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Anything that can be digitalized will be, and the Internet will be the dominant mode of distribution. But, Jerry Storch, CEO of Toys R Us, stressed today at the Shop.org conference, that for physical products, the internet (direct to home) will not dominate sales...until they invent the transporter.

Stores make money and a lot of money. Now Storch didn’t represent a bricks and mortar retailer ranting and railing against the internet and selling online. Rather he kicked off the conference with a call to action urging retailers not to search for the magic pill but to be where the customers are and have an omnichannel approach to retail. 

The internet is one of the most transformational, revolutionary forces of our lifetime but it’s not transcendent. It’s huge but it isn’t everything. In retailing, you are good based on what you buy. Merchandising still needs to be at the core of your skills.

Storch went through some perceptions we have of online retail and how it compares to purchasing in store.

MYTH: Store chains need to shrink massively and rapidly


Massive shrinking would be a self fulfilling prophecy, essentially receding the market without economic justification.

This assumption believes that online retailers are always able to offer lower prices. If you compare classic retail to direct to home, the cost of the supply chain is greatly impacted. Direct to home  is 1.5x – 2 x higher than classic retail as shipments at Distribution centres are not cross-docked, they have to have people pick and pack. Freight to home is 30x-40x higher than sending truck loads to a single store.  

So can you really charge less? The product costs the same and the supply chain is three times higher so really it comes down to how much profit you are willing to lose. Anyone can sell an infinite amount of commodities below cost. It’s a very efficient way to lose money.

MYTH: Customers prefer online shopping to stores

Some customers do love internet shopping as primary way to shop. But most customers love to shop in stores and it is a major national pastime in the US.

Some categories and purchase occasions work well with the internet, others are more store-friendly. Logistics also tell a different story. Stores are the most efficient delivery vehicle for many large products and purchase occasions. Kids rate a trip to Toys R Us just below a trip to Disney Land.

MYTH: The future belongs to internet only companies.

No. The future belongs to BRANDS. Storch joked that he wanted to say this is capital letters and wanted us to remember it that way.

It belongs to brands that create the best customer facing experiences across all channels. Those brands that build the best consumer-facing network, incorporating stores, interest mobile social and local components.

All companies will be internet companies or they won’t be companies at all. The internet is heavily used by almost everyone for product and retailer research but most of this occurs on RETAILER websites. So the majority of the growth of internet retailing is coming from the links people have with bricks and mortar companies. 

To succeed you need product that people love that they can’t get anywhere else but from you.  This is why omnichannel retailing is so important.

Omnichannel: Model of the future

This can’t come as a surprise to any of the retailers in this room or across the globe. The world is changing and so are customer expectations.

The omnichannel matrix allows you to:

Order from: home, elsewhere (work), your store, different store, mobile

Fulfilled by: Direct DC, Store DC< Your Store, Different store, vendor

Where received: Home, elsewhere, your store, different store

There are over 80 permantations when you use this matrix to determine where you order, how your orders are fulfilled and how you receive them. Customers are evolving from stores or websites to networks. 

This model allows customers choice, convenience, product that is more available and a vast selection. For retailers, it actually gives more foot traffic, inventory utilization (use from any location), customer retention, and an increase of sales.

Do you see the internet as the death of retail or are you striving for an environment for customers that allows them to shop where and when they want, including popping down to the store on their lunch break? What do you think the future of retail is?

Econsultancy's JUMP New York event is a conference dedicated to joined up marketing and e-commerce. It takes place on November 1, and features 40 speakers and 750 client-side delegates. 

Heather Taylor

Published 11 September, 2012 by Heather Taylor

Heather Taylor is the Editorial Director for Econsultancy US. You can follow her on Twitter, Google+ or Pinterest.

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Peter Jarosz

With the right onmi-channel strategy in place stores will grow their sales!
BUT it takes retailers some time to get to that thinking, as it requires changing of their mind set.
Very often my clients see their own online channel as threat to their stores and do not allow to combine both strategies. By working with them we are able to show how omni-channel strategy can help grow their sales for all distribution channels.

almost 4 years ago

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Dana King, Director at Trans World Marketing

The future of retail is secure for brick and mortar retailers who create theatre and unexpected user experiences that cannot be achieved online. Retailers like Apple, JC Penny and Dick's Sporting Goods are using interactive technologies and innovative visual merchandising to entertain, educate and excite the senses. Best Buy is also going in that direction with their "connected stores".

almost 4 years ago

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Hugh Snow

I found Mr.Storch comments to be quite interesting and informative. As a thirty year marketing professor I also know that a greater key for the instore customer buying is to have staff trained in real time customer service activities. By that I mean to truly understand the consumer drives the business, not fancy phrases, gimmicks and sales discounts.

almost 4 years ago

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Ashish Jandial

This debate isn't really about channels but about providing a consistent, integrated and seamless experience to the consumer. Each channel has a role to play and while digital channels will continue to show faster growth in the near future, the winning combination for any retailer will be a blend of the physical and digital. Retailers will be under greater pressure as Amazon rapidly expands its fulfillment center presence to achieve single day delivery capabilities. They will need to aggressively invest in scaling their cross-channel inventory visibility and order fulfillment capabilities to compete successfully.

almost 4 years ago

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ChristopherKrywulak

I agree. The physical store will never die. Brick-and-mortar retailers, however, must evolve to compete with online retailers, mobile apps and showrooming. As the article suggests, an omnichannel approach is the best way to cover all your angles. Driving in-store traffic -- whether from the mobile channel, the online channel or simply from walk-in customers -- is a fundamental goal for us at iQmetrix. Our XQ Interactive Retail solutions are designed to bring elements of mobile and online shopping into the physical store and increase in-store sales conversion: http://www.iQmetrix.com/products/xq

almost 4 years ago

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David Baker, Founder, Chief Operations Officer at 94582

Love this! Finally Retail perspective people can begin to evolve next gen Omnichannel thinking around. Well put!

3 months ago

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