Is Brick & Mortar the Foundation of Ecommerce’s Future?

Catalyst has long had an interest in ecommerce, which is how I recently found myself in the audience at eTail East 2017. Over the course of the conference, I fully expected to hear about the continued rocket ship growth of ecommerce and how Amazon continues to be the largest single competitive threat for companies across industries… and I did. What I wasn’t quite expecting, however, was to learn the lengths that retailers are going to in order to stay competitive in the Golden Age of Amazon or that brick and mortar stores actually work!

“Blaming it on the weather” is a thing of the past

Retailers often blamed the weather for any number of positive or negative revenue events – somehow an “unusually cold winter” can simultaneously leave consumers at home instead of shopping in stores for winter clothes (thus depressing sales) while also driving a record number of winter gear sales (thus boosting sales).

The overwhelming consensus at the conference was that this paradox is a thing of the past. Today record numbers of retail purchases are made online and retail store closings are at their peak. These trends drive consumers online where retailers must adjust their approach for drawing in customers and can no longer blame the weather.

The optimal way for brands to drive online sales is, counterintuitively, to open more brick and mortar stores… so long as the retailers 1) differentiate, 2) offer an experience, 3) prioritize data, and 4) build out a robust supply chain solution.

1. Differentiating

Today’s consumers are inundated with product and store choices; being in the “middle” in the retail world is incredibly difficult.
- Historically, many companies such as department stores had a huge amount of product overlap not just with their competitors but also with the brands they carried.
- Today, that doesn’t cut it; huge numbers of luxury stores saw the value in providing customers exclusive access to unique products and have refocused their (and subsequently their customers’) attention on their retail and e-tail stores.

2. Offering an experience

Americans spend more money today on food and drink than on clothing. Why? Because they prioritize experiences (and as evidenced by the below, have for a while).

Saks Fifth Avenue opened an indoor ski slope at their flagship store in 1935.
Brands can leverage offline experiences and use them to drive online sales.
- Brands can bring offline experiences to their customers via showrooms (M.Gemi), Pop ups (Mizzen+Main), or traditional Brick & Mortar stores (Indochino).
  - It’s counterintuitive, but physical retail locations can be strong drivers of online sales as they drive traffic for brands.
  - The biggest proof point of late is Amazon’s acquisition of Whole Foods; an ecommerce giant saw the value in a unique customer experience in store, so they actually bought a location!
- Brands can leverage the in-store experience by allowing the digital to augment the physical and treating the entire experience as the point of sale.
Surprising but true: there will be very few online-only brands in a few years. Companies must finesse their offline and online customer experience to stay competitive.

3. Prioritizing data

Between various points of sale, marketing campaigns, and customer interactions, retailers are faced with a daily assault of data that they can analyze to their heart’s content.
- Retailers can allow data to drive decisions across an organization, not just the top, and personalize the in-store and online experience for consumers.
- Using data to quickly determine the value-add of products and features enables retailers to kill ideas that don’t contribute quickly.
However, data for data’s sake isn’t helpful – a brand needs to be able to act on it.

4. Building out a robust supply chain solution

Investing in supply chain innovations is crucial to survival – retailers need to be able to deliver their products to customers ASAP.
Particularly important in an age where Amazon is developing an ever-expanding network of distribution centers.

All in, differentiating and offering a unique branded experience to customers is key to driving traffic and sales for retailers. However, data analytics is the key way for retailers to truly understand what customers want and supply chain innovation allows brands to successfully deliver that product to their customers.

If you are a growth-stage tech company that specializes in data analytics or supply chain innovation for commerce, let’s chat! I welcome your feedback on the above. Email me at [email protected]