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Online Retailers Moving Traditional April, 2013


Online Retailers Moving Traditional The advent of advanced technology has changed the consumer behavior as well as the retailing environment. The consumer’s expectation has not only changed about the product and price, but also about the service. The retailers are forced to re-define their business model and identify the best possible options to understand and serve the new age consumer needs. To reach both types of consumers, traditional and tech savvy, retailers have started selling through online medium too in addition to a retail store. Although the experience of shopping in a traditional store cannot be replaced by online shopping, there seems to be an Source: Ericsson ConsumerLab Analytical Platform 2012 increasing need to offer through online Base: Internet users in the USA, aged 15 and upwards channel too, for the possibility of passing on the cost savings (occurring from not needing to have a physical presence) to the final customer. Needless to say, many shoppers miss out on the ‘look and feel’ possibility that they have at a physical store, but are increasingly seen to buy many of their other needs like electrical gadgets online.

Brick and Mortar moves online and Online moves to Brick and Mortar The growth of online shopping has been tremendous over the last few years. According to A.T. Kearney's 2012 E-Commerce Index, the global online retail sale for 2011 was $400 Bn which saw CAGR of over 13% during 2006-11. The growth in online retail is mainly driven by consumer attractiveness towards the lower price and ease in comparison of products. Though most of the retailers across the world are moving toward the online channel to capture the growing online market share, there are some online retailers who are looking backwards, or towards traditional retailing to fancy their chances to increase the top-line. This move is expected to help online retailers to expand their distribution channel and get an exposure of traditional shopping and also fulfill the consumer sentiments of touch and feel of the product before making a purchase.

Here are some case examples... 1. Online retail giant, Amazon is planning to open its first brick and mortar store and distribution centers. Similarly, Apple has done the same to serve their consumers.

Online Retailers Moving Traditional

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Source: Form 10Q, Apple Inc; http://www.apple.com/retail/storelis; Company Annual Reports, Apple Inc.

2. Bauble Bar, an online fashion jewelry retailer, opened a store in New York in October 2012 3. Piperlime, an online division of GAP, opened a 4000-square feet store in Manhattan, New York in September 2012 4. Once proudly launched as a web-only store, Bonobos, opened a store in Manhattan in Q4, 2012 5. EBay and Etsy are testing temporary stores that may not sell merchandise, but may display scannable display images that are also gift ideas

“No matter how connected a consumer is, there is a part of shopping that involves the experience itself. Particularly with millennial consumers, shopping is a hobby,…..The trend is, people are going online more and more for everything they do…… but “they still want a haven.” Jennifer Gosselin, General Manager, Piperlime

6. Warby Parker, the eyeglass brand has also announced plans to be present in a physical location

“Well over 90 percent of sales still happen in physical stores, so there is a huge, compelling reason to think about the physical store as a driver of sales” Sucharita Mulpuru, an analyst at Forrester Research

“ ...We think service is more important than instant gratification … What's the benefit of walking out of the store with a bag of two shirts and some pants if it'll be on your desk the next day? ..” - Andy Dunn, Founder, Bonobos

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In the cut-throat retail space, retailers are trying to woo customers by providing them seamless experience across multi-channel retail platforms. Traditional retailers are doing forward integration by adapting online medium of retail; likewise online retailers are doing backward integration and opening up physical stores, all in an attempt to have presence across all platforms of retail. As they say, ‘Customer is King’ and who knows which platform a king chooses when he wishes to spend.

Source: All data from Secondary Research; Sutherland Analysis

Online Retailers Moving Traditional

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