Is Brick And Mortar A Passing Fad?
Q: Is the online world the best place to sell a product or
service these days? My friends seem to think that brick and
mortar stores will totally disappear in the future. I debate
this all the time with them, but it seems to be heading that
way. Your thoughts? - Alex H.
At last report, Alex, Sam Walton was still resting comfortably
in his discounted grave, so I'd say brick and mortar is safe, at
least for the next few years.
During the dot-com boom the mantra was "Brick and mortar is
dead!" Then when most of the dot-com's crashed like an elephant
sitting on a wicker chair, the mantra suddenly changed back to
"The Internet is dead! Long live brick and mortar!"
In both instances those doing the shouting were dead wrong (and
highly annoying). The correct mantra should be "Long live
ecommerce enabled brick and mortar!" It's not as catchy, but a
lot more accurate.
So to formally answer your question, Alex: I have to agree with
you: brick and mortar is safe for many years to come. That's not
to say that online selling will not continue to grow and
overshadow in store sales in the coming years. But smart
retailers realize the potential - and limitations - of the
internet and are making plans accordingly.
Smart retailers know that while the Internet has the potential
of opening up new sales channels for them, they also know that
not all customers will shop online, at least for another
generation or two. Until every man, woman, and child on the
planet can operate a computer as easily as a cellphone, there
will always be consumers who will not buy online.
Smart retailers also understand that a successful online
strategy depends on the mindset of the buying public. They
understand that the internet is not erasing business models: it
is changing business models. Those that adapt will succeed,
those that do not, will one day close their doors.
When http://Amazon.com burst onto
the scene with big plans to change the way people buy books,
Barnes and Nobles did not close their brick and mortar stores
out of fright. They also did not ignore the trend toward online
shopping. Instead they directed resources toward building their
own online sales arm to compete in the online marketplace.
Many large retailers that were slow to jump on the online
shopping bandwagon are now getting serious about online sales.
They are using the Web to launch new product lines and sell
things you normally would not find in their stores. Wal-Mart for
example, sells products online that would be too pricy for their
retail stores, like $6,000 plasma TVs and expensive sports
memorabilia.
Setting up an online shop is also cheaper than ever before. A
web store that would have cost hundreds of thousands of dollars
just a few years ago can now be built for less than $10,000.
Online retailers can also stock more items than brick and mortar
stores that only have so much shelf space.
As more consumers have access to broadband you will continue to
see a rise in online shopping and a rise in the number of
companies setting up online points of sale. One example is http://Sears.com, which saw online
revenues skyrocket 40% in the past year. Forrester Research says
US online sales will hit $145 billion in 2005, which translates
to 7% of US retail sales. That's a 26% rise in 2 years.
Wal-Mart will no doubt have a big effect on online sales as they
bring their "lower prices everyday" mentality to the Web. Just
as they muscled suppliers for the lowest prices in their stores,
so will they bring their weight to bear online. This is great
news for consumers. As more retailers go online consumers will
have more choices and find lower prices.
One thing that may ensure that some brick and mortars never go
away is what I call "The Try It On Factor." If you have to try
it on or want to see how you look in it, there will always be a
need for brick and mortar stores. For example, I wear cowboy
boots (I have a pointed foot) and I would never buy a pair of
cowboy boots without trying them on first, so until some genius
comes out with a way for me to hold my big foot up to the
computer monitor and get a perfect fit, I will only buy my boots
in the store.
I do believe that someday the majority of products will be
purchased online. We are already seeing this trend in many
industries. DVDs, CDs, videotapes (which will definitely go the
way of vinyl records in a couple of years), books, cellphones,
televisions, computers, stereos, etc. are all big sellers
online. It's also possible to buy a car from the comfort of home
and shop for a house. I know because I've done them both several
times.
When debating the death of brick and mortar you must also
consider the fact that shopping is a social experience for many
consumers, i.e. females, who happen to control the purse strings
and make most of the buying decisions for their families.
Case in point: Every year my wife and her mother trek to
Birmingham and Atlanta for annual shopping trips. When I point
out that there are perfectly good malls right here in our own
backyard, I am told that I'm missing the point. The point of
these trips is not to buy anything. The point is to shop, to
eat, to hang out, to bond. If a purchase is made, oh well.
Scientific studies on these phenomena have concluded that "It's
a girl thing..."
For men, shopping is a chore. For women, shopping is an
experience. So until my wife and mother-in-law can get the same
satisfaction sitting in front of a computer monitor as they do
exploring the malls, there will always be brick and mortar.
Here's to your success!