Kate Pioryshkina is Ecommerce Technology Observer at Iflexion
In-store and online retail have always stood in passive opposition to each other, but in the first quarter of 2019 this confrontation took an especially dramatic turn. Multiple mass media outlets published articles with agitated headlines like “It's Official: "Clicks" Have Topped "Bricks" (CBS News) or “Online Shopping Overtakes a Major Part of Retail for the First Time Ever” (CNBC), which proclaimed the final surrender of bricks to clicks.
In reality, the articles merely misinterpreted the recent US Commerce Department report stating that online sales across all categories surpassed the in-store sales for general merchandise (a segment that excludes apparel, food, beverages, and cars).
According to Statista, the ecommerce share in the global retail sales is increasing steadily. Yet, while in 2019 the clicks accounted for 14.1% of the total, their share is forecasted to reach only 22% by 2023. Hence, even with such dynamic growth rates, ecommerce is still far from leaving its physical-store counterpart in the dust. With the overall increase in sales, both online and offline retail are expected to grow, each at their own pace.
Still, this unsubstantial drama makes you wonder: what if instead of antagonizing two forms of commerce, we make the best of both? What if an average retailer opts for a digital channel while keeping and nurturing their offline channels?
Coming from the vaults of Iflexion, a specialized ecommerce development company, this article will focus on peculiar properties, advantages and pain points of online and offline retail, and how bringing these two worlds together can provide a new vector for global retail.
Modern customers’ attitude toward both online and offline retail is nothing short of complex and ambivalent. Consumer habits vary substantially and greatly depend on their age and what they shop for.
For example, generation Z customers prefer traditional in-store shopping mainly because it allows them to disconnect from the digital world. Interestingly enough, Millennials are not as enthusiastic about brick-and-mortar experience and make the majority of purchases online. Older generations – Gen Xers and Baby Boomers – have also been rather hooked on digital retail, and their contribution to ecommerce is as substantial as their children’s.
On top of that, the customers of today have grown prone to showrooming, or looking up the product in-store and then buying it at a lower price online. This behavior manifests throughout all generations.
Customer behavior, both online and offline, also varies from segment to segment: what is true for apparel is not necessarily the case for commoditized or electronics goods. Gardening tools might as well be easily bought online, while it’s always better to first try on an evening gown.
Financial services as well as TV, video and computing devices are most commonly bought online in the US, while consumer goods and clothes are bought predominantly in-store. However, AR-enhanced ecommerce is expected to substitute this need for touch-and-feel soon.
As for online retail, the convenience of shopping at any time of the day is recognized as a key differentiator: after all, not many physical stores can offer customers to shop from the comfort of their home.
Long delivery has until lately been a fly in the ointment for ecommerce. Back in 2015, more than a third of consumers acknowledged that shipping wait time was the most unpleasant part of the online shopping experience. Recently, Amazon and other big-box retailers decided to act on it and launched same-day and next-day delivery options. As of today, 40% of shipments in the US were received within two days.
Online retail, just like its offline counterpart, has grown overcrowded with competitors and therefore very costly in terms of marketing efforts. Both organic and paid traffic generation is turning into a battlefield for those who can afford investing more and more in digital marketing.
For search advertising, one is highly likely to bid with their keywords against ecommerce giants like Amazon and pay through the nose to get noticed. Although there are multiple marketing strategies aimed at helping a brand to stand out, they too require time and money – the money that the more cost-effective business model of ecommerce is supposed to spare store owners from.
At the same time, the burden of promotion does not elude brick-and-mortar owners either. Even more so, today they need to not only advertise through traditional media, but also invest in digital marketing. However, Google’s policy of balancing the giants and newcomers can play into the hands of in-store retailers that have just entered the digital advertising domain.
Businesses with physical locations can also benefit from Google Maps, especially if located in the city center or prime neighborhoods, and gain authority through My Business listings that showcase reviews, photos, and product availability in-store.
Online retail has always shown poorer conversions than its offline counterpart, around 2-3%. While this rate is impossible to evaluate accurately for brick-and-mortar stores due to their closed-off accountability, it is guesstimated to be times higher – from 20% to 30% depending on the sector.
The major reason for this disparity lies mostly in consumer psychology. It is anything but impossible to let go of the fancied item, especially if the customer has already held it in their hands or tried it on.
At the same time, online shopping cart is quite easy to abandon. Impulsive purchases that happen so often in stores are the equivalent of adding something to an online cart. But on the internet, the customer can take their time to reconsider hasty choices and choose not to close the deal.
Another substantial cause driving cart abandonment is high shipping costs, as well as unexpected fees and taxes that do not appear until the checkout page. Statista shows that in 2019, at least 40% of shoppers worldwide did not finalize their purchases for this reason.
It is believed that as digital retail channels are actively gaining momentum, more and more retailers should be shutting their brick-and-mortar stores and relocating their businesses online. But in reality, ecommerce has its downsides, so a transformation from bricks to clicks will not solve retailers’ problems entirely, but instead pose new challenges.
Adopting an omnichannel, or bricks-and-clicks, model appears to be the most viable way to strike a balance between the worlds of online and offline retail and reap the benefits of both forms of commerce. Such behemoths of retail as Target, Walmart, and Amazon have already tapped into this mixed model and report positive results in terms of traffic and sales so far.
What is more, the latest solutions for the integration of online and offline retail can bring this mixed strategy closer to the average business. And the retailers who resolve to ride the bricks-and-clicks wave will be able to bridge the gap between online and offline retail experience and gain a competitive edge in the rivalrous retail market.