by Tom Murray -- March 18, 2014
Once upon a time, it was all too common to read comments from hip and with-it e-leaders expressing a form of paternalistic disdain for the fuddy-duddy brick and mortar model. In this view, retail stores were considered to be passé, dinosaurs where your Uncle Harold or less-fortunate high-school classmates were doomed to work, and places where only those cursed with slow bandwidth and a sub-optimized appreciation for data-driven decision-making shopped.
One suspects that the motivation behind this viewpoint was driven in part by the personal aversion that many of these e-leaders held towards face-to-face consumerism. As an early Amazon television spot aptly summarized, given the opportunity to shop online in your underwear at home, why on earth would you go to a physical store, with its teeming masses, chaotic parking lots, disinterested retail workforce, and where the only “screen” involved was the one someone’s kid laid down (at your expense) to clear mom’s access to the 50% off table.
As resonant as these images were, to those of us with a less Darwinian view of consumer behavior, the idea that online shopping could fully replace an in-store shopping experience always seemed short-sighted.
The liabilities of retail physical locations are well-documented and can be easily found discussed elsewhere. What is less commonly articulated is the compelling and ongoing value of shopping in a store or mall, advantages that make the prediction of its demise at the hands of Web 2.0, 3.0 or even 7.0 appear “greatly exaggerated” (to borrow from Twain). The first of these values is rooted in sociology – like it or not, a still significant number of human beings view the opportunity to spend time interacting over the transaction of goods as a positive and necessary form of social engagement. Not surprisingly, we are still a long way off from losing the retail environment as a place to try and buy. Despite all of the recent growth, online purchases in the fourth quarter of 2013 still only accounted for 7.0% of overall retail sales. Granted the trend line is positive, but it seems reasonable to expect it to plateau at some point far less than 100% market share. (Source: US Census data, February 18, 2014).
Secondly, there are certain product categories that simply don’t lend themselves fully to the online experience. Until touch, feel, taste can be integrated into the online experience, e-tailing – as powerful and dynamic as it has become – will remain 3 senses short of a fully enabled in-store experience. And while it is true that for commodity products, two senses may be enough, it is hard to imagine more specialized products -- where the fully enabled panoply of human senses is an advantage and when sold in the right manner -- losing ground fully to a online shopping experience that may offer more informative depth, but at the cost of a reduction in sensory breadth.
A final advantage of the in-store experience lies in what I will call the advantage of presence. Whether it is your store’s ability to act as a physical affirmation of the brand or in a more utilitarian role as a pick-up destination (see my colleague Leah Lansberry Austin’s recent post), you don't have to be Olivia Newton-John to understand there are distinct advantages to getting physical. It’s why we fly home for weddings, rather than simply join via Skype -- being there still matters. To Apple’s credit, the development of a brand-defining destination location always appeared to me to be one of their most overlooked innovations. By choosing to deliberately reassign advertising budget dollars to store development – in effect, admitting that a great store is a billboard – they redrew how future physical store assets might be viewed.
Of course, the fact that there are advantages inherent to the in-store experience does not guarantee their successful execution. The strategic challenge facing any retail executive is in how to distinguish the effects of poor execution from more substantive shifts in consumer behavior or taste. For online leaders light on traditional retail experience and possessed with an abundance of enthusiasm for the potential of the new medium, it is understandable that the brick and mortar model was not viewed through a lens recognizing its potential, but rather on the basis of past, pre-internet performance.
The good news is that we appear to be entering a growing era of rediscovery by many of these same technology leaders for the potential of a well-integrated brick and mortar strategy within their own customer engagement models. The success of Apple has served as a good initial example, and has been followed up by comparative store openings by Microsoft, as well as rumored efforts by Amazon and, now, Google. How these companies define the value of this strategy varies: some view their new store strategy as a true retail opportunity; others as primarily a brand play.
Being good at technology does not make you good at physical retail (i.e. the ill-fated Homegrocer.com, Ron Johnson’s post-Apple fortunes as JC Penney CEO). However, a good collaborative, non-presumptive give and take between the two models could lead to some innovations of value for customers. This is important, because the consumer is in many respects way ahead of the industry, already weaving a seamless harmony between online and in-store shopping experiences that is bounded only by their own inclinations and their ability to properly set a screen.