“There’s nothing like the smell of burning brick and mortar in the morning”
- Col. Bezos
“Never get out of the Boat”
It seems like everyone you know is shopping on the internet. You’re wondering whether you should start buying your groceries online. The President of the United States is railing against Amazon. The CEO of Alibaba is all over your Facebook feed. The traditional giants of the retail industry are shuttering some or all of their stores. Statista is predicting that worldwide eCommerce sales will reach 4.878 trillion dollars by 2021. Sears and Toys’R’Us are on a death watch, along with plenty of other stores whose names seemed like permanent parts of our lives. But the fact remains: people like shopping in stores. They like trying on clothes, feeling and smelling the produce they buy, playing with an iPhone X before purchase, and driving home with a car full of exactly what they want to take home and use. Like you, most people believe that the growth of eCommerce is inevitable, but they also feel a deep emotional connection to the way they’ve always shopped. Today we’ll be looking at the rise of eCommerce and the future of retail.
One thing to note is what Foursquare CEO Jeff Glueck calls the “bifurcation of the economy.” Writing in Forbes Magazine, Glueck notes that brands at the bargain end of the spectrum like Dollar Tree (think Home Bargains in the UK) and Big Lots have had increased foot traffic over the past few years, while retailers at the highest end of the retail spectrum like Lord & Taylor and Saks are also seeing increased customer visits. Glueck posits that a middle class that’s under pressure is seeking increased value online, while bargain hunters, those below the poverty line, and those in search of opulent retail experiences are continuing to visit brick and mortar stores. Even the online titan Amazon, with its recent acquisition of Whole Foods has made a giant investment in actual, physical storefronts, even though it may not operate them in the traditional way.
eCommerce is growing exponentially, but it still only accounts for approximately 10% of the total retail market. As a recent Adweek survey notes, it has been exceptionally strong in the clothing sector, where it accounts for approximately 40% of total sales, but less successful so far in more personal areas like health and beauty (6.8%) and food and beverage (2.8%). eCommerce retailers like Amazon, Bonobo, and the clothing store Everlane have been experts at capturing and exploiting customer data, but the market is tightening as the cost of customer acquisition, through increased ad and re-direct costs on platforms like Google, Facebook and Instagram are putting the squeeze on retailers.
“Someday this war’s gonna end”
As online retailers have shifted into opening physical stores, they have brought the innovation and creativity of the internet into physical spaces. The AmazonGo stores in Seattle have allowed consumers to grab and go, with an app, sensors and cameras tracking purchases and debiting customer accounts. The online clothing retailer Everlane has set up showrooms in New York and San Francisco where customers can try on, feel and return items. In both cases, the retailers don’t accept cash at their shops, in order to continue tracking valuable customer information in order to target messages to consumers and better understand their shopping habits. Innovative online retailers are also experimenting with chatbots and virtual and augmented reality in order to offer customers personalized service and the chance to try out products before purchase.
Many more traditional retailers are scrambling to match the innovations of these new and nimble upstarts. The Gap, a 50-year-old clothing company, has been experimenting with the intensive use of customer data, purchasing histories, and targeted offers to aggressively grow its online business. Walmart, meanwhile, has been spending heavily to keep up with Amazon’s cannonball into the grocery pool. They expect their online sales to grow by 40% this year as they cut back on new store openings and make “an aggressive push into online grocery and increased capital spending on digital supply chain capabilities and in-store technology.” Is Amazon becoming Walmart, or is Walmart becoming Amazon?
Stoned Martin Sheen Talks Philosophically to the mirror
As Hegel or Kant or some other presumably super intelligent German said, progress happens when Thesis, the widely accepted idea, meets Anti-thesis, the negation or refutation of that idea, and the two meet in Synthesis, the reconciliation of the two opposing viewpoints. This is what is happening in the future of retail. Online giants are realizing that while some customers are willing to buy everything online, most are only comfortable buying some things some of the time, and most are still sentimentally attached to the shopping experiences they’ve grown up with. On the other end of the spectrum are giant retailers who have realized that customers love the convenience and savings they can take advantage of when they get the grocery shopping done while watching Apocalypse Now and lying on the couch.
The smartest people on both sides of the eCommerce divide have realized that a synthesis of online and brick and mortar retail that allows consumers to leverage the most convenience, best customer service and maximum savings from their transactions is the recipe for dominating the marketplace of both the present and the future. We at Adimo are committed to providing retailers and brands the tools to offer the ease of shopping on Amazon while continuing relationships with the products and stores they love.