Year after year the amount of spending on e-commerce exceeds the amount spent during the year before. Sometimes it seems like the end of the physical brick and mortar stores is near. The image above illustrates the recent trend in e-commerce sales which was published in 2019 by Statista. The forecast that was made was however heavily disrupted by the Covid-19 crisis. Stores had to close down and people were scared to go out to crowded stores. This accelerated the already existing trend of increasing e-commerce sales to a new level worldwide. These days anything can be ordered online, from groceries to shoes, it’ll be delivered to your front door at the push of a button. But does this mean that the end is near for the brick and mortar stores?
Simply put, no. While it’s true that the amount of e-commerce sales is quickly increasing, according to Ripen in the United States 92% of the total retail sales still take place in physical stores. So the surging rise of e-commerce still only accounts for 8% of the total retail market in the United States. It’s true that online stores offer the customer a very easy and comfortable way of buying products that physical stores can’t match. But physical stores offer the customer other aspects of shopping that their online counterparts are not able to fully match. Some examples of these are:
- Getting the item immediately: When an item is bought in a physical store the consumer pays for it and then immediately gets to take the product home and use it. Whereas with online orders it can take up to a few days before the item is delivered. This problem is currently being tackled by some big shopping sites by offering same day delivery options.
- Shipping costs: People don’t like to pay for the shipping of their products. In fact, according to Forbes shipping options are the number one reason for consumers to abandon their online cart before ordering. Some companies are countering this by offering free shipping on their orders but this strategy is terrible for their profitability.
- Feeling the product in person: Customers like to see and experience the product in person. They want to touch it and see if the quality is adequate. This is something that online shops can never fully match. But one way of imitating this is sending samples to customers.
There are plenty of other reasons for consumers to prefer physical stores over online ones. With the upcoming of e-commerce many companies who originally only had physical stores opened up webshops to get a piece of this growing new way of making sales. But the opposite has also happened. Stores that originally were exclusively making online sales started opening up physical stores in order to profit from the advantages that brick and mortar stores have to offer. An example is Coolblue, which started off as an e-commerce business but now has over 15 physical stores.
To conclude, the rise of e-commerce shops is a fact and it’ll inevitably continue to take over a larger market share of the retail market. But there will always be advantages that physical stores offer that simply can not be matched by online shops. The end is not near for brick and mortar stores but the development of e-commerce is definitely something to keep an eye on.
- https://www.bigcommerce.com/blog/online-shopping-statistics/#5-essential-online-shopping-statistics
- https://ripen.com/blog/ecommerce_survey
- https://www.forbes.com/sites/forbestechcouncil/2019/08/27/shipping-is-critical-to-keeping-online-shoppers-happy/?sh=6f34455178cb
Very interesting article! Considering the bright attention that digital business models generate, one is quick to call the dead of offline commerce to be close. While I agree with your three mentioned main incentives to buy things offline, immediacy, “free” shipping and in person evaluation of products, I believe, that services like Klarna (buy-now and pay-later) or Quick Commerce startups like Gorillas are bridging these gaps in online shopping by reducing the “distance” between the consumer and the product even further. An interesting fact to consider is, that many upcoming brands are online-only shops that are promoted solely on social media. In the future, even upcoming technologies like virtual reality 2.0 could play a role in emulating the remaining incentives for offline shopping.
You are right about certain new companies and services reducing the distance between the customer and the product. Interesting take on the problems of e-commerce in comparison to the physical stores. I also assume that with time, these e-commerce businesses will keep getting better at mimicking the aspects that make physical stores attractive to consumers.
Great work! The topic of online vs offline is really interesting and appealing to me. I definitely agree with your examples on ‘why consumers could prefer offline’. Especially the last one of being able to feel, touch and experience a product is something that is hard to replicate online (e.g. clothing retail). What would have been interesting to analyse is how firms should change their business model or value proposition in order to combat online rivals. Knowing that online is growing, it is very interesting to investigate how traditional brick-and-mortar stores could sustain themselves by re-inventing their value proposition. Therefore, I believe adding potential counter-attack strategies would have made this article even more complete.
Interesting article, Koen! Comparing Online and Offline stores is really valuable in today’s market. Also, I totally understand the three points you made on why consumers still prefer Offline over Online stores. However, I must admit that I did not expect this particular outcome. Only 8% of the retail market is based on e-commerce? I expected way more based on my own experiences. Nowadays, I only go to brick-and-mortar stores to see what size I need for clothing, check which tech devices I want to buy and to do my groceries. 2 out of these 3 things will later be purchased online. Only groceries will be bought in-store as I believe the products are fresher than ordering online. Nevertheless, great blog and I will definitely keep an eye on this topic to see how brick-and-mortar stores will protect their marketshare against online entrants.
Hi Koen, very interesting blog post on the potential rise of e-commerce vs brick-and-mortar stores! You bring up some very valid points about the advantages of having physical stores, and why customers choose to continue shopping offline, despite the increasing convenience that online stores offer.
To further build on your example of Coolblue transitioning from an e-commerce business to also having physical stores, Amazon has also recently started implementing physical department stores as well as convenience stores, despite being the largest e-commerce business. This definitely shows the added value for customers to be able to physically see and feel the products before purchasing them. Since the rise of e-commerce, people have been saying that it was the end for brick-and-mortar stores. While that remains true to some extent, since certain offline shops have run out of business due to rising competition from online retailers, maybe this example with Coolblue and Amazon could also exemplify an upcoming trend in the opposite direction.
Good evening Natia,
Very interesting point on the Amazon example, I think I read about that somewhere lately!
Best regards,
Koen