Etailers leap into Physical Retail: Have they gone crazy?

Posted by Harry Wong Harry Wong on Jul 13 2017

Amid the digital revolution, why are online retailers choosing to make the leap into physical retail? Despite the persistent coverage regarding brick-and-mortar retailing powerhouses rushing to catch-up and adapt to the new age with aggressive digital transformation strategies, online pure-plays (etailers) are looking in the other direction: leaping into the physical retail playground.

 

“It’s all about people, not platforms”.

 

Customers now don’t solely exist just online or offline - they exist, as we all do, in varying moments across different places and platforms. It is essential for modern business - young or established - to understand how to nurture relationships across these touchpoints.

Online retailers can enjoy fast growth and high revenue with relatively limited investment in comparison to their physical retail counterparts, which are hampered by business rates, rent and markets that impact their growth and scalability.

On the other hand, what bricks-and-mortar can do is to create a tangible, experiential environment to help drive visitors online, closing the gap between digital and physical - offering the engaging and connected experiences customers desire while simultaneously reducing the rent and rates burden that made online retailing so popular.

When online pure-play takes the leap into the physical, it’s essential that their strategic motivation is not forgotten. Increasing awareness and customer connection can only be achieved when the store is seen as a ‘destination’ or ‘attraction,’ giving its audience a desire and purpose to explore.

This approach shouldn’t simply seek to replicate the traditional physical retailing model; instead it must offer something new. Consumers want an immersive manifestation that is an extension the existing digital experience, which furthers their engagement as they continue interacting with the brand online.

 

Bricks-and-mortar remains as one of the most efficient marketing tools that emerging business can have, and stores are one of the tools that online pure-plays such as Amazon are starting to adopt to exploit these marketing opportunities.

 

Image by Grana

An example of this immersive, connected experience that blends the online/offline model is Grana, a contemporary fashion e-commerce brand from Hong Kong. Through its flagship bricks-and-mortar store dubbed “The Fitting Room” located in Mid-Levels, Hong Kong - a hip, trendy and mid-scale district - Grana is able to offer an environment that brings a digital experience into a physical space. ‘The Fitting Room’ represents a core part of their strategy, letting customers try on clothing before committing to making a purchase via the web using in-store computers. No "takeaway" purchases can be made in-store, but orders placed using the computers can be delivered to home or for store collection the next day.

Digital commerce is the etailers’ bread and butter. The opportunities it presents for huge revenue with limited overhead are vast. The number of people purchasing online, for example, continues to rise, and online clothing sales have weathered economic uncertainty reaching £133 billion in 2016.

Whilst technology has given brands greater and more meaningful connections with consumers, personalising the online experience is still one of the greatest challenges, and it’s likely to remain an insurmountable challenge in the near term.

For customers, bricks-and-mortar stores provide an environment and experience that online cannot with the added advantage for the brand and its representatives to engage and analyse customer style and behaviour, and influence purchase. Online, brands have limited visibility to the context to a customer’s decision-making process, with limited insight into buying motivation. Whilst context can be generated by aggregating data, this is a process that takes both time and investment in order to be meaningful, or risks being disenchanting for the customer if they are directly and immersively involved in the gathering process.

 

The question for pure online retailers then becomes how to use personalisation without exhausting the customer or segmenting the market too broadly.

 

As opportunities online expand, so too do the number of online retailers. How can online pure-play stand apart from each other? Storytelling through content across different touchpoints, including traditional bricks-and-mortar is key.

As e-commerce continues to evolve, there is no doubt that using artificial intelligence will be an important area of exploration and online pure-plays like Zalora and Modern Citizen will need this to stay relevant and lean into the digital future. Ongoing investment in technology and remaining agile will always be key to online retailers but they would be wise not to forget that they are engaging with people, not platforms. Sometimes people need to experience the physical not just the virtual.

 

Further Reading:

“Why Stores Are The Future of Retail” - Forbes

“The Future of Modern Commerce” - Marketing Land

“Grana Fitting Room” - South China Morning Post

“Why Online Retailers Are Opening Physical Stores?” - DMN

Topics: Insights

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