How to win the battle between physical stores and online shopping
Where should you put your time and effort when it comes to creating a new retail outlet?
It seems that weekly, and twice a week during the holidays, there is a new article discussing the demise of traditional brick-and-mortar commerce, or citing slower growth than expected in ecommerce. Most of these pieces focus on a single statistic – sales are up for ecommerce, sales are down for brick and mortar, and so forth.
But the relationship between traditional retail and online shopping is more complicated than a single number. Understanding why shoppers choose a specific channel for purchases can help businesses better address the needs of their customers.
Why consumers still shop at brick-and-mortar stores
If someone is telling you that brick and mortar is on the way out, just remember that 94 percent of all retail sales in the U.S. still take place in a physical store. With $3.9 trillion in annual sales, the 1.1 million brick-and-mortar retail locations across the country aren't going anywhere soon.
What makes a consumer choose to shop in a physical store? A survey by Retail Dive asked more than 1,400 consumers that question. It found the answer depended on age, gender and even location. Regardless of demographic, the biggest reason cited by those surveyed was the ability to see, feel and try out the item they were looking to purchase.
For women, this is the No. 1 driving factor for in-store shopping, especially for fashion items. Interestingly, this is also a significant driver for people over 65 and members of the millennial generation.
Another driver for shopping at a physical location is immediate gratification. For men, in particular, the ability to take an item home that day inspires them to venture out to make a purchase.
The least important element for most groups is getting help from a store associate. Having a person available to help isn't a significant draw to shop in a brick-and-mortar store. More important is the in-store experience, especially for shoppers under 35 and over 65. These demographics have more free time available and therefore enjoy the more social and experiential aspects of shopping.
Surprisingly, rural customers prefer physical stores to online shopping. Whether because logistics make deliveries and returns problematic or the physical distance to a store means shopping is a larger family event, 71 percent of those in rural areas prefer brick-and-mortar shopping.
Why consumers choose online shopping
While immediate gratification may drive consumers to a physical store, convenience is what frequently draws them to online shopping.
Being able to shop anytime, anywhere is a significant motivator that pushes the more than $294 billion in annual online sales. With this number expected to increase to $414 billion by 2018, the ability to shop at midnight or in your sweats is an important consideration for many shoppers.
Consumers also cite less "overhead" in an online shopping experience. When shopping, many stop to get a treat or a meal. Also, being at a physical store can lead to impulse purchases or shopping in stores that you wouldn't otherwise have gone to. The online experience allows consumers to be laser-focused on their intended purchases.
More and more consumers are also pointing to the hassle of shopping in a store, such as standing in line or dealing with crowds, as a reason they turn to an online retailer.
One area that can make or break the decision to buy online is shipping, both to and from the retailer. Consumers are more likely to buy from an etailer that offers free shipping and free returns.
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Where the two channels cross
There is a place in the middle where modern consumers use both brick-and-mortar stores and ecommerce to reach their goals.
Research is one of the largest crossovers between channels. For online retailers, this means that some of their visitors use their website to read reviews, compare prices and understand features of products they are looking to buy. This accounts for some of the $4 trillion worth of merchandise abandoned in online shopping carts in 2014 alone.
The flip side is the consumer practice of "showrooming." Shoppers go to stores to see what products are like in person and get a better understanding of the look, feel or fit of a product. These consumers then go online to purchase the item.
In-store shoppers also use their phones to check prices before making a purchase. Two-thirds of brick-and-mortar consumers will check prices for an item on their mobile devices before making a purchase in the store.
Leveraging the differences
So where does all this research leave a business that exists primarily in one channel or the other? It provides focus with your merchandising and marketing efforts to ensure you capture the attention of the right customer for the kind of store you are.
If you are a physical store, keep an eye on your prices. Your customers are already comparing you to online retailers. Know where you stand in comparison. If you're more expensive, make sure that you call out the benefits of buying from you, especially those that appeal to the reasons people shop in-store. Things like quick delivery of large items and easy returns may help justify your price.
If you're an online retailer, be sure your website's experience is geared toward finding items quickly and easily. While online shoppers may identify the ability to avoid impulse items as a reason they chose shopping online, it doesn't mean they are immune to it. Suggest complimentary items to the ones they are searching for. Also, have a plan in place to recapture some of that abandoned cart revenue. Emails triggered by abandoned carts can recapture as much as 29 percent of those sales.
Brick-and-mortar retail locations won't be disappearing anytime soon. What you can expect is that physical stores will evolve to better meet the needs of consumers who have the option of shopping online or in-store. To stay relevant, stores in both channels should understand the reasons consumers choose to shop with them, and then ensure that they cater to those consumer needs with their offerings, features and pricing.