Are We Seeing a Move Away from Online Retail?

Black Friday 2016 set a new record. No, not the number of parking lot assaults (hopefully that count is decreasing), but online sales outnumbered those in-store. The National Retail Federation reported 99.1 million Americans* shopping in-store and a massive 108.5 million online. Sure there’s some duplication and the research didn’t specifically say there were no international shoppers, but the difference is still the population of Melbourne, Australia TWICE over. Massive. The 2015 numbers were more even between online and in-store.

The sales numbers indicate the demise of in-store retail. Confusing, considering this post’s title.

Why Am I Questioning Online Retail?

Amazon-Full-BookstoreYes, I admit I’ve already contradicted myself. But it’s because of Warby Parker, Amazon, Blue Nile and others.

The three named started purely in online retail. Amazon as a bookseller, Warby Parker in optical, and Blue Nile for diamonds. All three sell different things, and all three now have retail stores. The kind you can actually walk into.

Why Have Online Retail Started Opening Stores?

My first thought was so they could increase their market size. Increasing transaction size and frequency is one thing, but having more people to buy is better. There are some people who just won’t buy online. And then some purchases, like diamonds, are emotionally driven. In-person assistance makes a better shopping experience.

However, they are my assumptions. Mike Elgan from ComputerWorld points out that Amazon is an “everything” retailer. Physical stores can extend their opportunities. Electronics, like Alexa, can be played with, and stores can also be delivery outlets. I know this second item can’t be true for their Seattle test store , but it may for others. Amazon’s new grocery store was launched after the article was written but is being used to develop point of sale system innovations. Could the system be a new commercial product? It would compliment AWS well. Of course, Amazon hasn’t directly given a reason for the stores but states their consumer advantages.

Blue Nile see their stores as extending the customer experience.

Online-Retail-Warby-ParkerWarby Parker launched with fashion optical at budget prices. I recall thinking they could offer $99 prescription frames and lenses because they didn’t have the overhead of stores. I’m not sure if that was accurate or not, but their stores now average $3,000 a square foot in annual sales . Not bad when all the products are under $200. It’s successful. Dave Gilboa, CEO and co-founder, has said that the first eight stores are profitable. (There were only eight stores open at time of the interview). Warby Parker also builds community through their stores: free ice pops for a summer store opening, live music events, and even a dog fashion event. It gets a level of community that’s hard to muster online.

Does this mean we’ll be seeing more online retailers setting up shop? It appears so. It also appears from this year’s Black Friday sales that online retail is here to stay too. It looks like retailers need to have it all.

 

* Yes, I have limited this to just the US. If another country has a bigger sale day with reliable data please let me know. I’d love to compare it. China’s Singles Day is larger, but I’m not sure how reliable the data is.

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