BrainTrust Query: E-Commerce Has December Advantage
Through a special arrangement, presented here for discussion is a summary of a current article from the Hurlbut & Associates blog.
There’s been a lot written about the growth of online shopping, especially on the year-over-year increases of Cyber Monday. What’s been clear for several years is that e-commerce is taking more market share with each Christmas season and that’s affecting brick ‘n’ mortar retailers more and more.
Anecdotally, I’ve had a number of people suggest to me that, apart from the Black Friday mayhem, the malls and major chain retail stores just didn’t seem as busy as they once were during the holiday season, even in the past several years since the recession. The malls weren’t as crowded. Lines at checkout weren’t as long. Parking spaces were easier to find. I felt the same way when I was out in the stores.
What I believe is that e-commerce business not only peaks during the Christmas season, but so does e-commerce market share. The Christmas selling season is when the hassle of heading out to the stores is the greatest. It’s so much easier to get what you need from your laptop or smartphone. Call it the e-commerce convenience advantage. At Christmas time, e-commerce clearly has a convenience advantage over brick ‘n’ mortar retailers that isn’t so much the case the rest of the year.
The major national chains have attempted to offset the convenience advantage through their own e-commerce sites. The very best independent retailers have sought to do the same within their niches, but the impact on them is still pretty significant. December is still the biggest month for most independent retailers, but it’s no longer quite the behemoth month it once was. You used to be able to count on December to make up for the vagaries and mistakes of the prior 11 months. December no longer packs quite the same punch it once did.
This is further reason why retailers have to be at the top of their game from the first day of the year right through to the last. The days of getting by without getting the very most out of your business day in and day out are over. Taking your business to the next level means taking your own retail business management skill set to the next level, now more than ever.
Discussion Questions
Discussion Questions: Do you see online shopping gaining an extra convenience advantage during the holiday shopping season? How can brick ’n mortar retailers best work with this principle? Are there any new drivers behind the online channel’s apparently accelerating momentum?
With the national media focusing on the mob scenes, injuries, and general mayhem, e-commerce grows more attractive. Add to that the various apps to get the lowest prices available and accelerated shipping like Amazon’s Prime and it becomes very daunting for the 4-wallers. The only defense against this is to have products and services not available anywhere else.
Online shopping gets a beneficial cost advantage from having the merchandise it sells displayed for customers to see in thousands of brick and mortar stores and in lots of advertising … plus online sellers do not have to charge sales tax in most cases. That represents both convenience and economy for online customers.
Thus, if a customer hates traffic and crowded in-store activities, why go to stores when the merchandise can cost the same or less and arrive hassle-free at your front door?
Brick and mortar stores undoubtedly now realize that online buying is institutionalized in the marketplace just as deeply are store leases … and that the growing wave of new customers like the convenience of online shopping. That gives momentum to contemporary Americans to having more time to do other things they may prefer to do.
There are many reasons why consumers might choose to shop online rather than in a store. Convenience, time savings and no sale tax, just to name a few. Brick and mortar retailers need to provide better customer service, have fewer out of stocks and offer creative promotions to bring people through their doors.
This holiday season was a last minute affair. According to ShopperTrak, retail sales in the whole month of December were up 4.7% over 2011. But the week leading up to Christmas and the day after increased 14.8% over the same week in 2010.
That was nearly a 40% surge over the week before. Traffic followed the same pattern.
Good bargains, good weather and good old procrastination conspired to push sales to the end of the month. It’s true that eCommerce may have dampened brick and mortar activity early- and mid-month, but the end of month habit presents a good opportunity for retailers because it falls outside the eCommerce shipping window.
Ways to take advantage include promotions, especially online to in-store; and adjustment of inventory and staffing, especially hourly if possible.
Let’s face it, it’s cheaper, faster and more convenient to shop online. The only way for brick and mortar to defend its market share is to invest on the experience: attentive customer service, amazing window displays and in-store events are examples of perks e-tailers cannot deliver.
There are frequently temporary advantages of one way of doing business over another. But they are rarely permanent. As retailing becomes more multichannel and multifunctional, the advantages of being an online-only merchant are no longer such an important advantage. They could, in fact become a big disadvantage. Building real long-term retail customer relationships today means serving the needs of shoppers at times and in ways they most want to be served. Many store-based, online, catalog and mobile-oriented merchants are well-positioned to serve the customer best.
It is also well past the time to create a fair marketplace by insuring that all merchants collect and pay sales taxes. This is not just unfair it is giving amazon.com and others a financial “gift” that isn’t available to other retailers and states with sales taxes.
There is no extra convenience advantage during the holiday shopping season for online. Online has an everyday convenience advantage. This year’s Christmas shopping for 2 children and their spouses, four grandchildren, my French daughter and her family, my mother and my wife took less than 90 minutes, entirely online. That is less time than I would have spent in a car going to the stores in the old days.
But, how about the other 11 months? What do I want to buy? A book? A DVD? A birthday present? Now, we are talking about MINUTES to get that done online versus hours at brick and mortar.
Somebody is going to the stores, but nobody I know. In my absolutely, positively, unscientific survey of about 6 people, I found no one that made less than 90% of their holiday purchases online.
What can the brick & mortar guys do? There is only one thing to do. Plan on having more than 50% of your revenue from online in the next 5 to 10 years. The tipping point is coming.
It is 100% clear that online shopping is more convenient than traditional shopping (although there are some aggravations/inconveniences with online shopping, too). But, most people are social animals who like to be entertained and shopping is or can be a social activity, with a high entertainment component. The stores and malls where I see high levels of activity have lots of entertainment, special events, and activities that make the experience fun.
Thanks for the insight, Ted. My clients were definitely slower in the early weeks of December, but the rush still came from the customer who wanted that seasonal experience beyond just buying stuff.
No doubt that it is easier and I’m sorry to say, even cheaper in most cases to buy online rather than go to a store. This was definitely true during the holiday, but also throughout the year.
Today’s consumer is truly multi-channel. At my house, the UPS guy just dropped off a new book from Amazon. and I picked it up while carrying a package from the store.
I did buy the book online because it was easier, cheaper, I didn’t need it today, and most of all, I have no emotional connection with any bookseller nearby. This is exactly why specialty and independent stores must add value to the customer’s experience and continue to extend the relationship beyond the single transaction.
Online holiday shopping has been growing in leaps and bounds over the past few years. Partly because of what several other have said — easy, cheaper, faster — but also, I believe, it has become more widely adopted. Even my 72-year old mother who, in the past, would never have given her credit card number to an online transaction system found herself shopping online this year. The times have truly simply changed.
As for the brick and mortar retailers, they will really need to pump up the value proposition to drive traffic, but value beyond just price. Give the shoppers a meaningful reason to traffic their stores and make it simple for them to do so. It’s a big challenge to tackle. Macy’s did a nice job this year with their “Santa mailboxes” in store, appealing to moms and providing a reason to visit. Yet I look for bigger things in the years ahead.
Brick and mortars can compete by offering products that are not available online (so they can’t be comp shopped) and/or on aggressive, negotiated manufacturer-funded pricing and discounting programs that would not be available to online retailers.
Additionally, one disadvantage of online is the cost of shipping. For bricks to play into that (against online retailers offering free shipping) they can sell items that are too big or bulky to ship cost effectively — or are sold at a price point where shipping costs would overwhelm the margin the online retailers would receive for selling items at that price.
E-commerce will continue to expand largely at the expense of the big box stores and malls. Food, building supplies and pharmaceuticals are the only possible exceptions, yet their declining numbers demonstrate that they are also shrinking due to internet sales.
What is most interesting yet still little mentioned is the growth of worldwide e-commerce. This is where fortunes will be made in the near future. The development of multilingual and language translating websites is key to breaking into the future of this market and a lot of money is being spent to move these software developments forward.
Gene D has this right. It’s not a case of “us against them” here. It’s “if you can’t lick ’em, join ’em.” Brick and mortar folks being hurt by online sales have to do more online sales themselves rather than trying to shovel sand against the tide. Maybe even have a way to buy online and arrange a hassle-free pick-up at the store.
Looking to differentiate myself from the other comments (pointing out the seeming inevitably of the online tide), I will mention that one of the main disadvantages of online — the inability to touch and try on items like clothing — is much less of one when the item isn’t intended for personal use (i.e. it’s a gift)…which of course is what most Christmastime purchasing represents.
It seems to me that avoiding the holiday crowds is a bigger incentive than normal.
However, there is still something to be said for knowing you’ve got your shopping done than thinking you have (as the Best Buy article demonstrates)!
I do a significant proportion of my shopping online (much of it International) and to be honest, it is not perfect yet. Not only are there item availability and delivery issues, there are also a lot of opportunities to improve on the packaging and delivery side of the proposition. For instance, for different gifts, I would like to have options or flexibility on things like the delivery window, appropriate messaging and/or gift-wrap options, exclusion of price/billing information, etc.
Online is justifiably gathering momentum as its reach and value equation grows, but it is not yet a panacea….
For brick-and-mortar retailers to be able to compete with their online counterparts, they must focus on the in-store customer experience — offering the things that online retailers can’t do: human customer service, touch and try the product, leave with it in hand. We believe combining those elements with the benefits of shopping online (product info, items in-stock, self-service technology) will allow retailers to maximize their competitive ability across all channels. Ideally, retailers should provide customers with the shopping experience they want, whether it’s through e-commerce, in-store or m-commerce.