I feel they look at it as an experience and are fully content. This story could be replicated for almost any major city I imagine.

    However, that all being said, I think that certain brick and mortar stores will certainly have an advantage over others, particularly moving into the future where e-tailers bring staunch competition and advances that make shopping online even more encompassing and fulfilling (as you mentioned). The stores that I think will continue to fight it out and will continue to offer an in-store experience for their customers are ones that also have a strong online business. The benefits that you mentioned in your post for e-tailers are undeniable, such as vast product selection, low capital expenditures, and the ability to harness the economies of scale of a larger business (thinking logistics, shipping). I believe that these benefits will help the retailer maintain their storefronts and possibly even help them maintain them more efficiently as their business grows. Additionally, maintaining their storefronts will allow retailers to always “be of service” to their consumers and always on the top of their mind. This “marketing” could be invaluable when a loyal consumer decides to sit down and shop online vice going to the store.

    But, it will be quite interesting to see where brick and mortar stores are in 20, 30, and 40 years from now. I can only imagine the advances that will be made and the threat level that will be increased for those hard working brick and mortar stores!

  2. Edward Brady

    Kayley,
    I think this is a difficult issue for existing apparel retailers and must be on the minds of numerous executives – how much should they invest in their online offering? How seriously should they take the online competition? Should they scale back their physical store presence?

    Regarding the sizing and fit issue you raised, we might see more focus from retailers on repeat purchases and basic items that do not need trying on. This would obviously exclude a lot of fashion brands that are constantly updating their lines, but this fits in well with your next point that fashion advice as well as fitting is the one of the great benefits of being in a store and, as Hollace mentions, the “experience” of shopping is something that fashion or unique clothing retailers pride themselves on. It seems that many retailer’s sites are trying to use reviews to inform customers on fit or shape but this has not really taken off, probably because tastes and body sizes/shapes are so personal that people find it hard to trust an unknown source.

    So if websites are not specifically for driving large purchase volumes, what might be their purpose for certain clothing categories?

    Store/brand discovery. Part of the excitement of shopping online is the searching and discovery of new looks, names and deals. The retailer’s sites could be used to catch consumers’ attention, allow them to share content through pinterest, facebook etc and really shape the view of the brand.
    Driving shoppers into stores. If the shopping cart of potential purchase items (with approximate sizes) can be transmitted to the nearest store and will ready for trying on when the customer arrives, this may remove the hassle of the store experience and encourage greater spending. The retailer may even be able to operate a smaller store, with lower rent and operating costs, if fewer sizes or variations need to be display on the shop floor. Much like Bonobos.com (a trendy online men’s fashion store) opening “guideshops” to allow customers to try on clothes, but in this case they do not even allow customers to buy the items in the stores and sometimes visits are by appointment only. Even without strong integration between the online and offline shopping experience, retailers' website or social media site can be a way to communicate directly with customers and advertise new items or discounts.

    The final worry I see for brick and mortar retailers is the popularity of other online commerce and services. With books, music, games and electronics retail as well as holidays and even banking moving out of malls and city centers the remaining stores will inevitably see less foot traffic and may depend on destination shoppers.

  3. Valeria Chisca

    When I think about the future of retail, I don’t think of off-line, online and mobile as being mutually exclusive, an “or” type of question. To address your point that e-commerce has revolutionized the retail industry, I think that what digital technology in a broader sense did was to really transform the customer experience and path-to-purchase, not just the purchase itself. And from my point of view, this is the more critical change.

    I do strongly believe physical stores will remain the main way people will make purchases, as there are still specific needs that only the in-store experience can offer, such as wanting to see/ touch the item before purchasing it or wanting to get the product immediately, etc. The important emerging trend is the strong growth in off-line retail sales made as a result of some prior online research. Web and increasingly mobile-influenced sales are expected to be the fastest growing retail sales. This trend is bringing significant challenges to traditional off-line retailers, which now have to deal with showrooming or influence from external resources on its customers, who are increasingly using their smartphones to assist their shopping even in store.

    I think this is why the true winners of the futures will be those retailers able to really master an omni-channel strategy that will enable them to control the entire customer experience across the increasingly complex and fragment path-to-purchase. Online and mobile channels can be used by traditional retailers to gather valuable customer data along all touch-points and really increase customer engagement, which will ultimately represent a sustaining competitive advantage, not the product or price. Just to give one example of mobile app developed around the changing shopping experience: Shopkick – which introduced a gamification of shopping, its users earning “kicks” when they visit partner stores. This drives traffic into traditional stores and adds interactivity to the customer experience.