The Insight: Online Retailers Are Getting Physical

7 Apr 2015

Google Online Offline Appear Here

In the last couple of months we have seen a surge in digitally native brands going offline; from Google who launched its first brand store, to Amazon who is greedily eyeing up locations across the US for its bricks-and-mortar drive. With the world’s biggest digital companies moving offline, does this herald the end of pure play retail?

In order to thrive, e-commerce companies are realising the need to create physical environments, just as how traditional retailers rushed to launch online stores in order to bolster their sales, e-commerce companies are beginning to understand the role of physical retail in driving sales.

At Appear Here, our fastest growing user group is online retailers moving offline, generally they cite one of these three reasons: create new experiences, build real-world relationships and increasing competition online. Let’s explore why exactly they are driving online brands offline...

New Experiences

In a world where products can be bought more conveniently and for cheaper online, physical retail needs to offer customers new experiences they can’t get elsewhere. A recent report by The Future of Retail revealed half of us go to the shops to be entertained and three-quarters to be inspired. Tactile and sensory experiences are one of the few things that cannot be replicated online.

A focus on creating new experiences, falls in line with Google’s strategy behind the Google Shop. In their official press release they commented, “with the Google Shop, we want to offer people a place where they can play, experiment and learn about all of what Google has to offer; from an incredible range of devices to a totally-connected, seamless online life”.

The importance of that touchy feely experience is one not be underestimated when it comes to influencing a purchasing decision. A great example of this is Apple, their retail stores focus on enabling customers to explore and experience their products. While only 20% of Apple’s products sell in store, 80% of their sales have had an in-store experience first.

Apple Online Offline Appear Here

Real-World Relationships

Nothing compares to meeting and talking to your customers face-to-face. A physical store is also a great environment for online brands to learn more about their customers and observe their behavioural habits. By connecting with them in the real world you create more meaningful relationships and can personalise their experiences better.

Bruce Cohen, senior partner at retail consultant Kurt Salmon, “consumers want to be talked to in a personal way.” Once you build a good relationship with a store and trust their curation and style, “you become incredibly loyal.”

Physical stores can also act as a magnet to bring together an online community. Ejder for Life uses physical stores to unite their online global community. At every store launch, 100’s of their followers turn up, wanting to experience the Ejder for Life brand in a new way and meet like-minded people.

Increasing Competition Online

As more and more brands launch online, it is becoming harder than ever to stand out from the competition, without throwing a lot of money at online advertising. Many brands are now looking to physical stores as a way of differentiating themselves from the crowd and as a cost-effective form of customer acquisition.

Europe’s leading online outdoor retailer Surfdome discovered this when they launched a pop-up store in Old Street Station. During their first week, the pop-up store was featured in all the major newspapers and online blogs. They also offered people new ways to experience their brand, they hosted live gigs, workshops and film screenings and forged closer relationships with their customers. Not only did this lead to a dramatic increase in online traffic but Surfdome also noticed those who visited their site through the Old Street Store landing page spent more time on Surfdome and had a bigger basket size.

Surfdome Online Offline Appear Here

Similarly, exploding delivery costs for online retailers such as Amazon, have made many turn to physical retail. For these brands, stores are essentially a flexible warehouses. By opening them in strategic areas and close to their target audience they can avoid excessive delivery costs. David Gilboa, co founder of the online glasses retailer Warby Parker, discovered this after launching their own series of stores in New York, “we quickly realized that while we were seeing all the benefits we expected from branding and marketing—the ‘halo’ effect of having a store open—stores could be a meaningful driver of sales and profitability, which was really unexpected.”

Warby Parker Online Offline Appear Here

According to the latest report by The Future of Retail, by 2020 retail sales of up to £338.5bn will be influenced by a physical retail presence and without these stores, online sales would plummet by as much as £52bn. It would seem this trend is here to stay.

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