Think Tank: The Realities of E-commerce

When it comes to e-commerce and the growth of online shopping, what are the realities? While it is true that e-commerce has experienced growth in recent years, much of that is primarily due to the growth of industry giants such as Amazon and Alibaba. The untold story is that while headlines proclaim the “death of physical retail,” an ever-increasing number of pure-play e-commerce retailers g open physical space.

The Facts

According to U.S. Census Bureau data, the online-only sector has an overall market share of only 3.5 percent. In dollars and cents, this means that of the $4.7 trillion in total retail sales, pure-play e-commerce only accounts for about $173 billion. The reality is the 10 percent e-commerce numbers you read about include mail order and auction sales, as well as shipping and service charges as well as the online sales of brick-and-mortar retailers.

Brick-and-mortar retail is evolving just as it always has. Today, savvy retailers realize that they need both a physical and online presence in order to stay competitive. Why? Because online only retailers, known as ‘”pure-play,” face hurdles when it comes to the cost of shipping and building their brand when the only place a consumer can see it is online.

Physical Meets Digital, Yet Human Touch Is Still Key

We live in a society where convenience is king, and purchases can be made by the click of a button.

Consumers enjoy the convenience of online shopping but still crave the social and emotional aspects that physical stores offers. It is about the customer service and personal attention as well as the ability to touch, feel and size up products. So, smart online players like Warby Parker and Bonobos are opening stores to build their brands and capture consumers by providing a shopping experience.

Those Who Think Online Prices Are Cheaper, Think Again

Many consumers believe that they can find lower prices online than at a physical store, but data tells a different story. We recently issued a report that looked at the online versus department store costs of many products in the women’s category and found that online shopping is more expensive in many areas including apparel, beauty, accessories and shoes.

According to the data, for women’s categories overall, shoppers enjoy a 7 percent price advantage when shopping in stores. When broken down into categories, the data finds a 19 percent price savings for athletic apparel, 27 percent for beauty and 5 percent for women’s accessories. Additionally, if we factor in the added cost of shipping, the savings for consumers shopping in stores continues to rise.

Technology Is Revolutionizing the Way We Shop In-Stores, Too

Technology is being integrated into the shopping experience, just as it has been integrated into almost every aspect of our daily lives. People have access to information instantly allowing them to be savvier and more informed than ever before. These days, advanced technology is likely at work in physical stores in ways most shoppers may not even realize.

Take for example, virtual and augmented reality. At Lowe’s, customers can see 3-D renderings of potential bathroom renovations before making a purchase. Sephora’s Innovation Lab offers an augmented reality app that uses a tablet or smartphone webcam to capture a shopper’s face then apply a choice of thousands of lipstick shades to help find the right products.

Social showrooming, a new trend used by stores such as Nordstrom, helps integrate social media into brick-and-mortar locations. The store encourages followers on social media to pin favorite products on Pinterest, and Nordstrom will then highlight the top picks through interactive displays within the store.

The industry is evolving to keep pace with consumer trends, just as it has in the past. As more and more consumers demand a seamless, integrated shopping experience, omnichannel retailers will emerge as winners.

Tom McGee is chief executive officer of the ICSC. To learn more about the ICSC, click here.

Related stories

Destination Maternity to Merge With Orchestra Prémaman S.A.

Ramblers Way Opens Second Store in Hanover, N.H.

Weekly Sales Pop as Wall Street Shuns Apparel Retailers

Get more from WWD: Follow us on Twitter, Facebook, Newsletter