Why In-Store Shopping Will Continue to Dominate the Marketplace
By Navneet Loiwal, CEO and co-founder of Shopular
The digital world has clearly revolutionized the retail environment. However, through all of the changes, one facet of the marketplace has remained surprisingly unaltered … the integral role that the in-person shopping experience plays in motivating and qualifying a consumer’s purchase decision. Folks like, and even crave, the ability to touch, feel and sample what they intend to buy. Despite the convenience of online-only purchasing, there’s just something about actually “shopping” and carousing the retail floor that makes the in-store experience all that it is. Some things, despite even the latest technology advances, don’t necessarily change. And Big Data supports the resilience and enduring popularity of the brick-and-mortar shopping “excursion.”
According to 2013 U.S. Census numbers, e-commerce spending continues to grow. Buying consumer goods and products online currently represents roughly 6.5% of all retail sales. But, in turn, offline brick-and-mortar commerce still clearly dominates, owning a staggering 93% of the retail marketplace. (Broken down even further, traditional in-store retail sales account for $4.5 trillion in income, versus $273 billion for e-commerce sales.)
Certainly traditional barriers to online purchasing have deflated to a large degree, making e-tailing more appealing and accessible than ever before. Shipping costs have lowered – and most of the big online retailers have done away with these extra ancillary charges altogether in an effort to remain more competitive. And the increased general consumer confidence in the online purchase process, as evidenced by year-over-year growth in Web-based sales, has, of course, created a steady escalation in e-commerce performance.
Despite these improvements, however, offline shopping still dominates as their preferred channel. To purvey some of the fundamentals at play when it comes to how consumers view the growth in e-tail purchasing, Shopular, a mobile shopping app with more than four million users, recently surveyed 400 shoppers across the U.S.
The results delivered insights surrounding the value of in-person tire-kicking of potential purchases: Nearly 80% (79.8%), among a digitally motivated and technology savvy sampling group, indicated a preference to shop in-store.
When asked “why,” some of the common answers included:
I want to try on the clothes - 20% of those surveyed
I want to see the merchandise - 22%
I want my items now - 6.5%
I find better deals - 5.2%
These numbers are revealing because they illustrate the consumer’s affinity for the touch-and-feel experience. This holds especially true for women consumers who purchase apparel. And, since the apparel category makes up about 20% of the total e-commerce spend, the dollars within this online retail segment are significant – second only to electronics.
With average return rates for online purchases as high as 30% within the apparel sector (which, in and of itself, is a $54.2 billion industry in the U.S.) – this return “gap” translates into about $16 billion worth of merchandise. This data is for the U.S. alone. When the numbers are applied on a global sale, the figures jump to more than $80 billion worldwide in clothing items (originally purchased online) returned each and every year.
Many in the industry directly attribute this income loss to consumers’ inability to physically examine and try on items in advance of their purchase. For most multi-national brands, this equates to a profit gouge that just can’t be ignored. And, these statistics have created a strong incentive for retailers to find easy, cost-effective means to drive users back into their stores.
Similarly, with 90% of beauty sales still occurring offline, it’s easy to understand why online brands such as beauty and grooming product marketer Birchbox, an e-tail darling that’s grown like wildfire, recently opened a brick-and-mortar location in New York’s trendy SoHo retail district.
The retail brands that are able to remain nimble and adapt to the fine balance between online, offline, and mobile selling will have a stealth weapon in their marketing arsenal that can translate into huge profit margin advantages. For example, Bonobos, a trendy men’s clothing e-tail line, has opened “Guideshops” across the U.S. that allow shoppers to make an appointment to try on the clothes they’re looking to purchase … but with a catch.
Bonobos doesn’t allow consumers to buy anything in the store, instead they are directed to place an order on the brand’s website – and items are delivered within two days. It’s a disruptive differentiator that’s working nicely for the company.
Why do this? Many retail categories, like beauty and apparel, are simply “touch, feel, see” categories. Despite the advances in digital shopping and e-commerce, these industries will always be tethered to the kinesethic experience. Human touch is still the human touch, and consumers still enjoy the knowledge that a store associate can assist them with their purchase – providing live consultation, style suggestions and purchase guidance. It is these qualities from an experiential point of view that make retail shopping what it is – something that cannot be duplicated in the same way in the virtual world. In fact, executed properly, keeping the live retail visit in place is a means of extending, not diminishing, a brand’s equity and trend factor.
Additionally, the in-store shopping remains a stronger impetus for the “impulse sell.” A recent industry study found that 40% of consumers spend more money than they had planned while shopping in stores, while only 25% reported impulse shopping while online. For many retail brands, these sales dynamics are simply game-changing.
Without question, retailers will need the right tools to straddle an ever-evolving hybrid retail environment that lives in both a brick-and-mortar and digital era.
Clearly mobile will play an indelible role in merging shopper behavior and preferences between the virtual and tangible realms. Currently, 8 in 10 smartphone shoppers use mobile capabilities in-store to help with their shopping decisions and engagement. This behavior is to the clear advantage of retailers. According to the research, shoppers who use mobile more, spend more in-store. Frequent mobile shoppers spend 25% more in-store than people who only occasionally use a mobile phone to help with shopping.
Second, with mobile technology enabling geo-fenced notifications, the industry is now seeing more and more retailers gravitating toward the use of digital as a means to directly drive pre-disposed in-store traffic and leads.
Third, the adeptness with which retail brands can engage with consumers via integrated promotions that bridge the in-store and online will ultimately help them to be more successful.
Fourth, in a related area, those that employ loyalty programs – executed both at the brick-and-mortar levels and within online channels – will derive strong advantage from an ROI perspective.
The bottom line: The “store on the corner,” though it may be gobbled up by a mass retail congl