It’s hard to overestimate how big 2020 was for e-commerce. Consumers spent more than $ 860 billion online at US merchants, up 44% from 2019. It was the largest year-over-year growth in e-commerce in at least twenty years and nearly three times the 15.1% growth rate from 2018 to 2019.
With e-commerce now accounting for more than 20% of total US retail sales, it is clear that online is an important channel in all industries. However, that by no means means physical store fronts are on the way.
In the pre-pandemic period, we saw many companies starting out as pure e-commerce businesses, investing in physical stores to complement their online businesses. Probably the most notable brand was Amazon, the world’s largest online retailer.
Amazon’s first serious foray into personal retailing began in 2017 when the e-commerce giant bought high-end grocery chain Whole Foods for a staggering $ 13.7 billion. The move gave Amazon an instant offline footprint of 460 stores in the US, UK and Canada and caused shock waves across the industry.
In the following year, Amazon opened the first location for Amazon Go, a checkout-less stationary convenience store concept, in Seattle. Since then, the company has opened 26 additional stores in Washington, California, Illinois and New York. The first international Amazon Go outpost opened in London just earlier this month.
In addition to Amazon Go, Amazon has invested in several other storefront concepts including Amazon Books, Amazon 4-Star, Amazon Fresh, Amazon Pop Up, and Amazon Go Grocery.
Other former online-only brands that have made their way into physical stores include Warby Parker (prescription glasses and sunglasses), Casper (mattresses), Peloton (personal fitness), Allbirds (shoes), and several men’s clothing retailers like Bonobos, Indochino, and Untuckit
So why did all of these ecommerce brands choose to develop a presence in the real world? The short answer: It makes very good business sense, both in terms of increasing customer appeal and as a means of increasing customer spending potential.
Even at the height of the pandemic during last year’s Christmas season, walk-in customers in the branches were still around 40% of the previous year’s figures. Despite ongoing pandemic concerns, customers continue to prioritize shopping in physical locations, and as restrictions related to COVID-19 gradually ease, we expect this trend to continue to accelerate.
Keep in mind that four out of five retail dollars are still spent in-store, which means that despite the explosive growth of e-commerce, the majority of shoppers still enjoy a tactile shopping experience. Whether trying on an item of clothing, lying on a mattress to see if it’s firm enough, or interacting with an electronic device to try out its functions, elements of the in-store shopping experience cannot be replicated online to the same extent as real-time tangibility . In fact, 82% of shoppers say that in-person interaction with a product increases the likelihood of purchase.
In-person customer service is another benefit of shopping in a physical store. Good salespeople can answer questions about products, explain functions and make recommendations more individually. And of course, we can’t ignore the importance of instant gratification, where buyers can bring their purchase home the same day and ultimately enjoy their merchandise right away.
A physical storefront also provides an additional layer of credibility for customers who would otherwise be skeptical of shopping online from an ecommerce brand. Consumers, especially those who may not be familiar with a brand, are more likely to feel more reassured about a purchase when they can make it in person. It is also worth mentioning that having a physical presence, especially in a high-traffic area, can increase brand awareness tremendously.
Research has consistently shown that consumers spend more money shopping in person than they do online. A study found that more than 70% of customers in stores spend more than $ 50 and more than a third spend more than $ 100. Compare that to just 54% of online shoppers spending more than $ 50 and a comparatively paltry 21% who spend more than $ 100.
The same study also came to the conclusion that impulse purchases are also significantly higher with personal customers: 11% more men and 12% more women stated that they would rather add their shopping carts spontaneously in a store.
In reality, online or offline shopping is not an either / or offer for consumers. Remember that 73% of customers If you are dealing with multiple channels before buying or entering a store, it would be more accurate to say that online and offline are two paths on the same converging customer journey.
Having established this fact, it is imperative that merchants take a holistic view of their customers. Still, many retail companies have split their sales, marketing, and even operations into separate online and offline teams. The challenge with this structure is that it creates internal competition for the same customers and puts an inefficient kink in your marketing funnel.
The retail industry has been moving towards an omnichannel approach for some time. While e-commerce has seen tremendous growth over the past 10 years as brick-and-mortar businesses have introduced online storefronts, we’re also seeing the opposite: a number of online businesses opening brick-and-mortar storefronts.
As more consumers return to physical stores and new technology allows retailers to identify and follow their most valuable customers online and offline, we are likely to see more retailers take an integrated approach to e-commerce and brick-and-mortar products -and- Mortar parts of their shops.
John Kelly is the CEO of Zenreach.
