There are a range of reasons why offline has gradually become more interesting for web-based retailers:
As the online retail space has become more competitive and price-led, differentiation amongst retailers has become correspondingly more important.
The rising cost of traffic combined with declining margins on sales from price competition, means that online retailers are increasingly having to look to brand as a means of maintaining a non-commodity pricing model.
As it turns out, one of the most effective ways of communicating brand values is through letting your customers have a physical experience of your organisation.
For example, eyewear retailer Warby Parker made the move from on- to offline with the opening of its first physical store in mid-2013. Its stores are intended, in part at least, as vehicles to help communicate the group’s brand in a way that simply isn’t possible in the two dimensional world of the web.
One of the surprises of the rise of clicks-and-bricks has been the power of retail real estate in the fulfilment chain.
Innovative fulfilment models such as click and collect, try-before-you-buy or pick-from-store have all enabled offline retailers to launch differentiated service offerings compared to their pureplay counterparts.
In particular, without a network of stores, online retailers have been forced to develop ever larger distribution networks to get close enough to retailers to facilitate next- or even same-day delivery.
Some pureplays are now moving into the physical world to help them match the clicks-and bricks players in new fulfilment models.
Amazon’s recent announcement to open its first physical store in New York made it clear that being a pureplay retailer just isn’t enough anymore and marks a move by the online giant towards a more customer-focused approach.
Amazon has understood that providing great customer service means it needs to be physically close to its customers.
One of the long-standing criticisms of traditional physical store networks is that they tend to come with a heavy legacy cost base of rents, staffing, technology and other outdated infrastructure.
However, as pureplays have investigated the physical world in more detail, they’ve realised that creating ‘greenfield’ retail sites from scratch means that this legacy can be avoided.
If a store estate is constructed based on a mixed format model then many of the costs and disadvantages of traditional stores can be avoided. For example, US clothing retailer Bonobos moved into the physical world in early 2013 with its ‘Guideshop’ ecommerce stores.
These enable shoppers to experience the Bonobos range and try on products for size and feel before ordering for delivery to the home.
By focusing the store presence on try-before-you-buy, it’s been able to avoid the traditional costs that clothing retailers incur in holding large in-store stock with the costs in terms of floor space and product value that come with this.
For a long time showrooming was seen as a threat to bricks-and-mortar retailers. The perception was that shoppers would visit physical stores to experience a product and then order it online for the best possible price.
Now, many retailers are beginning to view this as an opportunity, not a threat. The ability to give customers a physical experience of your product can be a direct route to sales.
Clearly, showrooming is more of a threat with a commodity product but, if you carry sufficiently differentiated stock, and offer customers a seamless channel from store to online purchase, showrooming can be utilised as a marketing tool.
For example, UK furniture retailer Oak Furniture Land started as an eBay storefront in 2004 before opening 54 stores between 2009 and the present day. Its offline presences enable showrooming by customers whilst giving them the choice to then purchase in store or online.
With a proprietary range the risk of cannibalisation is minimal and the physical stores let consumers experience the tactile nature of the all-wood products.
Clearly, not every venture from on- to offline is destined to succeed. For example, the move by Kiddicare to open retail stores following its acquisition by Morrisons doesn’t appear to have succeeded.
This was potentially because Kiddicare attempted to create a traditional, big box format rather than leveraging the efficiencies of online in a physical environment.
However, when the positive synergies between on- and offline are effectively combined, as has been the case with the likes of Warby Parker, Bonobos and My-Wardobe, it seems that the combination can be more than the sum of its parts.
While for many years the offline industry has been learning from the web, it seems now that there is something that the old guard can teach the new wave.