As each day goes by, it seems we are increasingly leaning on technology and digital media to connect, to communicate, and to learn about the world around us. On a daily basis, we are learning new ways to employ this exciting new technology to fulfill our needs and save time and money. One of our most fundamental needs, consumerism, is a large part of this digital revolution.
There are few things that we cannot procure digitally. We book hotel rooms and flights, pet sitting services, rental cars and equipment, and, to an ever-increasing degree, consumer goods. According to the US Census Bureau, total e-commerce sales for 2017 were estimated at $453.5 billion which is an increase of 16% from 2016 and e-commerce now accounts for 8.9% of total sales of retail goods in the United States.
This increase in digital consumerism has fueled debate as to what the future of physical “bricks ’n mortar” stores looks like. Many believe this move to digital procurement will continue unchecked and that our current retail building model will become irrelevant. Increasingly, however, retailers are beginning to understand the absolutely critical interplay between digital and physical presence. Omni-channel marketing and delivery are actually inextricably connected, and both the digital and physical retail markets are reliant upon one another.
Integration
As consumers, we are seamless in our online and offline experiences. We talk on the phone or in person but easily shift to text, email, or messaging services to interact with each other and with service providers. Retailers need to be that seamless as well. When we shop, sales associates need to be able to bridge the gap between supplies on hand and inventory available through online channels. When a type, size, or color is not available in store, the retailer needs to be able to smoothly shift to a “bricks to clicks” delivery model. Often the desired product is available with a one-day delivery time that fulfills the consumer expectations and minimizes return rates for merchandise that is not easily shopped for online. This enhances customer confidence in the store visit while maintaining the integrity of the online shopping experience. The two experiences then work hand-in-hand to ensure customer satisfaction.
Accountability
This is where things get really interesting. In a recent article in the January 30, 2018 edition of Forbes, Brent Franson of Euclid Retail Analytics makes a very compelling argument for bricks’n mortar stores. It all comes down to how we account for sales. Since the dawn of retail, we have always used the same metric for retail sales success: Year-over-Year Same Store Sales. Under this rubric, we have seen sales decline in bricks’n mortar stores while online sales have soared. The fact of the matter is that this is not actually true. in the same way that consumers look at their online purchases as a seamless extension of their online consumer experiences, retailers need to re-think how they account for their bricks’n mortar sales. When a bricks to clicks transaction occurs, typically the credit for the sale goes to the online side of the organization. This just isn’t accurate or faithful to the consumer experience. Target, Nordstrom, and Neiman Marcus all agree that 60% of physical store sales are influenced by the digital channel.
Often, especially with higher priced goods such as appliances and vehicles, the shopping research is done online with the purchase/fulfillment actually happening in a bricks’n mortar environment. How we account for this is actually critical to how we understand the interplay between the online and physical store experience. The consumer may sample or trial a product in-store but ultimately purchase the product online — frequently through the same retailer’s website. The in-store experience actually guides the purchase even if it is not ultimately made in the physical location. While Amazon has enjoyed the benefit of Best Buy paying the rent to be their showroom, Best Buy has learned to price match and immediately fulfill the consumer expectations.
The physical and online retailing presence is not seen by the consumer as being exclusive of each other; they are both part of an integrated whole. Retailers are increasingly becoming aware that when they close a physical location, they lose online sales as well within that very same geographic market area. Let that sink in… The consumer does not consider themselves an “online” or “physical” shopper. They are just consumers and it is not a question as to whether the money changes hands in the shopping mall or online- they simply expect the best deal possible for whatever they want to purchase.
Ultimately, the consumer is not concerned with the manner and method with which their behavior is measured. They will shop online, in a bricks’n mortar location, or some combination of the two retail formats. The consumer is primarily concerned with the best value and the best consumer experience and the fulfilment of those expectations is all that really matters. Retailers who remain “siloed-up” with a separately-managed online presence on one hand and a physical presence on the other will continue to be mystified at their sales experiences. They will not understand the clearly expressed dynamic between physical and online sales and they will continue to downsize their physical locations at the expense of their online presence and overall profitability.
Rob Tomlinson has been specializing in retail property sales and leasing with Cushman & Wakefield | PICOR since 2005. Experience with assemblages coupled with education in Urban Geography, Site Analysis, and Land Use Planning has helped him to add value to challenging sites. Reach Rob at 520.546.2757 or rtomlinson@blog.picor.com.
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