Store and e-mania: the new misunderstanding of phase 3

MICHELE CAPRINI
12/06/2020
In brief
The growth of online sales during the health emergency has brought up again the common misunderstanding on the opposition between e-commerce and physical retail. But the interpenetration and interdependence of the two different ways of selling are all too evident in the most recent sector’s news and in the field invasions by its major players.

Physical store and ‘e-mania’ are part of a conceptual confusion fuelled by the health emergency and the resulting tidal wave of online purchases. Even though are the growth rates that again hit the headlines, whereas the real impact on global retail volumes is hardly mentioned.

According to ISTAT data, the fall in retail trade in Italy (figures updated to 30 April) was 26.3% on an annual basis. At the same time, the lockdown tripled the number of online consumers in the period January-May.

THE MISUNDERSTANDING

It is an unprecedented situation, but it would be superficial to mark it as a point of no return in favour of e-commerce, also because it is not easy to build a competitive edge without adequate investments with the risk of low margins, or worse, that this entails. And this, of course, because we keep thinking of e-commerce as an alternative competitor to the store. But it is not so.

During a public event held in the United States less than a month ago, Credit Suisse analyst Michael Binetti expressed important beliefs about international retail trends and the conceptual deviations of ‘e-mania’.

 “Eighty percent of people still set aside time to get in a car and go to a store to purchase something that they could have gotten online. As beleaguered as brick-and-mortar is, retail can’t thrive without it, in part because e-commerce remains a lacklustre and inefficient way to shop for nonessential goods, and a poor conductor of impulse-buying.”

These are important words, in a place and at a time of particular concern. On the one hand, the consequences of the pandemic, and on the other, a restructuring process that in the United States has been going on for years and which, also due to oversupply and contraction in spending power, has forced many retailers to announce permanent store closures. Coresight Research predicts the definitive closure of between 20,000 and 25,000 stores this year, mostly in shopping malls. Very hard times for brands that have not adopted, in time, the tools indispensable for maintaining competitiveness on the market.

INTERDEPENDENCE 

The physical store and e-commerce have mutual needs, and we don’t say it from today. The interpenetration between the two different ways of selling is all too clear in the recent news of the sector and in the ‘field invasions’ of its major players.One representative example is the Click & Collect service, which combines online ordering with collection at a store. Worldwide, this service has recorded growth rates beyond all expectations.

In the coveted phase 3, the physical store will come back to life but, for some product types, it will certainly be less oriented towards the actual distribution and more towards developing the customer experience culture. After all, in spite of the increase in the costs of digital media and the drop in commercial properties prices, the store will prove to be an indispensable means of strengthening the presence of the brand, giving it credibility and gaining both the trust and interest of consumers.

NO PRE-ESTABLISHED MODELS

There is no universal and infallible standard of model of relationship with the consumer. Aside from the pandemic, those who buy are not devoted in principle to a definitive purchasing method and are willing to experiment. The satisfaction with what is offered is essential, but it is not enough to make a difference. Change in behaviours and growing ‘infidelity’ are the drivers of the often-sudden evolution of purchasing habits.

Several factors contribute to this changeableness: price-convenience, store innovation, the space-environment relationship, availability of ‘self’ technologies enabling a smooth and independent shopping journey, centrality of the services before and after the sale, the conformity and continuity of the offer in all its physical and digital parts.

In-store purchases still offers several advantages compared to online purchases: direct contact with what is offered for sale, immediate possession of the product chosen, support from sales staff, no delivery costs, gratification (even recreational) provided by the particular care reserved by the seller to the pedestrian shopping experience.

THE IMPORTANCE AND URGENCY OF INVESTMENTS

Digital technologies allow the store to enhance the consumer engagement but, above all, the quality of the relationship and its lasting over time. The value of information is therefore decisive and useful for customer profiling and personalisation of the service.

Of similar importance is also the integration of the management system data with the checkout system and all the new delivery and support services, in a system aimed at building continuity of presence and offer between physical store and e-commerce.All this by exploiting the system in a logic of convergence, as online and offline must complement each other to always ensure, for those who buy, the best choice and purchase solutions and, for those who sell, the best possible governance and the protection of business profitability.

That is why, today, the Italian retail market needs greater awareness and investments proportional to the need. Because later it will be late.