Online Shopping: The Impact on Brick & Mortar Set-up

Given the widespread use of online shopping platforms and rampant innovation of mobile applications, the common belief is that the retail stores are perhaps nearing their inevitable end. Almost every major retailer is investing heavily in e-commerce and many of them are even closing their physical stores as significantly larger numbers of consumers are continuously shifting to the online platform.

Moreover, even for the retailer having an online store makes more money sense than the regular brick and mortar store. Some are even doing away with an online website and pretty comfortable about reducing overhead costs even further by shifting their functions to a mobile application platform.


2015 Sales Revenue Analysis

In fact, the 2015 Cyber Monday sales bettered estimates and topped $30 million in US alone. This of course created a new record for revenue collected on a single day of online sales. The Adobe’s Digital Index recorded a massive 16% jump in total online sales on Cyber Monday on a year on year basis. This is significantly higher than the 12% rise that was predicted and anticipated. Further number crunching would reveal that the five-day period starting on Thanksgiving totaled more than $11 billion in online sales, close to 3% more than the expected $10.85 billion and 17% higher on a Year on Year basis. Mobile sales too reached record levels in online spending at $799 million this year.

These results no doubt serve as further evidence that buyers are increasingly favoring online shopping destinations and digital devices are getting preference over physical stores. Though you can still argue that even in US online sales despite these startling numbers comprise of little more than 10% of the total sales and bricks-and-mortar locations continue to generate higher revenues, the winds of change have been set well in motion and it is now a matter of time before they overtake the others.

What’s Driving Customers?

So what’s driving customers to these online platforms? Experts believe that there are three fundamental catalysts that can be identified.

  • Pricing: The transparent pricing and the easy comparison option serve as a primary reason for attracting increasing traffic. For example, if you are buying some trendy T-shirts or jeans you are no longer limited to just a few brands but a much larger choice. You even have websites like Static Ice, Askmebaazar and Shopbot which aggregate pricing from various retailers and display them sorted by price. The competition compels sellers to keep pricing on the low end of the scale
  •  Convenience: The whole idea of shopping at your convenience from any location and at whatever time is a big fillip. In today’s world most of us are scampering against deadline and in that scenario this is like an Oasis of comfort which does not restrict access based on time.
  • Range: Given the absence of any physical boundaries or need to physically haul products into the store before showcasing to the buyers has automatically translated into a significantly wider range. Now the seller can directly send the product from the warehouse to the customer without incurring any other cost in between. 

What This Means for Retailers?

This obviously means that warning bells have already been sounded for the retailers and it is time for them to take some constructive action. Retailers are aware of this fast changing scenario and many have already started making adjustments including

  • Balancing in-store pick-up of online orders
  • Taking returns in-store of orders web orders by customers
  • Increasing customers’ lifetime value
  • Creating higher margins through reduced markdowns of stuck stock

Not just that there is also an increased initiative towards enhancing the store experience for the customers. It is no longer about greeting customers and showing them the wares. Customers are increasingly pampered in the store in house hospitality initiatives and product exhibition in a way that they cherish going back to the store for that experience more than the product they are buying.

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What’s In Store for Future?

As the shoppers’ digital engagement continues to rise and the visits to the brick and mortar stores keep reducing, the retail stores globally need to look at ways of integrating the various channels of operation and focus on broader benefits and a comprehensive customer satisfaction proposition.

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