Why Physical Store are Critical

For the past decade conventional wisdom was that online is going to replace offline retail. Companies have spent millions of dollars building websites, mobile apps and online marketing teams in an effort to stay ahead of the curve.  Now it seems that curve has become a U-turn.

“The future for eCommerce is bricks & mortar. Online vs. physical store sales is not a zero-sum game,” said Ashok Jayaraman, who founded Fashion-Disruptors.com after spending nine years working for the Adidas Group, helping them to adapt to the fast changing fashion industry.

The buzz from marketing ‘gurus’ is “Millennial do all of their shopping online, so we have to be online to connect with this next generation of consumers,” or “people spend all their time on their smart phones, so we have to have an app in order to stay relevant.” However, this consumer ‘avatar’ often doesn't reflect real consumers.  

There’s a lot less shopping online than the media would have you believe. According to research by real estate firm CBRE, most Millennials prefer to shop in physical stores.  Yes, they shop online, but only physical retail can provide them with the experiences and social elements they crave. ‘Tangibility’ and ‘experience’ are listed as the top two reasons Millennials visit physical stores, according to CBRE.

Research from TimeTrade Research shows that 85 percent of consumers say they prefer to shop in physical stores, and if given the opportunity, 71 percent said they would even prefer to shop at an Amazon [physical] store.

 

Connect with the Consumer

Unlike online, which has no barrier to entry, offline limits the playing field and enables retailers to create unique selling environments.

“Successful brands are able to create compelling products and stories through personalized experiences that leave lasting impressions. This cannot be achieved by online alone ” Mr. Jayaraman told Inside Fashion.  A panel discussion at the recent APLF fair in Hong Kong focused on whether new technology is going bring customers back to store or keep them at home. Interestingly, at the panel participants agreed that the new direction is to develop IT solutions to enhance the in-store experience.

“There are many available tools for retailers to personalize the customer journey. Retailers should use new technology to enhance the customer experience, not limit it to browsing and clicking on their computer,” said Claude Eric Paquin, President, French Federation of Footwear.

He pointed out that smart retailers are using new technology as a way to draw customers to their shop instead.  For example, Eram uses 3-D printing technology to offer on-site customization so consumers get something unique by visiting the physical shop.

 

 

Offline is the Key

Fashion retailers may still think online is the way to the future, but many of the most successful online players are seeing it differently. Some of the world’s biggest online players realize that the online market is already over saturated and that future growth - and the real money - is offline. In the past few years, we’ve seen an increasing number of online retailers set up physical/offline distribution channels.

In February, China’s e-commerce giant, Alibaba Group, formed a strategic partnership with brick-and-mortar retailer Bailian Group. The deal underscores the importance of traditional retailing.  Bailian Group operates more than 4700 supermarkets, convenience stores, and department stores.

Earlier this year Alibaba said it would team up with the founder of China’s Intime Retail (Group) Co. to take the Hong Kong-listed department store private. It also has a stake in Suning Commerce Group Co., a large Chinese electronics retail chain.

Similarly, China’s second largest e-commerce platform, JD.com also plans to expand its offline footprint. According to an interview with its CEO Liu Qiangdong in April, JD.com is going to open a tens of thousands of JD convenience stores across China in the next five year, with half of them located in rural areas. The owners/franchisees of the stores could order goods, including consumer electronics, home appliances, clothing and home furnishings through JD’s application software. JD will provide the logistics and distribution to the stores.

According to JD.com, the penetration rate of e-commerce in small cities is still relatively low, in contrast convenience store play a vital role in local retail. Statistics from international consultancy Kantar Retail showed there are nearly 7 million convenience stores in the China market, which account for 40 percent of shipments among all retail channels. Establishing offline stores will help JD reach more of thee consumers

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