I was struck by a recent MediaPost article entitled “The Obsolescence Of Brick-and-Mortar.” I had to look at the date a couple of times because it had the flavor of a piece that might have been written in 1999:
Web sites will replace brick-and-mortar stores within five years. I realize that’s a bold prediction, but here’s why.
Brick-and-mortar retail stores selling everything from clothing to high-ticket items like flat-screen TVs will turn into warehouses where consumers can touch and feel the merchandise. Web sites, supported by search engines and site search, will become the cash cow for the retail store. Advertisers will have more of an opportunity to address consumers because many will spend the time online that they would have spent in the store. Tracking sales and pulling in data from social sites to target consumers with specific ads, coupons and discounts will become much easier for marketers.
True, we’re in a multi-platform world but physical stores and corresponding retail sales will not be cannibalized by e-commerce, which is and will continue to be a fly on the posterior of US retail — albeit a big fly. People fundamentally use the internet to research (“shop” for) products and look at reviews. In 96%+ cases they buy offline. The Internet is mostly a marketing platform accordingly. This is a fundamental fact that many (if not most people in the tech industry) have failed to see and accept.
That’s why location matters so much; offline is where all the spending — and Internet influenced spending — happens.
Let’s get over the e-commerce vs. offline discussion that characterized the early days of online. Now it’s really about how all these channels can work together to support sales, notwithstanding some of the lingering internal political-organizational issues among retailers. Clearly “multi-channel” sellers (e.g., Target) are at an advantage vs. “etailers” (other than Amazon and a tiny minority of others, e.g., NewEgg, Etsy, Zappos [Amazon]). The no-name, pure-play etailers are screwed unless they have:
- Razor-thin margins and huge volume
- Extensive inventory
- Unique or niche products
- Several of the above
Indeed, when taxes come to e-commerce (and they will) this will put even more pressure on the pure etailers. People don’t want to pay shipping and they don’t want to pay other costs associated with purchases (e.g., taxes, handling). Convenience and in some cases lower cost are the chief reasons people buy things online. If costs, such as sales taxes, are equalized I’m not going to buy stuff online unless:
- It’s the middle of the night
- I’m sending a gift to my mom in Southern California and I don’t want to physically ship it
- The store is out of the desired item
Yes, e-commerce will continue to grow (ironically it may be boosted by smartphones) but as Jeff Bezos once said:
I think online ultimately will be 10 to 15 percent of retail. The vast majority of retailing will stay in the physical world because people have acute needs, they want things now.
If it gets to that point those will still be huge revenues, given that total retail in the US is just under $4 trillion annually.