One Useful Feature For Online Retailers: Lots of Physical Stores

Pure-play online retailers like Amazon now account for about 5% of total U.S. retail sales, according to estimates from A.T. Kearney, with another 5% going through the online channels of traditional brick-and-mortar stores like Wal-Mart and Best Buy. The other 90% of sales still happen where sales have been happening for hundreds of years: in physical stores.

And that’s where the future of the retail industry lies, the consultancy says in a report on the industry released today:

Physical stores are clearly customers’ preferred shopping channel and a place where the most significant consumer and retailer value continues, and will continue, to be created.

It is important to acknowledge that shoppers actually find physical stores appealing—especially when we read all the hype about online and digital. Stores provide consumers with a sensory experience that allows them to touch and feel products, immerse in brand experiences, and engage with sales associates who provide tips and reaffirm shopper enthusiasm for their new purchases.

The consultancy surveyed 2,500 shoppers from seniors to teenagers and asked them whether they prefer physical stores or the internet for various stages of the shopping process, from discovering new products to making a return. Even among the famously Internet-centric millennial generation, the store wins out in most stages:



“Shoppers of all ages really love to shop in stores,” said Mike Moriarty, a partner in A.T. Kearney’s retail practice who co-authored the study. ”E-commerce is exciting, but when you talk about what shoppers prefer, it’s physical spaces.”

The big implication of the study is that all other things being equal, it’s better to have lots of stores complimenting a decent online operation. That may be of some comfort to traditional retailers, because while building up an e-commerce system is tough, creating a network of hundreds or thousands of stores is tougher. If old-school retailers can get better at e-commerce faster than online-only companies can figure out physical stores, the numbers suggest shoppers will keep spending the bulk of their dollars with them.

Online retailers, of course, still have big opportunities, particularly in picking off business from weaker physical retailers that lack the resources to compete. Amazon’s growth shows no sign of slowing down, and is expected tomorrow to announce results showing revenues growing by more than 20% to over $19 billion.

Written by Tom Gara
Source: WSJ