Battle Retail……

Some say the death knell for retail has already begun.  Others say that while many will not survive, retail is here to stay.   The actual facts suggest a far more complex web of marketing intrigue that makes the ebb and flow of the retail establishment something akin to the last stand at the O. K. Corral.

Here in the United States the battle between retail establishments and online sellers is changing dramatically.  With retail sellers closing actual stores at unprecedented numbers, malls are scrambling to fill vacant slots with many different kinds of stores.   What is most interesting is who is willing to take those spots.  As you may have guessed it, they are none other than, online retailers.

Now that may seem quite counter intuitive but it all, in the end, makes marketing sense.  How is that possible? When you have a marketing machine as many of the online retailers do, you can utilize your online metrics to quickly innovate in a brick and mortar retail setting.  You can also use instant market data to disrupt a market as fast as you can, pulling market share from your retail competitors.  As well the data generated from purchasers isn’t just used for competition but it is has become what many market analysts always stated it would, its own revenue source.

Manufacturers of different products pay handsomely to ascertain what products are being purchased where and more importantly when.  They will then strategically change their production and distribution chains to compensate.  So if a certain product is being purchased in a specific area in the country, the manufacturer wants to know that as fast as possible.  Timing is everything when it comes to just in time marketing.

The major difference here follows along to the difference between most online retailers and the average brick and mortar store.  The old world retail establishment is still working hard to catch up to the online revolution.  Online stores are garnering more and more of would be shoppers for the same products.   Looking to luxury product segments and the numbers are increasing more rapidly.   Ever increasing percentages of high end shoppers are just using the actual retail location to take a look, touch and feel.    They then will take to the Internet to find the best offered price for an item.  Most of the time there is no competition price wise as an online retailer can offer a much better price due to automation and lower costs.

But make no mistake the race is on to dominate the retail world.   Pundits claim that the real test will be if brick and mortar retail establishments can create a relationship with their customers in the same way online sellers do.  Then the next test if they can use the data collected to change what their stores buy and sell quickly.   As compared to an actual store, online stores know in real time what items are selling better or which ones are showing more sale through.  They can change pricing and offer promotions very easily.  If a product is not selling as well as expected it can be taken out of the marketing spotlight in favor of a product that is.   Retail establishments have to become as adept at this kind of marketing as online retailers are if they want to compete in the new retail paradigm.

The next piece of the technological domination of online retail are the algorithms that take a customer’s web searches and match them to products being offered right now.  Can a traditional retail establishment compete in that arena?  Change is often harder at actual store locations since higher end retailers often have issues switching merchandise due to cost or have a hard time changing displays so quickly.   But keep in mind we have been shopping in discount outlets for decades.  We have also been buying things at large discounted stores such as Target and Wal-mart for many years.   These companies are not only on spending sprees in the market to acquire the  technology and talent to get ahead; they are focused on beating online only retailers at their own game.

The Danger Within.

What some online retailers are embarking on is creating what some online companies call “guide shops”.  These are actual retail locations that are utilized to have customers come and see products.   Try them on and see how it fits before purchasing.   If the consumer is interested in purchasing the item it is sent through the online distribution channels the company already has established.   Market analysts feel that this will cut down on the buy and return scenario that plagues some online establishments.  The costs associated with distributing and dealing with returned merchandise has hurt some online retailers.   The thought process is that you will be less likely to return an item you have already tried on at a guideshop.   These shops will be the cornerstone of each online retailer’s improved distribution channel of goods.

Additionally, still even today, approximately 90% of all sales are still done through traditional stores.   Even though the Internet marketing revolution will never stop, people still appreciate seeing the products they are buying before they buy it.  So much so that traditional retail purchases were over $3 trillion in 2015.

Economists are now wondering how the show will play out.  Will online retailers be better or more efficient at approaching the regular retail customer through automation and marketing prowess?  Or will retailers be able to stage a comeback and utilize automation and real time marketing to change their time to market products?   Reality is probably some where in the middle.

Keep in mind though that since they were raised as online stores, these companies have been built for ecommerce from the ground up.    Their point of sale systems are top notch and have been utilized daily by swarms of online retailers.    As opposed to retailers who still have to innovate when they are not in the right environment to service both kinds of customers.  Innovation needs to happen in order to have the different kinds of stores co-exist for the future.

Other alternative marketing ideas are being utilized as well.  In todays marketing world after a company becomes successful selling a product online it can then utilize that track record to retail establishments.  Major establishments will allow a product to be shown and sold in their stores as a way to drive foot traffic.   Once in the store it is the digital marketing information that will be utilized to help sell to the customer why they should take a look around.

Will online retailers become brick and mortar companies?   Or will normal retailers venture into the tech model to try to be the ecommerce competitors at their own game?   The bases are loaded and there are two strikes out and three men on.    Even with that headwind many are fighting back by acquiring online sales sites that are allowing them to enter the ring.

Time will tell whether or not Tesla can make cars as well General Motors or Ford.  But, time will also tell whether or not GM and Ford can make self driving automated cars as fast as someone like Tesla can. Retail is certainly the survival of the fittest.  Deregulation and a pro-commerce government will make it easier for people around the world to embark on the information super highway.   But make no mistake it should not be taken lightly.      Online shopping is not going away.


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