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2012-02-28 09:56:14
Many retailers are being too slow in reinventing themselves for the age of
online shopping
Feb 25th 2012 | from the print edition
WE TEND to overestimate the effect of a technology in the short run and
underestimate the effect in the long run, observed Roy Amara, an American
futurologist. This is certainly proving true of retailers and their attitude to
the internet. After a panic at the turn of the millennium about the impact on
their industry of online shopping, bricks-and-mortar stores settled into making
only modest alterations to their business model or, ostrich-like, trying to
ignore it. Few have so far made the radical changes needed to meet the threats
from, and tap the enormous potential of, e-commerce (see article).
Such inaction threatens retailers survival. Online sales are now approaching
$200 billion a year in America. Their share of total retail sales is creeping
up relentlessly, from 5% five years ago to 9% now. People in their 20s and 30s
do about a quarter of their shopping online. True, few ladies who lunch will
buy their Christian Dior dresses online; and bargain-hunters will still enjoy
rummaging in discount stores like Dollar General. But to attract everyone in
between, retailers will have to build a strong online offering while making
their shops nicer, more conveniently located and, in the case of many big-box
retailers, smaller. Otherwise they are likely to go under, as United Retail
Group, an American clothing chain, did this month.
To build a profitable online business retailers must integrate it seamlessly
with their bricks-and-mortar operations. Many keep them separate, increasing
the risk that they fail to communicate or work together properly. Walmart s
online operations are in Silicon Valley, far from its Arkansas headquarters.
Target, another supermarket giant, until recently outsourced its e-commerce to
Amazon, the biggest online retailer, and is only now building its own
e-business. Both Walmart and Target still have a puny online presence relative
to their size.
Are you being served?
Retailers also need to be ruthless in chucking out products that do not gain
from being sold in a physical store: not just things like CDs and DVDs, which
can be replaced by digital goods, but bulky stuff like nappies (Amazon has
become a big seller of Pampers). Their shops must focus on those things, such
as expensive clothes and gadgets, that customers will want to try before they
buy, and for which they will pay extra, such as advice from competent sales
assistants.
Stores have to become more fun to visit, so shoppers feel it is worth the trip
to the mall or high street. Apple s shops thrive not only because they contain
cool products; they are beautifully designed, with helpful staff. Disney stores
may be an ordeal for parents but they often succeed in giving their pint-sized
clients the best 30 minutes of a child s day . But too many retailers think
only of getting a quick sale, neglecting to build relationships with customers.
They are the most at risk from showrooming : shoppers trying products in
physical stores before sneaking off to buy them more cheaply online.
To survive in the new world of retail shopkeepers will need large amounts of
imagination and money. Macy s is investing $400m in the renovation of its
flagship store in New York. The losers will include those (like Borders, an
extinct chain of bookshops) that keep selling things people are happy to buy
online. The biggest winners will be consumers. They can look forward not only
to ever-greater convenience thanks to the internet. They will also find a
growing number of physical stores that compete to make shopping a pleasure.