Technology: Clicks and Bricks

Retail ecommerce salesLast year, online sales in America reached $188 billion, about 8% of total retail sales. Overall retail sales were flat, yet e-commerce sales are up in the double-digits. Online sales are expected to reach $275 billion by 2015.

Futurists have been predicting this shift for more than a decade. Today, people in their 20’s and 30’s do about 25% of their shopping online. Customers are buying more through their smartphones. Nearly one-third of Americans own a smartphone and fully 70% of them, according to the Economist, use the device to do searches within a store, usually to compare prices. 

Of course, the undisputed leader of online retail sales is Amazon. Last year, their sales were roughly $48 billion, fairly close to total sales at Best Buy. Yet, think how the profitability at the two compare. Amazon has no physical stores but rather a logistics network. And, it has roughly 1/6 of the employees of Best Buy. Certainly shopping online is more convenient, but it’s more than that. Amazon is truly focused on the customer. Larry Downes, writing in Forbes last month, characterized them this way: “Amazon lives and breathes the customer’s point-of-view. It completely engineers its business practices, its systems and its people to support it. When they make a mistake, they admit it and fix it.” You can’t say the same about Best Buy.

However, some bricks-and-mortar retailers do focus on customers. Macy’s, for example, says it is investing $400 million in the renovation of its flagship store on Herald Square in NYC. It will become the largest women’s shoe department in the world. The store will include 22 spots to dine and 300 extra fitting rooms. Its 130,000 sales people have received training in “MAGIC selling”, teaching them to be more helpful and friendlier with customers. Macy’s is trying to join those stores which have become more fun to visit, including Apple’s stores and the Disney stores.

 

Certainly, changes in retailing will continue. It is likely that physical stores will continue to shrink. However, showrooms that are fun, customer focused and feature products people want to touch, feel and taste before buying will survive. Online operations that focus on the customers will also do well. We, as customers, are certainly the beneficiaries of the new technology – both when we buy online and when we shop at the fun, customer-focused bricks-and-mortar locations.

 For more information: http://www.economist.com/node/2148236