What Does the Future Look Like for Brick-and-Mortar Stores and Online Retailers?

Physical Stores and E-commerce Must Continue to Evolve to Meet Unique Challenges

I am loath to go into a store—except a bookstore—ever since the rise of the mighty and wonderful Amazon. Amazon, my dear, dear friend, you have over 4,000 choices for doggie-waste bags! For me, personally, I don’t want to deal with the lines of people, or the limited stock, or (and this is my absolute biggest pet peeve about the in-store experience) the never-ending exhortations to get the store credit card or join its loyalty club. Ack!

There is much more to online shopping than merely Amazon. But it’s not as easy as you think to have a successful business online. And brick-and-mortar stores are still going strong, for a variety of reasons. So what are the various challenges that each faces? And what does the future hold?

A Physical Presence—for Online Retailers

In November 2015, Amazon opened its first brick-and-mortar bookstore. Strange, yes? Maybe not. As Mark Walsh wrote in the Guardian, “In the last few years, some 20 online companies in the US have launched a physical presence to better market their wares, forge closer customer relations, and yes, boost online traffic and sales.”

It is an expensive proposition to appear on the first page of a Google search

The key phrase in that quote is “physical presence.” Notice that it does not specifically mention the word store. Online retailers have begun embracing “guideshops,” which allow customers to come to a physical presence, try or test the products, and then make purchases online. These shops benefit customers “while minimizing real estate and other traditional retail costs,” according to Walsh.

Brick and mortar versus online ecommerce

For menswear-clothing company Bonobos, the concept is working. The average order size from the shops has been twice that of online, and it helped Bonobos beyond sales. “This supported our idea of using Bonobos.com as the place to fulfill orders, so we didn’t have to worry about stocking inventory in a location and we could focus more on the customer experience,” said Erin Ersenkal, chief revenue officer for Bonobos, in the Guardian story.

It’s Not Automatically Easy to Sell Online

And what about those brands that are trying to make their way online? It is much more difficult than merely throwing up a website and waiting for customers to find you.

“It’s very hard to launch a brand these days that’s just online-only. It’s an incredibly difficult and crowded e-commerce environment,” said Sucharita Mulpuru, a retail analyst at Forrester Research.

All these brands—nearly a million of them—trying to attract attention. And attracting attention is an expensive proposition itself, thanks to keyword bidding.

What is keyword bidding? It’s how much a brand is willing to pay for keywords that will appear in the result of a search. For instance, Walsh reported that Macy’s spent $6,400,000 and Nordstrom spent $4,000,000 “in paid search listings for the top 1,000 apparel-related keywords in the first quarter of 2015.” Obviously, it is an expensive proposition to appear on the first page of a Google search.

Online sales is easy?

To supplement this highly competitive sector of retail, brands are opening not only the previously mentioned guideshops but also pop-up shops and flagship stores. As Walsh wrote, “By opening physical stores, they aim to increase awareness and draw customers in a realm where the retail options aren’t infinite or influenced by an all-powerful gatekeeper. And for purveyors of tactile and personal products, like clothing, eyewear, and jewelry, selling stuff in person has an obvious appeal.”

Popular eyeglass brand Warby Parker has taken this approach. After selling exclusively online for three years, in 2013 it opened its flagship store, and now “has 20 stores nationwide, with plans to add another 20 this year.”

What Can Brick-and-Mortar Stores Do?

But while some brands’ stores are flourishing, others are struggling. Take perennial powerhouse Nike, for example. A March CNN Money story reported that “revenue was up just 5% in the quarter” and that “investors are particularly worried about sluggish sales in North America, which accounts for about 45% of the company’s overall revenue.”

According to Nike CEO Mark Parker, online retail is at least one factor for the shoe giant’s performance. The CNN Money story reported that “Parker said that ‘the economics of brick-and-mortar retail’ is one of the factors that ‘is driving a more promotional environment in the near term.’” He also said that “the retail landscape, particularly in the US, is not in a steady state.”

So what can to be done to help the brick-and-mortar store? George Georgallides, writing for Entrepreneur, listed four things stores can do to challenge online retailers:

  1. Use localized search-engine optimization to drive your online visitors to your physical stores.
  2. Build stronger customer relationships by beefing up social media marketing.
  3. Get more competitive with a robust marketing mix.
  4. Leverage reviews and testimonials to show customers how awesome you are.

Regarding No. 1, of course a store needs a website, but in addition to the bells and whistles that that entails, the website content needs to contain “relevant keywords, key phrases and localized information so that search engines can find your site and return it in the list of results to a consumer’s search query.” Stores need to be able to be found. And being found results in visits. And visits result in purchases.

“It’s very hard to launch a brand these days that’s just online-only. It’s an incredibly difficult and crowded e-commerce environment.”

Brick-and-mortar stores should be embracing social media. Having a Facebook page and maintaining one are two different things. How many times have you seen that a business hasn’t posted on its Facebook page in two years? That’s bad. Social media is a golden opportunity for stores. It’s a chance to engage and interact with customers, to give them a voice and create a conversation. It’s a chance to get out in front of any potential problems, and it’s a chance to turn customers into brand advocates. Social media is very powerful, and brick-and-mortar stores can use it to their—and their customers’—advantage. Think of the Maya Angelou quote: “People will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

We are now living in a digital world. That’s not exactly a news flash, but it is something stores should be realizing when they are putting together their marketing campaigns. They should be collecting data on customers. They should be using email campaigns. They should be giving customers a reason to return to the store.

White brick wall

No. 4 ties in with social media. If a customer says how great a store is, the store should share that comment for other customers to see. These posts are positive influences on a store, and they give customers a look into the store’s personality. On the flip side, if there is a negative comment, a store should engage the customer. This dialogue allows the store to be proactive and to mitigate the situation.

Living in a Material World

Even though everything is moving online, brick-and-mortar stores will always have one very important point in their favor: “We’re flesh-and-blood beings, living in a physical world.” Greg Hong wrote this in his January 2016 Entrepreneur story “Why Brick and Mortar Is Here to Stay.”

We are social creatures, and we seek interaction, and one of the ways this manifests itself is through shopping or other transactions (think getting a haircut or going out to eat). As Hong wrote, “People want authentic experiences, and very rarely is seeing a picture the same as being there in person.”

“People will forget what you said, people will forget what you did, but people will never forget how you made them feel.” —Maya Angelou.

And online shopping doesn’t allow customers to feel the merchandise, which is a big feature when comparing two items. And online most definitely does not allow us to indulge our need for instant gratification. Why wait two or more days for an item when we can have it right now?

With technology ever evolving, it is only natural that online retail will continue to grow, but brick-and-mortar stores aren’t going anywhere. In reference to a Pew Research Center study on e-commerce, U.S. News & World Report’s Andrew Soergel wrote, “Americans aren’t simply abandoning traditional in-store locations. For instance, 65 percent of online shoppers indicated they generally prefer buying from physical outlets if given the choice.”

But, according to Pew, what is foremost in customers’ minds? You got it. Price.

Setting the Right Price

Rafi Mohammed explained in the Harvard Business Review how stores should set prices: “Retailers should view their online and in-store channels as unique services, much like gas stations offering self-service and full-service options. Relatively higher prices can capture the premium that some customers place on purchasing in-store. Web prices can be lower to compete against aggressive e-tailers.” It is a disadvantage for different channels to have the same price structure for each entity, as they have different requirements.

And what about customers who ask for a store to match an online price? Retailers are usually concerned about disappointing these customers, but, as Mohammed noted, customers “choose what’s best for them” with “airlines (prices differ if booked online versus over the phone), gas stations (self- versus full-serve), and retail (regular versus outlet stores).” The point being that there are differences between brick-and-mortar retail and online retail, and an educated customer will realize this.

Fast Food

An area of retail that is definitely growing online is groceries. In March, Retail TouchPoints reported that 31 percent of US shoppers “are likely to order groceries online in 2017.” This is an increase of 63 percent over the previous year.

This development makes sense. Most people try to get in and out of the supermarket as quickly as possible. Anything that can ease this burden is welcome. Order online. Show up at your local supermarket 20 minutes later. Have your purchase brought to your car. Nice.

Britton Marketing & Design Group’s Dave Goode wrote more about online grocery shopping in the March 20 Digital Update.

Challenges Abound

Brick and mortars are safe, probably for a good long time, if they rise up and meet their challenges. And online retailers are growing in strength, but they, also, are not without their own challenges of being found.

So the eternal quest continues for customers, customers that are savvier—and more powerful, thanks to the internet—than ever.

Photos: Shutterstock

Chip Compton

Chip Compton

Chip Compton has written on a variety of marketing and design topics and personalities, including Stefan Sagmeister, female creative directors, and luxury brands. His work has appeared on “Get with the Confusion,” Medium, and Pop Matters.

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