When Online Retailers Expand to Physical Stores


As legacy retail stores are closing down one after the other, why is it that online retailers are opening more and more physical stores?


            Online shopping websites such as Amazon, Warby Parker, Bonobos and Casper are expanding their businesses by moving from websites to physical stores when just as many traditional retail stores are facing problems and gradually closing down. What is the determinant factor for these online websites to open one physical store after the other and how will they manage to differentiate their stores from those focing problems?

            Many have come to name it a clicks and bricks model.  The objecrove of the online shopping websites are obvious: to create a new kind of customer experience and make customers feel special in a personal way while meeting the need at large in the same token in order to induce repeat purchase and customer loyalty, increase the average total of each purchase and also see a better interaction between brand and customer turn into long term relationship. Besides, online businesses have an edge over legscy retailers as they can offer a level of convenience, starting from placing orders to fast and safe delivery; all of which can be enhanced through physical brick and mortar retail stores.  Following are four examples:

  • The Personalized Experience: ModCloth is a good example of a physical store that enhances customer experience through personalized design reflecting individual customers’ needs. It’s an online retailer for women’s clothing that has opened shops where customers can make appointments for fitting as well as consulting with stylists while being able to choose to shop at the store or order online for home delivery.
  • The Showroom: A shop that has been designed as a showroom where customers can stop by to view, try on and touch displayed items only.  Given a customer’s wish list item, the shop can ship the product from its warehouse to the customer’s home.  As the storage requirement to have high demand products at the actual retail store is removed, available limited space can be utilized primarily for display items and layout designs for much needed marketing purposes.  Furthermore, in comparison to legscy retail stores that have to ship products from the warehouse to replenish sold items at the stores, e-commerce showrooms is more profitable simply from less associated overhead.  On the flip side, the opportunity cost for such e-commerce showrooms lie in the loss of sales as a survey has found that nearly 50% of customers who like the items they have personally touched want to take them home immediately. Thus, such showrooms are suitable for specific types of business, only.  An example of successful stores in this category is Warby Parker, an online retailer of prescription glasses and sunglasses that has opened 64 physical retail branches with the aim to open altogether 100 branches by the end of 2018.  The reason behind the opening is that its customers like trying on the glasses before deciding whether or not to place an orders.  A unique nature of the business is that it is normal to have to wait to receive the glasses as the opticians need time to make them anyways so delivery becomes a viable solution that’s saves a second trip to the store.
  • Incorporating Technology: Expanding to set up physical shops or stores, many online retailers make use of technology to enhance the customers’ buying experience.  When the customer walks in and logs in, the staff of some of these shops or stores can tell what products he/she has previously bought and suggest suitable products. Furthermore, technology is also used in selection process of selecting locations for a new branch or for creating special experiences for customers.  For example, Charlotte Tilbury, a British beauty and skincare company, uses AR to demonstrate more than ten make-up patterns for customers through special equipment that enhances shopping items as well as confidence while shopping. 
  • Display of Goods in Other Shops/Stores: Another option regarding the opening of additional physical shops is to display goods in shops at other locations which displays other items that are available to its own.

             What conventional retailers can learn from online business is the digital perspective that aids management.  Home Depot is another retailer that has started using applications and technologies like the AR Chatbot to enhance customer experience. Customers can search for desired items through Picture Matching while using AR system. That is a convenience because it saves invaluable time otherwise required to make an informed decision. And convenience saves customer loyalty.



Compiled by BLOG.SCGLogistics

Reference and photos supplychaindive.com, freepik.com

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