e-Commerce is alive and well... And living in a shop

One of the most important emergent trends in retail is the almost urgent drive by online retailers to get joined at the hip with physical real estate − including opening actual physical stores.

- Michael Baker, Retail Analyst    

E-commerce Moving into Bricks-and-Mortar

Online retailers leading the store opening trend include eyewear retailer Warby Parker, jewellery retailer BaubleBar, designer brand rental pioneer Rent the Runway, and men’s clothier Bonobos.

This would appear to put paid to the thesis that once virtual reality technology became sufficiently sophisticated, consumers would never need to touch, feel and try on anymore – they would have complete confidence in the online channel. That theory is beginning to look hollow. Frequently, people do want to experience the touch of products before buying them, whether it is a pair of shoes or a mobile phone.

Humans Crave Human Interaction

For the retailers, it offers something more than just an opportunity to satisfy the touch-feel-try-on factor: it gives them an opportunity to let consumers experience and interact with their products in a way that enhances the brand, thus leading to sales growth online. Apple understands that principle very well. Others are picking up on it. When Harry’s, an online retailer of upscale shaving products, opened a store in New York’s trendy SoHo neighbourhood, it wasn’t just a physical space selling shaving products but rather an actual barber shop.

Aside from its experiential value, physical real estate represents a triumph for customer convenience. It’s a place for customers to pick-up online orders if they don’t want them shipped to home or if they are in too much of a hurry to wait, and it’s also a place to return things ordered online if they turn out not to fit – or work.

Retailers Need to Innovate

Traditional retailers, many with extensive store fleets, have found themselves at a significant advantage over e-commerce retailers in this regard, just as e-commerce players have held an advantage in technology. Now, both sides are scrambling to make up their respective deficiencies.

Apart from consumers and the e-commerce retailers themselves, a major beneficiary of the trend toward e-commerce retailers opening stores will be store designers themselves. It is they who will employ their creative smarts to send consumers the in-store experience and brand message the online retailers want to convey.

For shopping centre operators and other commercial landlords it’s a hit too. Two years ago, there was panic amidships as landlords saw online retail as a windfall loss to store-based retailing, possibly even a long-term threat to the viability of many retail properties. That fear has now evaporated and been replaced with some of the old strut, as online retailers open pop-ups, shop-in-shops and freestanding stores, and launch partnerships with real estate-based businesses.

Landlords Don't Have the Sway they Once Had

To some extent, landlords need to temper their enthusiasm though. E-commerce retailers are highly unlikely to open enough stores to compensate for the ones that would have opened if we never had e-commerce at all. Deep down, landlords know that. But even so it is definitely a moment to emphasise the positive – in this mixed up muddled up world, there’s something for everyone.

Traditional retailers have a distinct advantage with physical real estate – brand exposure, place to touch and feel, place to ship and take returns. Online retailers have fought back in a hotch-potch of ways, which initially consisted of partnering with land-based entities.