The emergence of electronic commerce (e-commerce) in the retail industry has considerably shaken up and changed the retail landscape. This short article will briefly summarize the changes of the last few years.
Both retailers and consumers have increasingly become accustomed to using the online channel. As a result, e-commerce has become an important part of the retail market. Today’s consumers are more demanding and use different channels while shopping (Piotrowicz & Cuthbertson, 2014). The enormous growth of e-commerce along with the rapid development of information technology has caused a fundamental change in the retail industry. E-tailing offers greater flexibility, convenience and customization. Furthermore, it enables retailers to reach more customers. In general, the new developments have had an adverse impact on the market’s attractiveness (Lu & Liu, 2015). Although the competition has increased, e-commerce also provides many new opportunities. Several studies have proven that online shopping can enhance the shopping experience (Piotrowicz & Cuthbertson, 2014; Blazquez, 2014). The number of multichannel retailing is growing and new technologies enabled the integration of channels. Also, brick-and-mortar stores are changing their layout and make use of technology in order to improve the in-store experience. The changes in the retail have substantially changed users’ shopping behavior as well as their social interaction (Blazquez, 2014). With new technologies, such as social commerce and the omnichannel, and an increasing popularity e-commerce will continue to affect the retail industry.
Some people wonder if the physical retail stores will ultimately disappear totally; I disagree. For some product categories, this could be the case, but for many other product categories people might still want to see, test and/or feel the product before they purchase it. Moreover, a new business model is emerging: Online to Offline (O2O). Alibaba, one of the largest e-commerce companies in the world, recently announced that it will open physical stores (Ong, 2017). In the Netherlands, the e-commerce company Cool Blue, already has opened up some physical stores (Ecommerce News, 2017). O2O embraces “Online discovery, offline showroom”, meaning that brands use their psychical stores as showrooms, where customers can feel, try and see the products. Thus, I do not think that brick-and-mortar stores will disappear in the retail industry.
Please leave your thoughts about this in the comments!
Bibliography:
Blazquez M. (2014). Fashion shopping in multichannel retail: The role of technology in enhancing the customer experience. International Journal Of Electronic Commerce, 18(4), 97-116. doi:10.2753/JEC1086-4415180404
Ecommerce News. (2017). Coolblue: “We are 90% ready for expansion in Europe”. Ecommerce News. Retrieved 21 October 2017, from https://ecommercenews.eu/coolblue-90-ready-expansion-europe/
Piotrowicz W., & Cuthbertson R. (2014). Introduction to the special issue information technology in retail: Toward omnichannel retailing. International Journal Of Electronic Commerce, 18(4), 5-16. doi:10.2753/JEC1086-4415180400
Lu Q., & Liu N. (2015). Effects of e-commerce channel entry in a two-echelon supply chain: A comparative analysis of single- and dual-channel distribution systems. International Journal Of Production Economics, 165, 100-111. doi:10.1016/j.ijpe.2015.03.001
Ong, K. (2017). Alibaba’s first mall shows that O2O is a real business model. Techinasia.com. Retrieved 21 October 2017, from https://www.techinasia.com/talk/opinion-alibabas-mall-shows-o2o-real-business-model
Hey Jeroen,
Thank you for your article! It was certainly a very interesting read! You hear so often people talking about the “death of brick & mortar” where actually you really are starting to see a shift from online to offline and even in some stores integration between their online and offline stores. If I wanted to try on a pair of jeans I saw from an online storefront, there are some stores that allow me to see if my size is in stock nearby and even reserve it or pick it up in store. Furthermore, Amazon is even ironically starting to open up bookstores. Do you think this is a nod back to traditional retail? Where companies are starting to realize as social beings we want to be able to interact with their brand physically? Or do you think this is the start of a new kind of brick & mortar store completely? One that is less reliant on having the “hit products in stock” and more focused on experience?
Nice article! I also agree and think brick and mortar stores will not disappear. However, there is a side note that has to be made in my opinion. I do feel that in some industries brick and mortar stores are more important than in others. People are nowadays fine with buying electronics, clothes and even groceries online. So maybe for only a few products, as told by Pieter Zwart, such as TV’s will be bought in store since it remains hard to picture how big it is, how the screen looks in real life etc. But other commodities such as book stores will maybe disappear in the new future as online markets become bigger and more people looking to buy specialized products from the long tail.
Thanks for providing this informative article. I agree that physical retail stores will not vanish. However, brick and mortar stores need to adapt to a new role to stay relevant in retail. Instead of being a place where consumers only buy products, they need to provide other benefits as well. For example bookstores. For most consumers it is not very attractive to go to a physical bookstore to just buy a book. If that same bookstore however organizes information sessions, lectures of writers etc., the brick and mortar bookstore keeps its relevancy for consumers.
Currently there is an increasing demand for customized products that are tailored specifically to the preferences of a particular customer (Baum, 2017). As 3D printing technology advances rapidly, the role can quickly change and keep stores at least as relevant as they are nowadays. Instead of being just a place where consumers buy products, physical stores will become a place where people customize products and eventually let produce them. Retailers can even encourage consumers to visit stores by installing 3D printers in their store to enable consumers to personalize a product (Berman, 2012). With Virtual Reality / Augmented Reality technology, consumers can actually see and experience how their customized product will look like (Sharma, 2017). The aforementioned technologies will reinforce each other, and – despite another role – keep brick and mortar stores very relevant in retail. Physical retail stores are therefore here to stay.
References:
Baum. T. (2017). How Carbon Helps Adidas Produce World’s First Mass-Produced 3D-Printed Footwear, Retrieved October 21, 2017 from: https://www.forbes.com/sites/oracle/2017/08/16/how-carbon-helps-adidas-produce-worlds-first-mass-produced-3d-printed-footwear/#3de844f41b76
Berman, B. (2012). 3-D printing: The new industrial revolution, Business Horizons, vol. 55, p. 155-162.
Sharma, A. (2017). How Retail Can Thrive in a World Without Stores, Retrieved October 21, 2017 from: https://hbr.org/2017/07/how-retail-can-thrive-in-a-world-without-stores
Hello Jeroen! I really liked your article, it’s a very intresting topic, and I agree with what you said.
The number of e-commerce stores has sharply increased and the number of people making use of these are always more. However, I can hardly imagine a world without retail stores. People have the need to touch, try and check what they want. It’s true that the sale of many products categories would probably shift mainly towards webshops, but this won’t be enough to make the retailers disappear. Indeed, convenience is the keyword for them but experience is what makes the physical shop unique. Mostly of the time consumers are not just buying product but experiences and this cannot be found in the shopping online. I love going in a shop and spend hours looking for something that catch my attention, something that I would have probably never bought but once tried on become immediately my favourite cloth. The result is that when I get out from the shop, I have lived a surprising experience other than having bought a new skirt or a t-shirt. On this basis, I believe that e-commerce has been important for companies to realise how crucial physical retailer are for brand experience and business. For this reason, the key to exploit the benefits of both it’s understanding the different customers’ needs and meeting them in a bizzarre way, combining both online and offline. Some interesting examples could be the installation of an iPad in the changing room. It would help you to ask for another pair or size of jeans directly from there, without needing to look for one of the few sale assistants in the shop. Additionally, brick-and-mortgage retail stores could make use of a technology that allows them to send a message to the smartphones of their customers as they pass by. This solution would be a great tool to track and engage customers.
References:
How to Merge Online and Offline For Retailers. [Online]
Available at:
https://mofluid.com/blog/how-to-merge-online-and-offline-for-retailers/
Great post Jeroen. I did not know that Alibaba is also planning to open physical stores. Considering this fact, I think there are a few interesting shifts happening when it comes to brick-and-mortar stores and online stores.
It appears as if the more traditional stores who started with physical businesses before the internet era are increasingly experiencing the pressure of online stores. With the advantage of, for example not having to invest in real estate in prominent locations, hiring personnel needed for brick and mortar stores and other costs of traditional retailers, the online stores are able to offer lower prices, and gain market share. With consumers using online stores more and more, these start to proliferate in greater amounts, and the traditional physical stores who begin to lose sales cannot compete against them anymore. We have seen many retailers disappear in these last years, and I think there are some more vanishing in the near future. However, what I am noticing is that it seems as if these emerging initially online only stores are driving the conventional physical stores out of business, or at least reduce their number of stores considerably, to go on and open the same physical stores after they become big and get deep pockets. So, what we see is that the traditional retailers still in business extend their business with an online store, and the initial e-commerce players extend theirs with physical stores. So, I agree with you that retail stores will not disappear completely due to the emergence of e-commerce. Seeing that the online giants are also interested in opening physical stores suggests that face-to-face interaction is a key aspect of doing business and building a brand besides providing customers with the possibility to look and test the products they intend to buy. Therefore, I believe that although the presence of brick and mortar stores will diminish, there will be a number of new (e-commerce) companies increasingly moving to this area.
Dear Jeroen,
Interesting article! I actually wrote an article on the very same subject a while back, where I specifically focused on the role of virtual reality (VR) in the disruption of e-commerce on the retail market.
As for your conclusion on the subject, I totally agree. I also think that traditional brick-and-mortar stores will not completely disappear in the future. E-commerce giants, such as Amazon and Alibaba, are indeed opening up physical stores, as there are many products people will want to see, test and/or feel. The current e-commerce market is full of innovation, focused on quicker delivery for instance, but there has been no truly disruptive innovation yet which might renew the business model.
However, I do want to emphasize the potential of virtual reality. As you can imagine, VR is able to let customers try products at home. Where you state that O2O embraces “Online discovery, offline showroom” VR will embrace online discovery, online showroom; people can try products at home. VR opens up the possibility for an AI-assistant who is perfectly adapted to your preferences. Next to that, it can simulate a setting for you to try it in. Furthermore, waiting lines for either dressing rooms or counters will be a thing of the past.
Maybe you remember the example of Pieter Zwart, CEO and founder of Coolblue, where he said that televisions need to be in a physical showroom, as customers tend to return one as they find the television to big once it is in the living room. Their wives don’t like the size. Physical stores will still not be able to put the actual television in your own living room. It will only enable customers to put it in perspective before they buy one, where VR will put the television directly in a customer’s living room.
I wonder what you think of this potentially disruptive technology. Like I mentioned before, I do not think the physical stores will disappear. VR is and will always be a simulation. But for all we know, the technological advances made will be so promising, that VR can actually simulate information for all the five human senses and we are both proven wrong.
I refer to my own article for research on the subject: https://digitalstrategy.rsm.nl//2017/10/21/will-brick-and-mortar-retail-stores-disappear-in-the-future/
Dear Jeroen,
Interesting article! I actually wrote an article on the very same subject a while back, where I specifically focused on the role of virtual reality (VR) in the disruption of e-commerce on the retail market.
As for your conclusion on the subject, I totally agree. I also think that traditional brick-and-mortar stores will not completely disappear in the future. E-commerce giants, such as Amazon and Alibaba, are indeed opening up physical stores, as there are many products people will want to see, test and/or feel. The current e-commerce market is full of innovation, focused on quicker delivery for instance, but there has been no truly disruptive innovation yet which might transform the business model.
However, I do want to emphasize the potential of virtual reality. As you can imagine, VR is able to let customers try products at home. Where you state that O2O embraces “Online discovery, offline showroom”, VR will embrace ‘Online discovery, online Showroom’; people can try products at home. VR opens up the possibility for an AI-assistant who is perfectly adapted to your preferences. Next to that, it can simulate a setting for you to try it in. Furthermore, waiting lines for either dressing rooms or counters will be a thing of the past.
Maybe you remember the example of Pieter Zwart, CEO and founder of Coolblue, in the guest lecture, where he said that televisions need to be in a physical showroom, as customers tend to return one as they find the television to big once it is in the living room. Their wives don’t like the size. Physical stores will still not be able to put the actual television in your own living room. It will only enable customers to put it in perspective before they buy one, where VR will put the television directly in a customer’s living room.
I wonder what you think of this potentially disruptive technology! Like I mentioned before, I do not think the physical stores will disappear. VR is and will always be a simulation. But for all we know, the technological advances made will be so promising, that VR can actually simulate information for all the five human senses and we are both proven wrong.
I refer to my own article for research on the subject:
https://digitalstrategy.rsm.nl//2017/10/21/will-brick-and-mortar-retail-stores-disappear-in-the-future/
I agree, I think there will always be brick-and-mortar stores. Online shops have too many limitations that cannot be fully mediated with the use of tools like Virtual reality: no physical examination of the product, no advice and judgement from personnel, no emotional purchase experience, etc. While reading your post I also had to think about Coolblue. Coolblue recently opened a physical store just across the street from my apartment even though it started off as a pure E-commerce company. Especially for high-interest products that are hard to evaluate and distinguish online (such as a TV screen – how would you be able to distinguish the quality of a ‘better TV screen’ without actually testing it?) and are very expensive. Therefore, you need a physical store.
Combining on- and offline stores is actually a very good strategy, they can complement one another. The products you sell online would most likely differ from the products you sell offline (like we discussed in the lecture about the longtail – in online stores there is a bigger variety of products and niche products can be sold. Or in the case of Coolblue even purpose-build products based on customer needs which the company detected with the help of customer analytics.)