'Brick-and-Click': The Future of Stores vs. Online
In a global market currently populated by over 800,000 online outlets, the world of e-commerce has become something of a battlefield, with brands competing with each other for hits, clicks, and digital transactions.
To further complicate the lives of e-tailers, there's been a resurgence in the fortunes of more traditional bricks-and-mortar retail outlets. In its 2017 ‘State of the Merchant Report’ ecommerce Fuel research suggests that in Europe and Canada, bricks and mortar retail is growing 50% faster than in the USA.
Pure-players in the online retail sector who were previously content to confine their activities to the digital realm are now branching out into the physical world with their own bricks and mortar showrooms to stay ahead.
It's a trend that's being fuelled by a number of factors – and one that will have far-reaching consequences in the continuing "Stores vs. Online" dispute.
The Omnichannel Imperative
Physical shopping culture never really went away, but e-tailers might be forgiven for thinking that it has, based on their previous dominance. Now, the successful re-emergence of stores has put e-commerce practitioners in Europe under increasing pressure to adopt an omnichannel approach to their sales and marketing, supply chain management, and customer fulfilment activities.
According to research conducted by Twenga Solutions in 2016, 73.5% of Europe's population of 821 million is made up of regular internet users – of which, over 60% made online purchases in 2015.
Clothing and sports-related products were most popular in a market predominantly led by the United Kingdom, where 81% of people bought commodities online in 2015. Denmark and Luxembourg followed, with 79% and 78% respectively. However, the online retail sector is still led by the UK, Germany and France, which collectively account for 81.5% of European sales.
The recent success of physical outlets poses a threat to this dominance, and e-tailers in Europe are now keen to round out their omnichannel profiles of digital catalogues, mobile apps, electronic payment systems, and "click-and-collect" based delivery. The next step is an actual presence on the streets – whether that be in the form of a showroom, or an additional touch point where customer transactions may be completed.
This hybrid mix of “brick-and-click" is intended to position e-commerce for more direct and proactive competition with physical retail – and to address some of the factors currently paying into the success of the bricks and mortar sector.
To help you figure out the next steps in click-and-collect for your business, Karen Gibson, Head of Logistics, Asda will be hosting a talk at eTail Fulfilment and Returns this year called ‘Taking click & collect to the next level to enhance the omni-channel experience, increase sales and reduce transportation costs’. We’ve also got John Ford, Head of Logistics and Delivery Experience at eBay, speaking on ‘The return of the store: As a result of digitalization and urbanization, how can we use our stores as the new warehouses?’. Download the agenda to see all the other great speakers, sessions and activities we’ve got planned for this year.
Physical & Tactile Drivers
Clothing, footwear, books, and home electronics have been the most stable drivers of Europe's online retail economy. But customer psychology and shopping preferences continue to influence the choice as to whether purchasing decisions are made online, or during visits to physical outlets.
The ability to see, touch, and try out new products before buying them is a major factor pushing consumers to physical stores, together with the opportunity to take purchased goods home with them immediately.
Research suggests that there's something of a gender split to this, with women tending to cite the tactile element (see, touch, try out) as their preference, while males tend to weigh in towards the immediate satisfaction of going away from a store with goods in hand.
Age is also a factor, with younger and older generation shoppers tending to favour the tactile experience (and younger consumers more inclined to want to take their goods away immediately), while middle generation shoppers tend more toward the online route.
Retail organisations in the e-commerce sector are therefore looking to open up bricks and mortar outlets of their own to capitalise on these trends.
For the e-tailer, knowing where to site a physical showroom or customer touch point is a critical factor in ensuring its success. With high streets already saturated with big-name stores from the traditional leaders in the bricks and mortar sector, and regional marketplaces lacking the high-profile visibility necessary for promoting a name brand, positioning the real estate for a "brick-and-click" strategy becomes something of a challenge.
Setting up stores at prominent "marquee" locations in selected cities and regional catchment areas is one approach – particularly for online retailers with brand recognition on a par with the big high street stores: e-tailers like Adidas, Alibaba, Office Depot, or LEGO for example.
Economies of scale may encourage some organisations to expand their physical reach to more locations – an approach that may capitalise on the tendency for shoppers to visit actual stores in rural areas or regions where internet coverage isn't quite so good.
Achieving a balance between price levels that can effectively compete with physical retail, and a pricing policy that achieves both positive returns and customer fulfilment across an e-tail operation's entire omnichannel supply chain is another challenge.
Two schools of thought weigh in here. On the one hand, there's been a tendency to offer price reductions to online customers as a way of attracting business away from the bricks and mortar alternative. But economic and logistic factors may make such prices untenable in a physical retail environment where overheads for packaging, delivery, equipment and staffing of stores, and rental/acquisition of the premises come into play.
On the other hand, having a consistent price level across all channels of the organisation's online and physical presence makes logical sense – and allows the customer to know exactly what they're getting, and what they should be paying for it.
Given the instantaneous nature of online payment transactions, customers might be forgiven for expecting instant gratification in other areas – such as immediate delivery of their goods. In practice, though, this may not turn out to be the case.
Next-day or two-day delivery still tends to be the ideal for online purchasing. In Europe, consumers in the Netherlands expect such levels of service, while shoppers in Spain represent the more patient end of the spectrum, with 25% of them willing to wait six working days for delivery.
Comparing these figures with the "buy now and take it away" ethic of physical retail, it's little wonder that some form of "brick-and-click" option is becoming a must for online retailers.
Returns policies also factor into the consumer culture of immediate gratification. Cost and hassle-free returns or exchanges of defective or deficient goods are the mark of successful physical retail – and online retailers looking to establish a viable "brick-and-click" presence will need to beef up their staffing, inventory, and supply chain delivery if they hope to compete with leading stores in this regard.
Make sure to download the eTail Fulfilment and Returns agenda to check out all of the great activities, speakers, and sessions planned for this year.