The Role of Retail In The Internet Age

Over the past decade, corner stores have been replaced by 24-hour one-stop shopping malls. With the rise of electronic business, shopping patterns will undoubtedly continue to change, forcing retailers to redefine their roles to ensure their place in the Internet age.

Indeed, the Internet is making an impact, providing the benefits of capturing a global audience 24 hours a day, seven days a week. Lately, the longer working day is driving customers away from queues at shopping malls and turning them to the convenience of the Internet. In certain industries, retail stores are losing business to Internet competitors. etoy has managed to capture 1percent of the total toy market share in the US within two years. The future losers will be the toy stores that do not have a strong online presence. The advantage of online shopping is that a shopper can check to see if the product is in stock, determine its suitability, and make a purchase, all without standing in a queue or fighting for a parking space.

Shopping patterns are changing as customers seek added value from their shopping experience, including dramatic cost savings. Customers wishing to send a bouquet to Europe can either visit an Interflora accredited florist and make the purchase over the counter or visit the Interflora web site. He or she can save 40 per cent and also personalize the gift by typing in a greeting.

Most Important Reasons People Shop on the Web

Easy to place an order 83%
Large selection of products 63%
Cheaper prices 63%
Faster service and delivery 52%
Detailed and clear information about what is being offered 40%
No sales pressure 39%
Easy payment procedures 36%
Source: Jakob Nielsen 1999

Retailers must acknowledge the trend toward Internet shopping and assess how it will impact their business. If they do nothing, retail outlets could become browsing emporiums. Customers may try before they buy, taking advantage of the tangible shopping experience that the Internet can never provide, but then turn to the Internet to make the actual purchase. For instance, shoppers may visit their local bookshop to browse through titles but then order from to benefit from the site’s hefty discounts.

In addition, large manufacturers recognize the added benefit of the Internet, especially the one-to-one relationships that it offers. Toffler’s age of the ‘prosumer’ becomes a reality with the ability to customize products. Some large manufacturers have used the Internet to introduce customized shopping options, thus becoming retailers themselves and providing yet another challenge to the traditional store owner. By visiting the Barbie web site, shoppers can choose the hair, eye and dress color of the doll they purchase — a service that the traditional stores can not offer. Customization services attract collectors or shoppers prepared to wait for their purchases to be created and delivered.

Customization further extends to loyalty programs. Internet shoppers gradually reveal their demographics and purchasing patters, including date of birth, average spending, product preferences and hobbies. Web-based businesses can use this information as a platform to create an interactive loyalty program. For example, in the case of our customized Barbie-doll purchaser, Mattel might consider introducing digital birthday cards or greetings from Ken to the newly purchased Barbie.

The Internet has a slim chance of capturing market share in industries that are better suited to traditional shopping methods. Although consumers can research high-price items such as cars and real estate via the Internet, seeing the place and finalizing the deal is still more effectively done face to face. Thus, a customer may use the Internet to visit car manufacturers’ different web sites but will go to a traditional car lot to test drive the vehicle and close the deal. The retailer provides necessary personal contact that the Internet cannot offer.

To succeed against Internet competitors, retailers must reassess the benefits of the entire shopping experience and seek niches in the market that the Internet cannot fill. No one can dispute that the Internet offers large selections, convenience and low prices. However, it can never offer the entertainment, personal service and “touch and feel” value of a physical store.

The future successful retail store must build upon what the Internet cannot offer and add value to its customer’s shopping experience by giving them that “something extra” to ensure continued patronage. For instance, a wine shop that offers free tastings, talks from wine experts, and food and wine pairing sessions, will always be able to share the market with Internet competitors. The physical store may sell the same base products as its Internet counterpart, but cater to a very different customer.

In contrast, certain industries such as music have won a significant percentage of the market away from retail outlets. RIO Diamond offers consumers the flexibility of selecting individual tracks of CDs from a library of more than 18 million. Actually, several hundred thousand of these are free, all of high sound quality. Indeed, this technology has replaced the need for actual world music stores and has posed a challenge for record companies.

There will always be a place for retailers that serve impulse and recreational purchasers, as well as for those that sell products that don’t sell well over the Internet. However, traditional retail stores will need to re-invent themselves as often as their online competitors to compete offline and online.

Martin Lindstrom is Executive Director and founder of ZIVO. Lindstrom, the key visionary behind some of the most successful Internet sites in Europe, came to Australia in 1997 to head up BBDO Interactive Pty. Ltd. Australia/Asia (later renamed to ZIVO). He was previously with the advertising agency BBDO in Europe for 6 years where in 1995 he established the agency group’s interactive company and developed a strategy for the construction of brand sites on the Internet. Lindstrom was key speaker at the Australian Summit 1998 and is a frequent writer for both The Australian and The Australian Financial Review. Together with his previous partner in Europe, he is publishing a book on how to build brands on the Internet. The book will be available in Australia June 1, 1999.

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