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CAN BRICKS AND MORTAR RETAILERS SURVIVE THE E-COMMERCE REVOLUTION?

19-06-2015
by 
in 

US eCommerce expert Kim Baudry, Director Business Development at Dematic, examines the challenges now facing retail businesses and how they can survive the online e-commerce onslaught …

Are traditional bricks and mortar retail stores becoming obsolete?

No they are just in the midst of a major change. Omni-channel retailing and supply chain initiatives are key for retailers to remain relevant and profitable. Companies that figure out the right store count, format, and offer effective direct to consumer programs will not only survive but thrive.

 

Which sectors have been most affected and why?

The first market segments to feel the impact of competition from pure play e-commerce companies and changes in the way consumers shop were books/music, electronics, general merchandise and apparel. These were segments that Amazon aggressively targeted when they started their work in the US and in many cases drove companies out of business (i.e Borders Books, Circuit City, Blockbuster).

Companies that are making changes to combat the competitive threat from Amazon, such as Walmart, Best Buy, and many apparel companies are likely to weather the storm and emerge with new ways to serve their customers in the future.

 

What must they do to meet the expectations of an ever-evolving consumer?

Provide excellent service regardless of the channel they are interacting with their customers in whether it be a large store format, small store format or e-commerce. This means delivering products accurately, on time and with competitive prices anywhere the customer may buy or wish to have them delivered.

 

Online retailers Vs glittering shopping malls – which one will win in the long run?

It will be a combination of both; customers still like to shop in-stores but the number of stores and malls will shrink as more customers expand to buying on line. In the US many retailers are moving out of malls and to local stand alone shops or outdoor shopping venues rather than malls.

 

A FedEx study conducted earlier this year with 9000 respondents from 17 countries, said shipping related concerns were a crucial factor when purchasing online. More than half said shipping costs determine their purchase decision. Is this the biggest advantage retailers have over e-tailers?

It can be if retailers find a way to capitalise on their existing store infrastructure for last mile fulfilment or in-store fulfilment efforts. There are many more stores in the US than there are distribution centres so if retailers find effective ways to use their stores to fill orders they would have a competitive advantage over e-tailers.

 

According to the survey, lack of trust is another key issue when buying online. Only 11% of those surveyed would choose to purchase from an SME independent online retailer. Your opinion?

I think this is consistent with shopping patterns seen by both e-tailers and retailers; until an e-tailer is well known and of a certain size customers are uncertain of purchasing from them, whereas, a traditional retailer with a store presence is more “reliable” in the eyes of a consumer because the customer can interact with the company directly and in person.

 

Long shipping delays and inability to track packages are also major concerns for online buyers. Obviously, this is not an issue for retailers. Your view?

If product is not in stock at a retailer it can be as detrimental to a retailer as shipping issues for e-tailers. Also, any retailer that also sells direct to consumer can harm their store brand if their online channel fails to meet customer expectations.

 

Finally, what advice would you give to retailers who are struggling to survive against a plethora of online retail sites?

Cross channel initiatives in organisations will be key; siloed business segments that do not communicate plans across an organisation will not succeed. The front end of retailing (marketing, merchandising, management) needs to communicate and plan with the supply chain in order to execute plans for omni-channel retailing.

Study companies that are pushing omni-channel retailing initiatives and understand what is working for them – i.e. mobile commerce, social media, order online pick up in store, RFID inventory tracking).

Know your competitors – which is now more than just brick and mortar and examine what you need to do to remain competitive.

Most of all know your customer – their buying patterns, what they expect in their interaction with your company, what are their key purchasing drivers (i.e. free shipping, free returns).

Finally, always push the envelope and think outside the box. What works today may not work next year so constant evaluation of programs is key to survival.

 

*Ms Baudry was a keynote speaker at the recent Smart Conference 2015 in Melbourne.

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