BrainTrust Query: Clicks to Bricks
Through a special arrangement, presented here for discussion is a summary of a current article from the newmarketbuilders blog. The article first appeared on the Licensing Industry Merchandisers’ Association (LIMA) blog.
E-commerce is clearly still in its infancy as a volume-driving "channel," but the establishment of digital flagships, often in lieu of physical ones, is driving a host of additional benefits for retailers. The "bricks-to-clicks" model of the past is beginning to be turned on its head, and a new wave of retail competition is transforming the landscape without laying a single brick.
- Japan-based, fast-basics retailer Uniqlo is said to be on the hunt for an agency that will build out a U.S. digital flagship for its brand. Uniqlo’s e-commerce platform will definitely get its volume engine cranking, but it will also prime the pump in markets slated for future stores, while driving global brand awareness in a way that its spotty physical footprint can’t just yet. While currently limited to three stores in New York, it’s set its sights on generating $10 billion in the U.S., with 20 percent of that originating online.
- Often referred to as its country’s equivalent to Nike, Chinese challenger brand Li-Ning expects the U.S. to account for 10 percent of its international sales by 2018, but it has no imminent plans to hang anything but virtual shingles here. With the premise of enabling consumers to "feel the personality of the brand" as if they were in a physical store, Digital Li-Ning debuted in March and has garnered a 425 percent increase in unique monthly web visitors. The brand has since created a robust virtual ecosystem that incorporates Facebook, Twitter, Pandora, YouTube, and the blogosphere into its digital mix.
- Although Burberry’s bleeding edge drives into digital stand out as an impressive exception, the rest of the luxury market has largely resisted the rush to e-commerce, and instead relied heavily on carefully-curated physical flagships situated in major markets. Amazon’s just-announced foray into fashion will provide a much-needed margin boost to its portfolio, but its determination to sign on brands such as Michael Kors, Vivienne Westwood, and others also portends it transforming into the digital flagship of choice for many luxury brands.
- While its nearest physical store is in Secaucus, Walmart actually counts Manhattan as a top market, thanks to the magic of its endless online aisles. It’s also a channel that isn’t reliant on New York bargain hunters making hikes to neighboring states or succumbing to its ongoing store-building overtures. Any future ribbon-cuttings in the Big Apple are bound to grab headlines, but for Walmart, they will signify the achievement of a multi-channel milestone.
- Clicks to Bricks – Licensing Industry Merchandisers’ Association
Discussion Questions
Discussion Questions: How will the emergence of digital flagships and store-less markets change the retail landscape? Is the digital-first, clicks-to-bricks model a viable one for growing brand awareness and market share?
The first sentence of this piece, “E-commerce is clearly still in its infancy as a volume-driving “channel,” strikes me as being from 10 years ago. Retail is about selling, with many successful retailers blending online with brick and mortar sales.
Online and offline sales should complement each other. Either one can lead, so long as the effort results in profits.
In the current world where more and more customers “Google” buying information and trust their friends on Facebook for brand recommendations, companies need to reposition their professional sales teams in the field or expect more strikeouts in their increasingly expensive brick cottages.
This generation’s grasp of social networks drives them to achieve faster goals and faster rewards. Companies should quickly consider how to reposition their sales strategies to take full advantage and win more sales in today’s digital and social media worlds.
If Walmart can make this work, any retailer can. And should. Where shoppers go, retail must follow or be forever lost.
There will always be a certain percentage of people that need to see/feel physical product before making a purchase, so for internet-only retailers that carry exclusive items that can’t be showroomed elsewhere, they won’t reach those people. For others that have products that can be seen somewhere, they have the potential to capture the touchy-feely crowd if they can compete on the other factors such as price and service.
The rest of consumers that are willing to buy sight unseen will not care if the digital store is backed by a local physical one, if all their other expectations are met and the digital store instills confidence in the purchase.
There’s just never one factor that will make any merchant a success, but there are many factors that can cause a failure. Retailers have to know who their customers are and deliver a user experience that attracts them, wherever they want to find the products they seek.
This is an arena where you play or you lose. No retailer can afford to be left behind or they will be looking at the backs of the competition.
I agree with Max. eCommerce is not in its infancy. I would say click to brick may be going through adolescence, but it is certainly not an infant.
The retailers that haven’t embraced it yet will be the retailers that are in the process of dying.
The two work hand in hand.
There is no clean “flagship model” anymore. It’s more like a marketplace mosaic. One stop shopping still can be a viable strategy, but the range of categories has narrowed for the physical space. But at the same time, it has expanded for the retailer, thanks to the virtual space.
Retailers who are in touch with their shoppers know to focus their merchandise selection in the right place, just like they have always done. The big difference is the inclusion of a virtual store location. Think of it as a new geographic layout, which can both drain the sales of some categories from many store locations and add total company sales from a broader assortment and a broader reach.
Television and radio commercials are still the fastest way to tell every body what you think they need to know. But television and radio are now digital and travel via the net on computers! It seems to be that there is now no way to get around IT as the way to get the word out at least for now. When a new product or service is introduced those interested want to know how many dollars and where it is.
Those still interested will buy if they can meet product pricing demands. If their means are borderline or if they simply shop price, the “clicks” stores will always get first shot. If the product location is within the individuals acceptable distance range for a visit and or the product need is right now, then a “bricks” sale is almost a sure thing.
The key ingredient for the growth and maturity of the digital IT sales platform is user acceptance and reuse. Acceptance and reuse is dependent on customers ease of finding, access and use followed by the quality of information available for positive reinforcement of the investment. Most of the abandoned carts that are driven by real customers are left because checkout is clumsy or full of hidden added costs. It would be a better idea to streamline this and add live assistance in the customer’s native language.
After the initial sales drive the bulk of the market will want to make their decision based on how happy the initial users are. This is where social media and hand held communication devices are selling ahead of television and radio. And this is where the money is. Failure to keep pace with customer needs and wants is a death sentence in the IT industry. I have seen hundreds of giant IT power houses disappear overnight simply because they refused to move into current technologies. Now that retail is stuck in and dependent on the IT industry, retail sales leadership and new product success will mean keeping up with the user/customer in their playground which, for now is the world wide net.
One final incentive might be that the internet is much cheaper than the price of gasoline and faster than a phone call.
I think this has been a viable model for a while for new retailers trying to break in to the US or for brands and branded retailers whose traditional channels might be in decline. In the past, branded retailers would hesitate due to fears of channel conflict. Now I think the threat from pure play eCommerce would be enough to remove any hesitation.
Retailers must be who, what, and where their customers want them to be. Know your customers and you will know the answer!
For most retailers their digital sales are the strongest growth engines, and in many cases the ONLY growth engine for sales. Food is NOT an exception with 25% year over year, same-store sales increases being the norm.
Consumers want all the options — brick & mortar, digital, phone, etc.; and the companies who thrive in the future will offer all these.
Retailers and brands who succeed in the future will ditch the silos which have come to make consumers lives difficult. The digital silo, in fact, is often a result of lack of imagination from the digital folks — who undervalue the importance of a place the consumer can see, touch, hold and test the product.
And pursuing this strategy jump out in front of Amazon who lacks the wherewithal to establish the brick & mortar value that will always be critical to consumers.
What Dan said. “Flagship” is already misused enough — with many stores claiming to have hundreds of them — it makes zero sense when you essentially have one store (albeit a digital one).
It’s making the cost of a lease go down! The recession/depression has made much retail space available and the internet has filled much of the void. In many, many cases those stores will never rent again and lease prices will eventually drop which will allow for a new crop of independent retailers to occupy the space.
eCommerce is the most cost-effective and ubiquitous way to drive new profitable growth for both retailers and manufacturers. The more innovative retailers have been doing this for years. This is nothing new, as opposed to what the article states. And we’re WAY behind the curve here in the US.
This vehicle is “brand building” at its best… at least for now.
The evolution is from dichotomy to duality, as the line dividing in-store from online is growing fuzzy. Dynamic coexistence is the only sustainable strategy, but beware of generalizations. The success formula will be unique for each retail entity and it will vary with each shopping moment.
As consumers spend an increasing amount of time online, digital flagships hold greater potential than in the past. The challenge is how to drive consumers to those flagships, when most consumers tend to well-trod paths on the web (their favorite stores, Facebook, etc.). The challenge is the same one as building a destination physical location in a brand new mall that does not advertise.
I believe retailers will be well-served to establish new brands on established platforms (e.g. Amazon Marketplace). Even then, remember to address the factors that are difficult to gauge on the web, such as product quality, reliability, customer service, etc.
The age of thinking of these touchpoints in terms of separate channels is over. 90-95% of consumer spending is still done in stores. Over 50% of consumer spending is influenced by online experiences. Google calls all that research the ZMOT (Zero Moment of Truth), because it comes before Proctor & Gamble’s traditional “First Moment of Truth” on the store shelf.
With rare exceptions, you can’t expect to support a mainstream consumer market without great experiences at both touchpoints (amongst others).
BTW, creating a great digital experience these days is usually more expensive than building a single flagship brick and mortar location. There are not a lot of savings in creating digital content, creative, and IT infrastructure for a pilot vs. a worldwide deployment. Where building one store in NYC is vastly less expensive than building 1,000 stores across the USA.
The concept of digital flagships is especially interesting for luxury brands. The challenge for them is moving past their provincial past, as Burberry has so artfully done, and into the digital present. It’s a relatively easy business case to make given the costs of physical stores and the market penetration to gain.
“Emerging?” It’s already here! Alibaba is China’s version of eBay. It’s 2010 online sales were $4.7 billion. They estimate that 30% that was from US sales. Forrester projects a compound annual growth rate of about 27% for China’s online sales between 2010 and 2015. I was just on their website the other day looking for specific light fixtures that were $8 each on ebay. I found them on Alibaba for $4. I didn’t buy them though because Alibaba’s problem is that shipment fees are very high and they often have volume requirements.
Digital flagships allow brands to map out their customer base virtually to plan for best locations for physical store openings. I am sure many retailers are mining their online sales data to figure out high concentrations of customers to help them make decisions on where to open physical stores. There is always the event excitement component of physical stores from a brand perspective that isn’t easily duplicated online, and physical stores tie closer to the communities esp when integrated to charities and schools. Shoppers will want both and retailers need to be able to address both.