The growth of online stores in recent years is a fact that cannot be overemphasized, every passing day retailers spend huge sum of money in the development of high tech eCommerce stores. The advent of wix and other platforms that aid in the building of free websites has definitely aided in the growth of the e-commerce sector. some retailers are closing down their brick and mortar stores and concentrating more on the online platform.
eCommerce Is Growing But Are The Profits Growing Alongside With It?
eCommerce is very important for a brand that wants to be recognized globally, but there is a need to balance the e-commerce alongside brick and mortar stores. According to US census Bureau, eCommerce made up only 7.7 percent of all retail sales in the first quarter of 2016, eCommerce sales have been growing at a rate of about 15 percent year over year. In quarter 1 of of 2016 total sales only grew by 2.2 percent.
The fact is, eCommerce is growing so fast and becoming very convenient for buyers but the real question is how profitable is this platform to retailers? John Idol the CEO of Micheal Kors, in February 2016 made a statement saying that the profit from online sales were weighed down by free return, free delivery, and packaging costs, which was resulting in a lower margin than physical stores, one of the problems noted by John Idol is that consumers are taking advantage of free delivery and free returns by ordering clothes in different sixes to try on and afterwards return it back. This is absolutely wrong and it gives room to reduced profit due to the capital spent on free delivery and free returns by the company.
Another critical example of an eCommerce store that is heading towards the brick and mortar route is Amazon, in November 2015, Amazon opened it’s first physical outlet store in Seatle, it went ahead to also open the second store in the summer of 2016 at San Diego. In October 2017, Amazon reported $1.3B in physical store sales, although not matched up to the revenue generated by its online sales.
The Essence Of A Brick And Mortar Store
Let’s first start by stating all the detriments of a brick and mortar store, firstly you have rent, utility bills, maintenance bills, and off course overheads which comprises of sales associate, personal assistance, janitors, shop security, marketing department, and lots more. If we keep that on the side, there’s a lot to gain from having a brick and mortar store. There is no feeling as seeing an item you want, feeling it, trying it on, paying for it and working out the door with your item. The physical stores brings all the brands aesthetics into play, think about it this way, you have a room in your apartment and you decide to re-brand this room by bringing it to live with the graffiti drawing on the wall and the furniture. You would always want to showoff this space to friends, that is the exact way a store is, it is just interpreting your vision in a space you sell your products at.
Brick and Mortar stores also give consumers the chance to engage directly with store associates, make relevant complains which can lead to immediate change and better customer service, sometimes they even have the opportunity to learn about new products. Brick and mortar stores give your consumers a home effect, they become use to the space and are always happy to shop from your store anywhere in the world.
Although online plays an important role in the path to purchase, the physical store brings a brand to life in a way that an eCommerce site cannot. Despite their significant investment for retailers, they can strengthen awareness of the brand and boost online sales, driving ROI. I
More than three-quarters of respondents to a Kantar retail survey said that they would research items online before purchasing them in bricks and mortar stores, this only proves that although online is important, many persons still head to the shop to make purchases as channels become increasingly blurred. A 2015 Time Trade survey revealed that more than 80percent of consumers still prefer shopping in stores and seeing products before making a purchase decision. This same survey shows that More than a third of respondents (36 percent) don’t like waiting for items to ship, and 90 percent said they are more likely to make a purchase when receiving assistance from a knowledgeable store associate.
Zara, which is known for high street fashion has over 2100 stores in 93 countries and these does not stop them from running their eCommerce effectively. At the end of the day, it is all about balance, digital channels are here to stay, so start getting used to it. Brands that fully operated on eCommerce are now opening up popup stores. Know your target audience and also what is best for the brand. Have a plan, if you think the number of stores you operate are too much then reduce the location, but at the end of the day both eCommerce and Brick and Mortar stores work hand in hand to grow a brand and maximize profit.
By Utibe Ayi
Source: Radial.com, Ecrebo.com