One of the best recent articles on omnichannel is “E-Commerce Is Not Eating Retail” from HBR.
As I have studied and worked with multichannel retail and marketing since 2002 and am about to submit a PhD Thesis about omnichannel, I’m naturally really excited to read well-written pieces like this. Here it is in full length:
The recent headlines about retailing are nothing if not provocative. “Shoppers Are Fleeing Physical Stores.” “The Great Mall Exodus.” “Macy’s Confronts the Crisis of the American Mall.” They seem to bolster Marc Andreessen’s prediction that by the end of this decade “retail guys are going to go out of business and e-commerce will become the place everyone buys.”
Regrettably, the scary articles completely miss the real story. And panicked retailers who get confused about what’s really happening will head off in dangerous directions.
There’s no doubt that digital technology is transforming the retail industry. Digital devices are changing how customers discover, evaluate, purchase, receive, use, and return products. And, yes, more and more customer interactions take place entirely online. Over the past 20 years, e-commerce sales have grown to about 6% of total retail sales (excluding gasoline and food services) and about 11% of Forrester’s top 30 product categories.
But though the e-commerce growth rate is attractive, it has slowed from about 30% per year in the early 2000s to less than half that rate today. If the trend continues, e-commerce sales will increase from 11% of Forrester’s top 30 categories to about 18% by 2030—higher in some (such as music) and lower in others (such as food). While 18% is a significant number, it does not exactly spell the end of physical stores.
The current hyperbole also misses the mark in other important ways:
All of these issues point to one conclusion: Omnichannel retailers—those that seamlessly integrate the best of both digital and physical worlds at each step of the customer experience—are likely to enjoy significant advantages over retailers that try to pursue either one alone or both independently. For omnichannel retailers, websites and mobile apps are not just e-commerce ordering vehicles, they are front doors to the stores. Stores are not just showrooms, they are digitally-enabled inspiration sites, testing labs, purchase points, instantaneous pickup places, help desks, shipping centers, and return locations.
Stores don’t necessarily need as much foot traffic as they have had in the past to succeed. If 20% of their sales are shipments from online orders to nearby customers, they are still valuable. That’s why so many companies that began as pure e-commerce plays have added physical stores, including Warby Parker, Athleta, BaubleBar, and Bonobos.
As Bain’s research has found, these principles apply far beyond retailing. In most industries, digital technologies are transforming physical businesses rather than annihilating them. Indeed, the fusion of digital and physical innovations—we call them “digical”—creates opportunities that most businesses have barely begun to tap. A digical experience is what consumers want and have come to expect. A digical strategy, when well executed, almost always outperforms competitors and turbocharges profitable growth. Retailers may be on the front line of these changes, but no company can afford to ignore them.
Posted on 14th Aug 2014: http://blogs.hbr.org/2014/08/e-commerce-is-not-eating-retail/