Some commentators are concerned about the state of brick-and-mortar retail. But even though online shopping is increasing, we can’t lose sight of the fact that retail physical stores are still really useful.
Why? Because of the variety of merchandise that shoppers can buy. “The world has moved to a smaller number of high-quality stores like Costco, Aldi, or Walmart, but these are still products that people want to see, touch, smell, and feel before making a purchase,” says Martha Hurtubise, director of industry practice at the Office of the CEO of ECommerce & Retail Management at PriceWaterhouseCoopers. “Amazon ships a nice assortment of physical products. People just want to see what that feels like.”
To a certain extent, the rise of e-commerce has led to the discovery of new ways to sell to customers. “We’re seeing increased opportunities for physical- and virtual-store hybrids,” Hurtubise says. “Think Nordstrom and Target combining the two.” Nordstrom is testing the novel idea of turning its store location into a showroom where people can try on clothing—and just about anything else—before buying it online. It’s an interesting idea. It also echoes a familiar offer from Amazon: “Get 30 percent off everything with this Prime Day discount code!”
These shopping hybrids are not without their challenges. One potentially harmful trend is the rapid expansion of online fashion retailers. While these companies often lack specific physical locations, they often have a massive inventory of clothing and more importantly, a fast-track system for shipping new and damaged inventory from retailers to Amazon warehouses and then out to customers. This often means that online retailers can often service many more people who purchase from their sites than one might think. “Stores are seeing a much faster return rate, and are shipping much less back to the retailer,” says Hurtubise. But, she adds, “the problems are usually only about the size of the store, not the size of the merchandise.”
To some extent, the current market structure is often where it should be, Hurtubise says. The growth of omnichannel retail has led to increased market share for Amazon, the lowest prices on the market, and low returns for retailers. There is a role for all retailers, but that role is increasingly becoming more problematic. The market distribution is highly competitive. The competition drives prices to the lowest levels. “One way to think about this is as a global arms race for who can improve their merchandising and fill-in lines,” says Hurtubise. There are losers in the process—indeed, it can seem that way for every major retailer these days—but there are winners, as well. “While online ‘explosion’ is good for some retailers, not all of those winners are in these brick-and-mortar locations,” she says.
And, in general, there is still no easy way to quantify exactly how many people choose to shop online. Online shopping will continue to be an important growth mode for a retailer for years to come. At the same time, it may be worth looking at other market sectors to uncover which businesses have adapted the best and can profit in this changing world. “We’ve seen very strong trends in e-commerce over the last several years,” says Hurtubise. “Not every retail strategy needs to be based on a presence in the physical store.”