Integrated online and physical retail

By February 9, 2012Ecommerce

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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  • The online/offline integration, is almost definitely the way forward.  There’s a limit to how much you can sample a product ‘virtually’, or through reviews, and recommendations online, and sooner or later, you need to see the product in physical form.  There is however that dance between doing all your research online, and wanting to go into a store, to actually take a look at the goods/items that you’re going to buy.  Within the more tech/geek communities, first mover advantages were translated into the kudos that comes with having the newest gadget first, but then also translated as opportunities for more like minded geeks and individuals to get their hands on the product, before deciding whether to buy the product or not.  As more people do their research, and go into stores better equipped with specific and detailed questions, the onus is going to be on the store staff to up their game in terms of product knowledge, and enhanced in store experience, for a customer to be converted from a visitor checking out a physical product to actually wanting to buy it right there and then in the store..

    It’s exciting to see how this trend will start to surface, and how the shopping/retail interface with consumers will need to adapt/evolve to continue to draw in the crowds both online and offline, as price is never going to be the only reason why people buy.

  • If by ‘shopping/retail interface’ you mean the instore experience, then I agree it will be very interesting. New store structures a la Apple and more brand direct to consumer will change the face of retail.