As the ecommerce market becomes increasingly crowded, more pure-play etailers are taking steps towards launching a physical presence.
Following the success of Amazon’s first physical bookstore, it is very likely the etail giant will roll out more bricks-and-mortar shops across the USA – and in time globally.
The drive to ‘go physical’ is an ever-increasing phenomenon as the online retail market becomes more crowded. And in the last few years, many new players have entered the sector and grabbed significant market share
In order to stand out in the face of such competition, online pure-plays should consider investing in limited physical retail networks.
The UK’s most successful high street brands are those that have developed their multichannel offer and merged distribution channels, but whose physical stores are still crucial in terms of customer engagement, increasing sales and brand awareness.
Multichannel approach
A single channel retail offer really is no longer an option. Click-and-collect is the fastest growing sector of ecommerce and bricks-and-mortar stores still account for the majority of final transactions.
“A single channel retail offer really is no longer an option”
Jonathan De Mello, Harper Dennis Hobbs
Click-and-collect gives those traditional bricks-and-mortar retailers that have invested in a transactional website a tremendous advantage over their pure-play peers.
This is best evidenced over Christmas, when pure-play sales drop considerably given shopper reluctance to leave the delivery of important Christmas presents up to the vagaries of the postal network.
This issue has been compounded more recently in the UK, with a reported significant shortfall in lorry drivers needed to physically deliver online product to shoppers. This has increased the cost of home delivery to retailers, and as a result, many are having to charge more for home delivery and setting minimum order values.
The net effect of this is to make physical shops more attractive to shoppers – and also to retailers that don’t currently have a physical network.
Complementary channels
Harper Dennis Hobbs advises that rather than investing in a substantial physical store network, online pure-plays would do well to emulate international retailers when they enter a new market for the first time – for example, flagship stores in key high footfall centres to build brand equity (including concessions in major department stores); pop-ups to test new markets and lines; and ecommerce fulfilment for the wider market.
This approach would build significant brand equity and interest and allow for the testing of new concepts, while keeping the cost of operating a physical store network to a minimum.
It also gives the pure-plays access to click-and-collect services that they can fully control; taking the opportunity to upsell other products too.
Investing in a limited physical store network in this way would create barriers to entry to other online pure plays, where currently only minimal barriers to entry exist.
A couple of months ago, Harper Dennis Hobbs acquired a physical shop for online fashion pure-play Poetry, which sells high end womenswear.
The store – located in Chelsea – is trading well ahead of expectations, and in addition to the profit the store itself delivers, the presence of the store has boosted online sales in a wide catchment area around the store too.
- Jonathan De Mello is director head of retail consultancy at Harper Dennis Hobbs
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