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Etailers Get Physical

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Once again, the physical element of the brick-and-mortar format can’t be ignored.

ModCloth, an online only retailer for 13 years, opened its first physical store toward the end of 2015. Soon after, it learned the benefits of having a physical presence and ways to improve upon the winning online formula it had. CEO Mike Kansas said customers immediately indicated what they loved, like pockets and linings in dresses and skirts. ModCloth is just one example of online companies moving to Main Street.

“Today’s customers shop in multiple formats," says Vicki Cantrell, who heads the digital division of the National Retail Federation. The move to multiple channels for sales is “absolutely a growth strategy for these companies."

Customers still want to try on, touch and feel the items they’re buying.  Eyeglass seller Warby Parker; men’s clothier Bonobos; RenttheRunway, which rents designer dresses; and Birchbox, a subscription service for beauty products, have all added brick-and-mortar stores to their buying venues.

Wendy Liebmann, CEO of consultancy WSL Strategic Retail in New York City, notes that physical stores also make for excellent marketing and advertising vehicles. “It’s a way to differentiate from the plethora of virtual stores online today.”

Another reason online retailers like physical stores is because they attract real-world customers that they can observe to gain valuable insight into what sells and what doesn’t.

“If you look at it from a market research standpoint, [a store] pays for itself,” says Sucharita Mulpuru, a senior analyst with Forrester Research. “It costs $10,000 to pull a focus group together. If you look at how much it would cost you to do market research, and the amount of market research you gain just by observing people, it’s the equivalent of 100 focus groups.”

Even if a store made little money on its own, and most make a lot, they'd still be worth opening just for the chance to watch customers in action, Mulpuru says.

Of course, the big news is Amazon’s foray into brick-and-mortar. The mere thought of the online giant succumbing to the street should give physical retailers that “told you so” moment, but also make them nervous and up their game.

Amazon’s recently opened Seattle store ironically concentrates on books—those which are proven customer favorites. But the store also sells Amazon devices such as the Kindle, Echo, Fire TV, and Fire Tablet. User reviews are prominently displayed everywhere.

In a stroke of genius or arrogance, or both, Amazon does not display prices, so the customer is forced to download the Amazon app to look up prices or use an in-store scanner.

Amazon is also making appearances on college campuses. Students can pick up things they ordered on Amazon, and place new orders. A new pickup point at the University of Pennsylvania will also offer study and collaboration space for student use, and will provide same-day or next-day pickup for members of Amazon Student or Amazon Prime. Consumers who live nearby but who aren’t affiliated with the university will also be able to register the pickup center as a delivery address and pick up their packages there.

“The preference by today’s students for online shopping has led to a significant increase in deliveries. When we looked closely at the shipping activity, we discovered that almost half of all packages delivered to Penn student mail rooms were from Amazon,” Marie Witt, the Vice President of Business Services at Penn, explained in a statement.

What this means is that opportunities for stores and new formats seem unlimited. But this also forces existing stores to rethink their strategies and come up with new merchandising and customer experiences to compete with this wave of online-to-Main-Street sellers.

TAGS: retail, retail trends, retailers, omni-channel,
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