From Click to Brick: Why Online Retailers from Amazon to Alibaba are Investing in Brick and Mortar Retail
Published May 2019
When the ‘retail apocalypse’ was declared a few years back, it failed to anticipate that customers would continue to prefer the in-store experience, and so most were quick to agree that e-retailing was the smart and strategic choice compared to brick and mortar. After all, with less overhead costs and the opportunity to expand geographical reach, why waste time on brick and mortar?
How times have changed.
Not only have predictions for a retail apocalypse not come to pass, traditional brick and mortar retail is becoming a critical element of retailers’ growth strategy. With everyone from Amazon to Alibaba moving away from exclusive e-retailing and towards integrating physical ‘offline’ locations into their business strategy, the reasons why so many are investing in brick and mortar is worth exploring.
Opportunity to disrupt the status quo
As Jeff Bezos noted in his April 2019 letter to shareholders, “90% of retail remains offline, in brick and mortar stores”. With that statistic comes an abundance of opportunity, and with AmazonGo rolling out as many as 3,000 stores by 2021, the world is already anticipating that Amazon will set a new standard in retail.
Natalie Berg, co-author of the book ‘Amazon: How the world’s most relentless retailer will continue to revolutionize commerce’ highlights how Amazon is almost guaranteed to disrupt when it comes to brick and mortar, and in a big way. “No one loves a challenge more than Amazon. It sets them apart from their rivals,” Berg explained. “It can see shoppers’ dissatisfaction with the current in-store experience and is setting out to improve it.”
Elevating an integrated and omnichannel experience
When Warby Parker, an online-only eyewear company, opened up a brick and mortar location in NYC in 2018, retailers and consumers alike took notice. Co-founder David Gilboa has said the company learned that physical retail was far from dead – “it just needed a creative makeover that enabled a fun experience for shoppers. We’re finding that 75% of people that buy something in our store have been to our website first. And what they really value is convenience so we invested in technology to make the online and offline experience as convenient as possible.” He went on to say that after noticing many customers were coming into stores after visiting the website or app with the names of frames they liked written down on a piece of paper, the company created the ability to ‘favorite’ items online, with the information immediately accessible to store associates.
Similarly, Neiman Marcus recently opened up their Hudson Yards location, with a “focus on providing physical and digital experiences in a way not seen at other stores, creating a personal customer experience that is seamless and magical.” Customers visiting that location experience things such as fitting rooms that are digitally enabled, customized lighting, and the opportunity to check out directly from that space.
Data and the “new retail”
After years of dominating the online space, Chinese retail giant Alibaba recently invested as much as $8 billion in brick-and-mortar. As Forbes has reported, the physical stores Alibaba will open will allow them to test their vision for “new retail” – a concept focused on using technology to upgrade China’s entire retail sector, with a focus on predictive insights. The company “is developing algorithms to analyze customer data such as brand membership information, purchasing history and store visit time to better understand shopper preferences and predict changes in consumption habits” Forbes has noted. Similarly, Canadian retail trends indicate success is increasingly linked to the integration of data and the insights that come with it to tailor store design, go-to-market strategy and campaign execution.
With the shift towards integrated retail, its clear that the retail apocalypse was never the end of brick and mortar retail, it was the start of the evolution of retail. Those that are disrupting, innovating, anticipating consumer needs and offering an integrated customer journey are succeeding in today’s retail world. Those that don’t, won’t survive. Success lies in reimagining and elevating retail, and brick and mortar is a critical part of that.