We’ve seen retail giants like Kmart and J. C. Penney shutter hundreds of their physical stores in the recent years. On the greener side of the shopping lawn, Amazon and Alibaba continue their journey as digital retail juggernauts.
With online shopping becoming the default option for more people, one would think that brick-and-mortar shops earn significantly less and will eventually be all phased out.
However, this infographic put together by the team at redbrain.c
Looking at in-store revenue vs. online revenue, you’ll notice a vast difference in amounts. In-store revenues are significantly higher, on average 90% higher than their online counterpart.
Why is that? How do physical stores earn more than online stores in this age of digitalization?
The truth is, there are simply important aspects of the buying journey offered by physical stores that cannot be replicated by a website. On the other hand, online presence actually complements offline sales. How do they do that?
Being able to actually touch the products and interact with real people who represent your band is something an online store cannot replicate. Physical touch is a big trust builder. It removes the anxiety that comes with wondering whether the product is as described or if it will actually arrive on your doorstep.
Being in a physical store immerses your customers in your brand. When browsing online, a shopper could have several tabs open, creating infinite distractions. In-store, however, customers have no choice but to focus on your brand.
Also, although online shops carry the promise of convenience, it can actually be more of a hassle when mistakes are made. Complicated returns and refund policies, and inefficient online customer service could destroy a brand. In-store, one could resolve a problem on the spot.
Research found that people who buy in-store spend more money than those who shop online. This probably contributes to the vast difference in revenues.
One reason could be that signage in physical stores is positioned with the items, making them blend in with the environment. When done skillfully, such arrangement encourages shopping in subliminal ways.
Another thing is product placement. People lining up at the cashier still have a couple of minutes to browse nearby shelves. This opens up more chances of last-minute buys. Online checkouts do not have that “delay”.
The infographic below clearly shows that the longest time people spend at an online store is a little more than 5 minutes. This doesn’t allow for that crucial impulse-decision-making time.
On the other hand, online communication actually encourages unplanned spending. Shopping apps and messages from favorite stores drive people to spend more. This shows how digital presence is an essential part of a brand’s marketing efforts.
Market Targeting Expertise
Besides the high costs of putting up a physical store, another reason why retail startups prefer staying online has to do with audience reach.
Theoretically, with a website, there are no borders. Anyone with an internet connection can buy your products. The only major barrier is shipping.
If you look at the image, however, you’ll notice that the top 3 countries accessing e-stores actually are the USA itself and its neighboring countries, most of which have a local branch of the particular brand.
Following the logic of “open borders” that online stores should achieve, these digital shops should have a higher revenue because more people can access them. The evidence though points at the fact that an online presence serves more as an extension of an offline-first brand, letting existing customers or potential customers who already know about them get in touch with their brand more conveniently.
This is because these established brands all have a localized marketing strategy that targets audience from areas where there are physical stores. Their data and expertise lie in these locations, so even if they are online their marketing wouldn’t exactly appeal to other audiences.
Synergy Rather Than Competition
After considering all these factors, it’s clear that online and physical presence work together to propel a brand forward instead of competing with one another.
Having an online presence lets customers access information about the brand more conveniently. It also allows people to know a brand through trusted reviews to help with their decision-making.
People still prefer to physically experience what they’re about to spend money on. Physical interaction builds more trust and putting a face to a brand familiarizes your customer with your brand value.
Online presence is an extension of a brand’s ongoing conversation with its customers. This is how these 11 American business giants extend their decades-long legacy into this increasingly online world.