Can blending online and physical stores help sellers compete?

Executive Summary

Consumers in an Internet age have the world at their fingertips. They can buy on the Web, on mobile devices and via social media. They can shop seven days a week at any time of day and buy from anyone anywhere. Some browse the Internet, then buy in a store; others browse in a store, then buy online from a competitor. To survive in this demanding environment, retailers are breaking down the boundaries between physical and digital “channels,” the ways in which they sell and distribute products to consumers. Retailers are blending their operations into a seamless experience the industry calls omnichannel retailing. Growth in this type of selling comes at a time when retailers are facing increasing competition and shrinking profit margins. As a result, they are trying to improve their Web experiences, bring the digital world into the store and reorganize their supply chains for speed. The challenge is daunting and raises numerous questions. Can existing supply chains support growing omnichannel retailing? Can Internet retailing help small businesses compete? Will brick-and-mortar stores disappear?

Resources

Bibliography

Books

Giannetto, David, “Big Social Mobile: How Digital Initiatives Can Reshape the Enterprise and Drive Business Results,” Palgrave Macmillan, 2014. A marketing consultant and former CEO illustrates how retailers can use mobile to drive business.

Howard, Vicki, “From Main Street to Mall: The Rise and Fall of the American Department Store,” University of Pennsylvania Press, 2015. A history professor traces the history of retail through department stores.

Lord, Bob, and Ray Velez, “Converge: Transforming Business at the Intersection of Marketing and Technology,” Wiley, 2013. The then-CEO (Lord) and the chief technical officer (Velez) of digital marketing agency Razorfish explain how the merging of technology, media and creativity is revolutionizing marketing and business strategy.

Articles

Bond, Josh, “The Home Depot builds an omnichannel supply chain,” Modern Materials Handling, Feb. 1, 2015, http://tinyurl.com/o9sk5oj. Home Depot is tweaking its supply chain to cater to omnichannel customers.

Gard, Sabuhi, “Meet the small business owners who are profiting from online retail,” The Guardian, June 21, 2013, http://tinyurl.com/qf2zf9c. Small retailers are finding easy access to markets and customers through such sites as Etsy.

Gustafson, Krystina, “The Incredible Shrinking American Retail Store,” The Fiscal Times, Jan. 23, 2014, http://tinyurl.com/nsjzgj6. Experts say average store size could shrink by as much as 50 percent in the next decade as more consumers shift to e-commerce and have less incentive to visit brick-and-mortar establishments.

Isidore, Chris, “Everything must go: There's a flood of store closings,” CNNMoney, July 3, 2014, http://tinyurl.com/o52xb6h. A number of large retailers, including Sears, Staples, Radio Shack and Macy's, are closing stores in response to changing shopping patterns.

Korber, Sabrina, “Retail's ‘beacon’ of hope: Shopping that's personal,” CNBC.com, May 26, 2015, http://tinyurl.com/ovrabxq. Retailers, including Macy's, Gamestop and mall owner Simon Property Group, are experimenting with beacons that can “push” messages to customers near their stores. Shoppers engage in the popular trend of “webrooming,” where they research products online and visit stores to buy them.

Popovec, Jennifer Duell, “Toys ‘R’ Us Shifts Bricks-and-Mortar Strategy,” National Real Estate Investor, April 1, 2015, http://tinyurl.com/ondxglx. Toys R Us is adding spaces for play to its stores and enhancing its customer service to make those stores more relevant.

Stambor, Zak, “Striving to stay competitive, Staples opens ‘omnichannel’ stores,” Internet Retailer, Aug. 30, 2013, http://tinyurl.com/qepv4vu. The office supply retailer is integrating more digital elements in its stores to bring the Web experience to the physical world.

Reports and Studies

“In-Store Personalization: Creepy or Cool? Consumer Attitudes towards ‘The Store of the Future,’” RichRelevance, May 2015, http://tinyurl.com/pq9cmx3. A study and infographic highlight how consumers view retail technology.

“The Omnichannel Opportunity: Unlocking the Power of the Connected Consumer,” Deloitte, February 2014, http://tinyurl.com/kawbpgs. A study commissioned by eBay examines the effects of omnichannel strategies in selected European markets and measures the value for retailers.

“Showrooming and Webrooming: A Tale of Two Trends,” Harris Interactive, Dec. 3, 2013, http://tinyurl.com/peh84ch. The practices of showrooming and webrooming are growing, according to a survey of 2,250 U.S. adults.

“Social Commerce,” JWT Intelligence, July 2011, http://tinyurl.com/o43dtqu. Retailers and brands are using social media to engage customers wherever they may be with custom content and experiences, according to a report from the research arm of marketing agency J. Walter Thompson.

The Next Step

Retail Technology

Katzmaier, David, “Samsung shows retail-ready transparent, mirrored OLED,” CNET, June 10, 2015, http://tinyurl.com/o8mcrdn. To personalize the shopping experience, technology firm Samsung has developed transparent glass displays that use virtual reality in fitting rooms, allowing customers to try on items in different settings.

Sciacca, Annie, “Target launches technology lab and retail space in San Francisco,” San Francisco Business Times, July 9, 2015, http://tinyurl.com/papgex7. A planned Target store in San Francisco will showcase wirelessly connected home appliances and include lab and meeting space for tech companies.

Young, Molly, “At Rebecca Minkoff in SoHo, Interface-to-Face Service,” The New York Times, Feb. 10, 2015, http://tinyurl.com/pxxlnp3. A high-end handbag designer opened an interactive store in New York City's SoHo neighborhood where customers can use touch screens to request items to try on or to notify them when fitting rooms are available.

Physical Stores

Johnston, Chris, “Amazon's first bricks-and-mortar store opens in … Indiana,” The Guardian, Feb. 3, 2015, http://tinyurl.com/q3gvk5h. Web retailer Amazon opened its first physical store at Purdue University in West Lafayette, Ind., where customers can pick up merchandise ordered online.

Lindeman, Teresa F., “Department stores, including Macy's, looking for ways to evolve,” The Pittsburgh Post-Gazette, July 19, 2015, http://tinyurl.com/nq8uzwo. Department stores such as Macy's and Nordstrom are adapting to e-commerce's growing role in retail by selling physical locations and introducing personalized online shopping.

Ramakrishnan, Sruthi, “Deeper back-to-school discounts to hurt teen clothing retailers,” Reuters, July 22, 2015, http://tinyurl.com/qh5o5wk. The growing popularity of online shopping and changing consumer tastes are forcing some apparel retailers to close physical stores, cut jobs or offer higher-than-normal discounts.

“Showrooming”

Evensen, Jay, “Allowing states to collect sales taxes from online purchases is a tough sell,” Deseret (Utah) News, July 1, 2015, http://tinyurl.com/paogyz3. Rep. Jason Chaffetz, R-Utah, wants online purchases taxed so states don't lose out on revenue compromised by “showrooming,” but he has been unable to get Congress to go along.

Halzack, Sarah, “The new shopping behavior that is creating big challenges for the retail industry,” The Washington Post, Feb. 11, 2015, http://tinyurl.com/nepzghg. The practice of “webrooming,” in which shoppers check prices online before arriving in stores, can threaten retailers' ability to suggest other products or to help customers who have already researched what they want to buy.

Soper, Spencer, “Amazon Showrooming Forces Stores to Go Digital on Price Displays,” Bloomberg Business, July 17, 2015, http://tinyurl.com/ndvv7ow. Retailers are investing in digital displays in stores that compare their prices with competitors' in order to prevent customers from showrooming.

Small Businesses

Greenberg, Julia, “Tictail Wants To Be Your Global Marketplace By Going Local,” Wired, July 29, 2015, http://tinyurl.com/nahw3a2. A Swedish start-up offers personalized websites and marketing to small businesses so they can compete in the international marketplace.

Jayakumar, Amrita, “It's not just Amazon and Facebook. Small businesses want to use drones too,” The Washington Post, July 16, 2015, http://tinyurl.com/plnapxp. Professors, tech company executives and small-business owners asked a House committee to encourage the Federal Aviation Agency to quickly craft rules that would allow small businesses to use drones.

Zimmerman, Eilene, “Makers of Custom Sneakers Cash In on Desire for One-of-a-Kind Goods,” The New York Times, July 1, 2015, http://tinyurl.com/nmg3ef4. Custom shoe companies are thriving on the online handmade goods marketplace Etsy, thanks to the personalized customer appeal of handmade shoes and the rise of e-commerce.

Organizations

American Marketing Association
311 S. Wacker Drive, Suite 5800, Chicago, IL 60606
312-542-9000
www.ama.org
World's largest marketing association, with 30,000 members in marketing and academia.

Electronic Retailing Association
607 14th St., N.W., Suite 530, Washington, DC 20005
703-841-1751
www.retailing.org
Trade organization representing direct-to-consumer marketers.

National Retail Federation
101 New York Ave., N.W., Washington, DC 20005
202-737-2849
www.nrf.com
Trade association whose mission is to advance the interests of the retail industry through advocacy, communication and education.

National Small Business Association
1156 15th St., N.W., Suite 1100, Washington, D.C. 20005
800-345-6728
www.nsba.biz
Small-business advocacy group with 65,000 members.

Retail Industry Leaders Association
1700 N. Moore St., Suite 2250, Arlington, VA 22209
703-841-2300
www.rila.org
Trade association and advocate for large retail organizations.

Retail Merchants Association
5101 Monument Ave., Richmond, VA 23230
804-662-5500
www.retailmerchants.com
Association that advocates for retailers and small businesses in greater Richmond.

Retail Supply Chain Institute
Babson College 231 Forest St., Babson Park, MA 02457-0310
781-235-1200
http://www.babson.edu/Academics/centers/retail-supply-chain-institute
Academic institute that acts as a conduit for research between students, retailers and suppliers.

DOI: 10.1177/2374556815603685