Why Online Retailers - Like Amazon - Are Opening Physical Stores

Just as more retailers have been beefing up e-commerce offerings, online retailers are increasingly turning to brick-and-mortar. And the trend, pioneered by such brands as Warby Parker, Bonobos and Athleta, is getting even more attention now that Amazon is rumored to be opening its first retail store, just in time for the holidays. (Amazon hasn’t confirmed it yet, but the Wall Street Journal says it’s on New York’s 34th Street, a Kindle-toss away from Macy’s.) Mike Kercheval, president and CEO of the International Council of Shopping Centers, tells Marketing Daily what’s driving the trend, and what to expect from stores this quarter and in the years ahead.

Q. So in addition to the Amazon reports, more online retailers are opening physical stores. Why?



A. To grow their businesses and gain market share. It gives them a chance to create multi-sensory experiences, offers better logistics and service offerings, and helps build strong, lasting brand relationships. Athleta, BaubleBar, Bonobos and Boston Proper are all good examples. It’s a way to remain competitive, and shows how mobile, online and in-store experiences complement -- rather than compete with -- one another. Physical stores are good business. 

Q. Even while physical stores are pouring so much into pursuing online shoppers?

A. Yes. We have seen that the omnichannel customer shops more frequently and spends 3.5 times more than other shopper types – and that, I believe, is the path that we will see retail continue to head down. So online and mobile channels are now enhancements, not detractors. 

Q. We know more people shop and purchase online than they used to. Are fewer people heading to shopping centers? 

A. We don’t really know, and it seems traffic is becoming a less reliable metric. Sales are up. Conversions are up. The question is increasingly becoming ‘How does the physical store amplify sales?’ We know that webrooming is a real phenomenon, and that it is growing, and in people under 30, it’s especially strong. This idea that consumers are researching everything, even if they are just driving to the supermarket and checking on the hours, is real  and it’s huge. And, sad to say, much of the retail industry is just waking up to it.

Q. So how can stores do a better job of capitalizing on the trend?

A. Seamless Wifi, for one thing, pushing it out into the malls and in some cases, into the parking lot. Beacon and NFC technology are important. And an interesting trend we’re seeing is how popular buy online/pick up in store services are. It’s funny—everything old is new again, and this is like when you ordered something from the catalog and picked it up in the store. And it’s a real advantage for physical retailers, because when people come into stores, they’re likely to buy — or at least shop for — additional items. Smart stores are figuring out how to make that pick-up a positive experience.

Q. What do you think the typical mall will look like in a few years?

A. We’ll see many more brands in shopping centers, and smaller stores. They’ll be brighter and more colorful. We’ll see pickup areas, not just in stores, but in the malls. There will be more dining, even more high-end dining, as the emphasis shifts on malls as a place to explore and shop and be entertained. They’ll be looking to inspire creativity, and so it will be a place people want to go — more like a souk or a bazaar. People want to interact, they don’t just want to shop.

Q. Finally, ICSC recently forecast a 4% increase in spending this holiday season. Any updates?

A. What’s interesting is that Halloween is a totally, totally, totally discretionary holiday, so when you see strong spending — as we are now — that’s a great leading indicator. So Halloween is up, that’s a good sign. Gas prices are falling, and most people don’t realize that every penny drop in the per-gallon price translates into about $1 billion in discretionary spending. So that’s a huge push for better sales.

2 comments about "Why Online Retailers - Like Amazon - Are Opening Physical Stores".
Check to receive email when comments are posted.
  1. Trung Ho from ASU, October 24, 2014 at 10:26 p.m.

    In general, opening a business as an online store is much cheaper than a physical store. Unlike a physical store, there is no rent to pay or other utility bills directly related to the store, except for web hosting and technical support. We do not have to decorate the inside of the store, purchase inside and outside signage or display units. With an online store, our costs are directly related to our website, shipping and accepting online payments. We must pay for our desired domain name and may pay someone develop our website and e-commerce platform, which can be expensive, but is less expensive than opening a physical store. Consumers tend to pay significantly more for high value products that they can view in person, such as designer clothing, antiques, jewelry, furniture and cars. A physical store will appeal more to customers and generate a higher profit margin on individual items. In addition to the price of items that we can sell, we must consider the number of items we wish to sell. A physical store will perform better for a business that sells a select amount of products, while an online store may work better for a business that carries an extensive selection. Building a customer base is one of the most-essential components of starting a successful retail business, either online or offline. With a physical store, the potential customer base is limited to the surrounding area. Online store, the customer base is vast. Once we open up a physical store, our options for attracting new customers are limited. We are confined to the retail space that we chose and changing logos, signs, shelving and the overall marketing strategy can be expensive. When we work online, changing signs and logos takes mere minutes and we can quickly and easily change the products that we sell and the way we present them on our website.

  2. Paula Lynn from Who Else Unlimited, November 19, 2014 at 11:15 p.m.

    Would you rather have a massage or watch someone else showing you how to do it ?

Next story loading loading..