Is Online Retailing Taking Over Physical Retailing?

online shopping

As Amazon, eBay, Taobao (China) rose rapidly in the past decades, people are talking about how dramatically digital retailing develops and forecasting when it will quickly take over the market of physical retailing. Some people forecast that malls, department stores and even supermarkets will shut down, consumers move to online stores, shipping services will be too busy to run. Is it really true?

Let’s take a look at Amazon. It just recently opened its first bookstore in Seattle, the second one in San Diego, and then next one in Portland, and planning to open up to 400 bookstores. The pricing in physical bookstores remains the same as online, which is generally lower than other retailers. Sucharita Mulpuru, a retail analyst at Forrester Research, noticed that the e-commerce environment is too crowded and competitive so product differentiation is hard to achieve. Also, no matter how quick the shipping service could be, online shopping still can’t compare with the immediate take-away convenience of physical stores.

amazon bookstore(source: amazon.com)

In fact, the percentage of e-commerce sales occupying retail sales in the U.S. only increased from 2.00% in Q1 2004 to 8.10% in Q2 2016.

US ecommerce sales

Seems like the competitiveness of online retailing is not as much as we thought. But is online retailing really the enemy of physical retailing?

Actually, more people nowadays are interacting with both online retailers and physicl retailers to finish one purchase process, which are called showrooming and webrooming:

Showrooming: customer visits a physical store first and then buys the product online

Webrooming: customer researches product info and reviews online and then buys the product at a physical store

Think about your shopping experience, have you ever done showrooming and webrooming before? In my experience, for cosmetic products, I like to try it in a physical store and then buy it online because it usually comes with other product samples. For electronic products, I like to read recommendations and reviews online, and then visit a physical store to really touch and try this product before I buy it.

Here are some interesting examples that physical retailers utilize digital tools to deliver an enhanced customer experience:

1   Some US retail stores are introducing a smart shopping cart that carries a screen with searching, scanning, tracking functions and promotion ads which are personalized for the customers. Walmart also announced that they are creating a smart shopping cart that will allow customers to upload their shopping list and then automatically guide them to navigate shopping items. In my opinion, how awesome it would be if there’s a shopping cart that allows me scan barcode of products and then I can just check out without bringing the actual products to the cashier during the shopping trip. By scanning the barcode to the computer system of supermarkets, my shopping items will be delivered and waiting for me at the checkout.

2   Building the retail stores like an amusement park, bring more enjoyable experience to customers which online shopping can’t bring them. retail- innovation.com is an interesting website that you can find tons of retail stores provide innovative digital service. For example, Cognizant’s virtual dressing room is one of my favorite. It allows customers to try on clothes virtually in store or at home. IKEA also launched a test app with VR technology which customers can use to customize and navigate kitchens.

innovative retail.png

3   Utilize social media to catch customers’ attention and emotion. In Brazil, a retail company called C&A uses digital hangers to display “Likes” received from customers.

C&A.jpg

4   Utilize data and provide customized service. Westfield is putting effort on building a world-class shopping mall by bridging the digital service with the physical world. It’s “fueled by data and customer preferences”, trying to deliver a customized experience to consumers by utilizing technology on smartphones which will guide them to navigate the huge shopping mall based on their own needs and wants.

5   This is an example about digital payment. When I went to China in the summer of 2015, many people starts to use Wechat Pay for variou things. Wechat Pay is an electronic wallet which connects users’ bank accounts with the largest social app in China, Wechat. Whenever you need a taxi, you can open Wechat, call Didi (a mobile transportation platform that recently purchased Uber in China) and pay via Wechat Pay. Whenever you purchase something in 7/11, you just open Wechat, scan the barcode and it will be paid automatically via Wechat Pay. Moreover, whenever you need to transfer money, give lucky money, download coupons, reserve flights, book hotels, buy movie tickets, and more, everything can be done through Wechat. Here are the screenshots of my Wechat Pay:

What is your personal experience in online shopping VS offline shopping? Are you a showroomer or webroomer? Do you think online retailing will eventually take over physical retailing, or they can be combined to deliver an integrated experience to customers? Share your thoughts with me here or send me an email!

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