A business model assuming that a company operates both physical stores (the bricks) and online ones (the clicks) is named brick-and-click. In other words, it integrates the two into a single retail approach. This model has an advantage over both brick-and-mortar stores and pure e-Commerce in terms of handling customer returns. E-Commerce had a significant effect on the retail industry. The U.S. Census Bureau reported that “retail e-commerce sales in Q1 of 2018 were up 16.4% from Q1 of 2017” (“The clicks,” 2018). Although online sales are continually increasing, “they still only accounted for 9.3% of all retail sales in Q1 of 2018” (“The clicks,” 2018). An ability to physically return the online purchased item and vice versa provides the customers with the freedom to choose the most appropriate option, erasing potential boundaries.
Multichannel Perspectives (iHerb and BestGear)
The two online-only retailers that could benefit from a brick-and-mortar presence are iHerb and GearBest. In their cases, moving from online to physical sales will help these retailers to gain exposure and insights into customers behavior. Additionally, a physical store is a unique opportunity to engage the customer in the company’s corporate culture. Moreover, a positive association with a physical store experience makes people order online more frequently.
GearBest physical store will let the customers touch and test different gadgets, evaluate their productivity and convenience. Considering that this retailer has a mobile app, it would be appropriate to add the function of scanning a QR-code of a specific item and see the list of customers reviews. Many customers do not believe that the gadgets characteristics declared by the Chinese retailer correspond to reality. Therefore, they might change their minds after testing the devices in stores.
In turn, iHerb might also benefit from opening physical company stores. The vast majority of their customers are women, physical communication with the salespersons is likely to double the average check of purchases at least twice. The driving forces are a positive attitude, propensity for the auditory perception of information, and innate sociability. Moreover, if good-looking salespersons share their own experiences of taking specific supplements and achieving significant results, women usually strive to repeat and surpass the evident positive effect. This online store had a mobile app, so the variant with QR-codes proposed for GearBest is also appropriate for iHerb.
Reinforcing Brick-and-Mortar Sales
Brick-and mortar business sells items to customers personally in physical locations. Retailers should realize that coming up with their products is a start; hence, they need to get them to the consumers to succeed. Experiments with mixed options of distribution help to define the best strategy for the company to gain success. Although online shopping deserves rather a support than fighting it, shopping in physical stores might be reinforced by providing the customers with the comfort they need (for instance, while driving in-store traffic). Their interest should be captured with innovative and exciting in-store experiences.
The digital fitting room at Kohl’s is one of the most vivid examples of growing the in-store channel. It resulted from Kohl’s collaboration with Avanade, the tech developer (Ogino, n.d.). The digital fitting room provides customers with the ability to try on accessories and clothes. General Pants Co, an Australian clothing retailer, went on with interactive kiosks in its physical store, bridging the gap between offline and online shopping experience. An interactive kiosk is an imitation of social media interactions having an “Insta-opinion” function (Ogino, n.d.). Customers may photograph themselves holding up or wearing an item, and their photos are submitted in real-time and get ratings from other kiosk visitors (thumbs down or up).
Online vs. In-Store Prices
Many retailers tend to set different prices in their stores depending on the competition. As an example, Target store policy is as follows: “select items at an individual Target store can be impacted by prices on identical items at other nearby retailers. Therefore, it is commonplace that prices on selected items may vary from Target store to Target store within one metro area” (Mohammed, 2017). The same philosophy might be applied to an online pricing policy.
The prices may be discounted in cases when the web “store location” is more competitive. In other words, in-store and web channels should be viewed by retailers as unique services. Lower online prices are an efficient tool for competing against aggressive e-tailers. Simultaneously, relatively higher rates can capture the premium which some shoppers give to the store. The statistics show that “In the third quarter of 2016, e-commerce accounted for 7.7% of all retail sales” (Mohammed, 2017). Moreover, in 2018, 85% of retails were reported to be brick-and-mortar (Chronicle 5 WCBV, 2018). Some retailers worry that discounting online prices will lead to purchasing only online. However, this opinion is not entirely true: it is a well-known fact that although customers may order at lower prices from Amazon, they still prefer to shop in stores paying premiums.
Matching Online and In-Store Prices Issues
In terms of the self-matching pricing policy, the strategies of different retailers differ. Gerdeman (2018) states that “some brick-and-mortars, including Best Buy, Target, Staples, and Sears, will gladly match their online prices in-store if a customer asks for them. However, others, like Home Depot, Bloomingdale’s, and Macy’s, are usually quite firm about saying “no”.”
Nevertheless, if a retailer has already successfully poached a significant number of customers, there is a sense to reconsider the benefits of the same in-store and online prices. One-price mandate applied to all channels might result in a disadvantage in a similar market. If the company sets minimum prices to compete with online rivals, it will lose money on purchases in the store due to the higher costs of the store (employees, high rents, etc.). Simultaneously, if prices are set at a rate favorable for in-store purchases, online prices will not be competitive.
To be successful in today’s retail world, executive managers need to use the Internet and the store as unique operations focused on customers with different needs and price sensitivity. Mohammed (2017) claims that “if price matching can be curbed to 10%–15% of a store’s sales, matching can also be viewed as a type of sustainable couponing strategy.” For retailers, it is best to approach price matching as a temporary measure and proceed to pay more attention to giving shoppers more reasons to purchase in their stores.
With different in-store and online prices, some consumers will inevitably appear in stores and ask for a web price. Mohammed (2017) provides an interesting analogy: “this is akin to pumping a customer’s gas but charging the self-serve price.” Usually, it is best to make in-store and online prices similar. Nevertheless, this rule is not applied to, for instance, airlines (booking on the phone and online), gas stations (self-serve or full-serve), retail (outlet and regular stores), and others.
The click-to-bricks model is an ideal option for retailers offering personal items and big-ticket items. People want to touch and test these products before purchasing. In such industries, a physical space might be used as an experience center and a showroom to attract new consumers. Typically, items in showrooms are only for display, so customers can choose what they want and have the selected item shipped at home. Additionally, customers obtain an opportunity to see products in person and communicate with a knowledgeable sales representative. These two factors enforce the customer’s perception that buying quality product is worthy of investing.
Chronicle 5 WCVB. (2018). Retail roundup: From clicks to bricks. [Video]. YouTube. Web.
Gerdeman, D. (2018). Should retailers match their own prices online and in stores? Harvard Business School. Web.
Mohammed, R. (2017). How retailers should think about online versus in-store pricing. Harvard Business Review. Web.
Ogino, S. (n.d.). 9 examples of innovative in-store technology. Annex Cloud. Web.
The clicks to bricks trend: What’s driving online retailers to invest in physical locations? (2018). Web.