Integrated online and physical retail

By February 9, 2012 2 Comments

The main story of retail over the last fifteen years has been the rise of ecommerce and the transfer of market share to pure online players like Amazon, Net-a-Porter, ASOS, Wiggle, and BlueNile. I think the most successful companies over the next ten years will have integrated online and offline strategies.

It is early to call exactly how an integrated online-physical offering will look, but the directional trend is becoming clear. The online players are starting to move offline. Net-a-Porter had a pop-up shop last summer, and is rumoured to be planning a permanent physical presence and now Amazon is rumoured to be have similar plans. Meanwhile, traditional retailers are integrating their offline and online strategies with in-store pick up and returns (Argos was first to do this in the UK) and by encouraging people to use the web to research products and check prices whilst in-store (take a look in Dixons next time you are in an airport).

It is easy to understand the moves by the physical retailers. They are making the obvious competitive responses to their pure online competitors, who are buy and large succeeding against both the offline and online offerings of traditional retailers. Pick-ups and returns to physical stores improve the customer experience and are a point of differentiation from their online competitors, and encouraging people to do research in-store is a recognition of what was already happening and helps get people to a purchase decision whilst they are still on premise.

The move by the online players into the physical world is more nascent, but is primarily being driven by branding. Having a physical presence lends solidity to a brand, particularly for less tech savvy sections of the population, and that is critical as online retailers look to expand their reach to all available customer segments. Techcrunch has a good analysis of the reasons why Amazon would open a physical store. This is the money quote:

The Kindle was Amazon incarnate, a way for Amazon to bring its online presence into the real world. A physical Kindle store – one that exists in a mall or popular area, even for a short period – is like the third coming. It’s basically a chance for Amazon to grab every else they have missed during the initial run up in Kindle popularity. We’re talking older folks, luddites, grumps, and folks who claim that “reading it in paper” is better. To have them walk up to a display of working Kindles, newly minted and displaying the latest Stephen King book, is the only way Amazon will convince them that going digital is the only way to go.

It will be interesting to see how this pans out. It could be that integrated online-offline strategies allow traditional retailers to regain some ground. They have been operating non-integrated online and offline businesses for some time and it will be easier for them to develop compelling integrated offerings than it will be for the pure online players to open up physical stores.

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