Stephanie Clifford of the New York Times reports on the growing trend of retailers using their brick-and-mortar stores to gain an advantage over online-only shops like Amazon, taking advantage of easier delivery, more comforting payment mechanisms, and the ability to browse:
In April, Walmart began allowing shoppers to order merchandise online and pay for it with cash at a store when they picked it up.
Even without the cash option, in the six years since Walmart has allowed online items to be picked up in stores, customer demand has been high. More than half of the sales from Walmart.com are now picked up at Walmart stores, Mr. Anderson said.
With the cash option, Walmart was trying to appeal to customers who did not have bank accounts or credit cards. Walmart says the majority of in-store purchases are made with cash or debit cards, and that about 15 percent are made with credit cards.
Retailers have varying motivations for doing this. Clifford discusses the Container Store, an American chain that sells containers (brand simplicity, there):
The Container Store has also been pushing a drive-through service, a reflection of its altered approach to online shopping. Initially, executives viewed the pick-up-in-store feature as a way to draw consumers into stores and encourage customers to buy more. Now, they would rather close the deal on an online order as soon as possible so shoppers do not go elsewhere or forgo the merchandise altogether.
The piece ends with Alison Jatlow Levy, a retail consultant at management consultants Kurt Salmon predicting a convergence, with physical stores moving more and more towards a “showroom” model, and online-only retailers opening stores for the same purpose.
That may be the case in the medium-term, as the two styles of retailing meet at an equilibrium, but it seems unlikely to last. A physical location is a tremendous fixed cost to run, and while Clifford gives many stories of tangential benefits from doing so, none of them seem game-changing. If a business already have a chain of stores and a website, merging the two in the many ways described seems like a no-brainer. But if it doesn’t, it’s hard to see how the bottom line would actually be affected in any way but negatively.
What seems more likely is that as many of the benefits which can be abstracted from the cost of running a shop will be. As Felix Salmon points out, there are advantages to retailers in being able to take cash payments, even for online orders, and having somewhere to ship bulky goods for collection seems to be popular as well. But both of those things require little more than a posh version of the Post Office; somewhere which can handle the more methodical side of the transaction for a number of businesses at once. And such companies already exist.
All that would leave is the showroom aspect of the physical store. Can any company gain enough extra sales through physical viewing of items to make up for the extraordinary increase in cost? There are probably a few categories where the answer is yes.
The most obvious is products that are already sold in showrooms due to the high cost of the goods: cars, boats, motorbikes and so on. Things which people really need to see and touch before buying, and which are so valuable that a single sale can make a day. There’s a second advantage as well, which is that cars are so bulky that the showroom essentially doubles as the warehouse. A car retailer which decided to move online only would still need to have physical premises almost as large, just not in quite as expensive a location.
Clothes are the other clear winners. People still really like being able to try on things before they buy. But the problem for many retailers is that you can go to, say, Office to try on some shoes, then buy it from a cheaper retailer online. Office loses a sale, but still pays for the advertising.
The solution to that is retailers like Apple. Famously, the company doesn’t care if people go into their shops purely to use them for the free internet; their aim is to get as many people using Macs, iPads and so on as possible. That doesn’t mean that it isn’t relentlessly sales focused – it is – but if, at the end of a trip to an Apple store, you go home and buy a MacBook from Amazon, it still gets the sale. Apple stores are just as much about advertising as retail.
It doesn’t paint a particularly rosy picture for the high street of the future – lots of high-end, single-brand stores peppered with glorified post offices – but it’s probably better than the alternative thesis, where everything becomes a coffee shop.
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