E-commerce grows, but physical stores dominate retailing

The future of retailing

The future of retailing

Internet retailing continues to grow as technology sweeps the globe, a communications and commerce revolution unprecedented in human history, big news, gets lots of attention, exciting, scary, wow.

Or, maybe not so much.

A new report from a company called Timetrade pushes back against some of the hype and e-commerce love. The report notes that physical stores dominate retailing so thoroughly that calling it a mismatch is understating the case to the point of absurdity. And while e-commerce is expected to more than double by 2020 to about $550 billion, the money spent at stores will still be nine times what is spent on-line that year.

The Timetrade report is based on in-depth survey of 1,029 consumers about their shopping patterns and motivations. While the limited sample hardly qualifies it as hard research, the report does make a number of interesting points related to on-line versus bricks-and-mortar.

Some highlights:

  • 87% of consumers say they plan to shop in physical stores in 2015 at least as often as in 2014.
  • 85% say they go into stores to “touch and feel things.”
  • 71% say they would prefer to shop in Amazon’s physical store versus Amazon.com.
  • 65% report that if an item they want is available online or in a nearby store, they prefer to shop in the store.
  • Mobile shopping is cited as a trend, but when consumers are looking to buy something, just 13% use a mobile device to do so. Most use mobile to browse, research products, compare prices, and then look for the nearest store location.
  • Nearly 90% of respondents are more likely to buy when helped by a knowledgeable staff member, and 50% value the expertise of sales associates.
  • 63% say that if an item is the same price at four different retailers, they decide where to shop based on the overall customer experience they have.
  • If a knowledgeable sales associate recommends items the customer may need based on what they know about the customer, 64% said they would leave the store much more satisfied.

The authors believe that retail is seeing a paradigm shift in consumer behavior. Consumers are now more often doing their shopping or discovery online, then going into the store for final purchase decisions. Leading retailers are aware of this change, and will support it by accommodating the customer’s end-to-end journey across multiple channels that they control.

The fact that e-tailers such as amazon are opening retail stores gives some credence to the importance of physical stores.

Amazon and others “are vertically integrating stores to the physical realm because they understand that the personalized part of shopping … is very important to consumers, and the in-store experience allows for such opportunity,” the report says. This is especially important for highly personalized goods. An example given is glasses, but it could equally apply to bicycles.

“Amazon is a perfect example of the notion of retail convergence, which is the converging of web and physical retailing,” the report continues. “The main driver for retail convergence is that purchase behavior has changed. Consumers are now more educated and now view the in-store experience as the final buying decision point.”

The key for stores is the quality of in-store staff. “Store managers and store associates must have the right knowledge to help these educated consumers with their final buying decisions,” the report continues. “How store employees handle in-store behavior is more crucial than ever as consumers will take their business elsewhere.” The survey shows that 60% will buy more than originally planned if they genuinely like the sales associate. 50% say they value smart recommendations from a sales associate.

“Retailers are realizing more and more that the key to superior customer service is personalization,” the report says. “This means knowing the customer and being able to anticipate their wants and needs, and in the case of retail, being able to anticipate their purchase behaviors and give them the appropriate help.”

While on-line sellers continue to gather and use consumer information to build an apparent closer relationship with their customers, on-line, the report points out that the best opportunity for a relationship lies in a personal interaction, “a highly personalized in-store experience with a knowledgeable associate is what leads a lasting impression and creates brand loyalty.”

The consumer’s path to purchase is also examined, described as the first touch point of discovery (a web site for example), followed by an in-store visit, the interaction with the store associate, and then the final purchase.

“The key element of the path to purchase is being driven into the store,” the report notes. Staff members become the key to guiding the purchase phase, followed by the post-purchase phase where the retailer can use tools to measure customer experience and follow up to create loyalty and return visits.

The report quotes Mike Moriarty of A.T. Kearney, “The boom in e-commerce has brought challenges. Both brick-and-mortar leaders and major pure-play on-line retailers are learning that the future of the industry is not merely on-line, but rather in creative omnichannel offerings that link online and physical shopping.”

Sheryl Kingstone, of 451 Research, notes, “The industry needs to transition from a merchandising point of view to a customer-centric point of view. The shopping journey has changed more in the last five years than it did over the past 150 years. As a result, there can no longer be a divide between digital and brick-and-mortar. It’s important to meet the new consumer behaviors and expectations that doesn’t think among organizational silos still rampant in today’s retail industry … it’s not about channel, but content; whether that be an app, mobile web, e-commerce or store. The entire company owns the customer journey, not the channel.”

3 thoughts on “E-commerce grows, but physical stores dominate retailing

  1. I am concerned that the nature of the Timetrade survey and the conclusions being drawn are apples and oranges.

    The survey seems like a sentiment survey, which is far from scientific when it comes to predicting actual business volume per retail channel. Yet, the tone of this blog is “Sorry, false alarm, no fire here folks. Brick-and-mortar SMB retail is healthy and unthreatened.” Are we saying that the mountains of hard data showing main street contraction has suddenly been overcome by a sentiment survey, conducted by a company that how many of us has heard of?

    We are missing a big opportunity, if we are going to use this sentiment survey, to send the appropriate message to the marketplace: “Hey brands, your customers are telling you that brick-and-mortar SMB retail is important to them, or that they would like it to be, yet if you keep underselling your brand through channels that brick-and-mortar cannot compete with on price, then brick-and-mortar SMBs will continue to contract and disappear.”

    The million dollar question then becomes, as main street contracts, so too will your customer’s interest in your brand and its products??

    Swing and a miss, here.

    • Jeff, I disagree that this piece suggests all is well with Main Street retailing. The numbers cited support continued growth in e-commerce, and this is from the U.S, Commerce Department, not a sentiment survey. It does suggest continuing consumer interest in physical retail stores. It does not suggest that business as usual is an effective strategy. It does suggest that using on-line tools and understanding evolving consumer behavior are aspects of pursuing the business opportunity to understand and serve customers better. Continued interest in physical retailing should also be a message to brands that if they think distribution that favors e-commerce is a good idea, they are ignoring consumer sentiment. I agree with you that physical stores are facing huge challenges. I don’t think this report suggests otherwise.

  2. I did not know about the bike industry but for bike baskets I think time to time ecommerce starting to dominate. FYI, I am bike basket producer from Indonesia. We make rattan bike basket for big name in Europe.

    They are now very serious build ecommerce for bicycle accessories. Some years ago, they put the marketing cost on exhibition.

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