Is the "Bricks-and-Mortar" Retail Model Obsolete?
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Politics and Activism

Is the "Bricks-and-Mortar" Retail Model Obsolete?

Relevance of physical stores in the age of e-commerce

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Is the "Bricks-and-Mortar" Retail Model Obsolete?
Apple.com

The question of whether or not the Internet will render the “bricks-and-mortar” model of retailing obsolete has loomed large over retailers since the first secure retail transaction on the World Wide Web in 1994. With companies like Macy’s, Nordstrom, and Sears reporting declining revenue, it is only natural to question whether the correlation between low in-store traffic and the depressing sales pattern is reflective of a greater industry trend. (https://www.nytimes.com/2017/01/05/business/depart...) (http://www.businessinsider.com/declining-store-tra...) However, as retail giants close down stores and sell off brands in an attempt to remain afloat, companies like Amazon that built their customer base from e-commerce are building physical stores to expand their reach. Although a consumer behavior study (http://www.retaildive.com/news/hudsons-bay-ceo-onl...) shows that only 9.8% of all transactions are made through non-traditional retailing, the blurred line between digital-first and traditional retailers presents interesting information regarding the role of in-store experience in the age of online retail.

In November 2015, Amazon opened its first physical store in Seattle University Village. (http://www.wsj.com/articles/amazon-to-open-first-manhattan-bookstore-1483580781) In January 2017, it announced the opening of its fourth bookstore in New York City’s coveted mall The Shops at Columbus Circle. (http://time.com/4099690/amazon-books-bookstore/) In January 2016, Alibaba opened its first physical store in China. The expansion into bricks-and-mortar on the part of e-commerce companies is of material interest as their traditional counterparts are moving toward the opposite direction. By 2017, Macy’s will close down 100 of its existing 730 stores, and Sears will sell off its Craftsman brand to cope with declining sales. The simultaneous evacuation of traditional retailers from shopping malls and the opening of physical stores by e-commerce companies presents the latter with favorable prices in the retail property market, strengthening the case for expansion.

Having built up a brand image and reputation through their online platforms, e-commerce companies seek to unlock value by providing their customers with an integrated shopping experience. Opening physical stores not only allows e-commerce retailers to showcase more of their products to pique consumer interest, but also adds to their brand appeal as companies tailor the shopping experience to their customers’ needs. For “showrooming” (http://www.theatlantic.com/sponsored/pitney-bowes-...) customers who visit stores to check out products before purchasing online, digital purchasing platforms offered by e-commerce retailers make price comparison easier. For “webrooming” (http://www.theatlantic.com/sponsored/pitney-bowes-...) customers who browse products online before visiting physical stores to make their purchases, the pickup-in-store service offered by many e-commerce retailers expedites and streamlines customers’ shopping experience. Physical stores of e-commerce retailers enjoy perks like having data collected from its digital platforms readily available to inform managers the types and units of goods that individual stores should stock. (http://www.nytimes.com/2017/01/05/technology/amazo...) I As digital-first companies bear increasing resemblance to their traditional counterparts, the latter is forced to venture into the digital realm either through in-house software development or acquisitions in order to keep up with the competition. A prime example is Hudson’s Bay Company’s 2016 acquisition of Gilt Groupe. Through this acquisition, Hudson’s Bay is able to incorporate Gilt’s data-driven marketing and digital distribution platform across its other brands.

The convergence of e-commerce and traditional retailers produces a hybrid service provider: the omnichannel retailer. The omnichannel retailer sees the bricks-and-mortar experience as an integral part to its brand identity. It utilizes the in-store experience to engage its customers in new ways that build brand loyalty. Take Apple for example. Apple stores remain a major component in the Apple customer experience and an integral part to the business flow. In the stores, potential customers are offered the chance to test out devices and applications, often times with sales representatives that offer helpful comparisons between devices. With its San Francisco Union Square location, Apple rebrands its store as a hub for lay customers and developers alike. Interactive themed windows that line “The Avenue,” the 6K Video Wall in “The Forum,” and “The Plaza” that remain open to the public 24/7 are intended to bring together a community of artists, engineers, teachers, photographers, musicians, and gamers. “Genius Grove” and “The Boardroom” are both tactics to open up new business opportunities through customer engagement. (http://www.apple.com/pr/library/2016/05/19Apple-Un...) Apple stores serve as the cornerstone to the Apple experience, as customers who become inspired in store may be prompted to make online purchases, and vice versa.

E-commerce and in-store buying is slowing merging into one, inseparable revenue-generating machine. According to Gary Edwards, Chief Customer Officer of Empathica, “E-commerce and in-store buying have become so intertwined that in the consumer’s mind, they’re the same thing… it’s almost silly to try to pull them apart anymore.” Instead of the bricks-and-mortar model itself, it is the idea that in-store retail and online commerce are separate entities that is obsolete.


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