Though the recession and still-low confidence levels among consumers are affecting brick and mortar retailers, this is by no means the only challenge they are facing. The increasing propensity to shop online is a major threat too, and one that must be addressed if retailers wish to continue to trade successfully.
While consumer confidence is something retailers cannot easily change, the good news is that a double-dip recession is not expected, and recovery in retail sales is predicted to remain steady in 2012. So the major challenge for retailers is how to compete in an online shopping world.
Understanding the Threat
In order to compete, retailers need to first understand the threat. In a survey carried out by Accenture in September last year, the Christmas buying habits of 500 consumers were analyzed. In the days before the internet there was little alternative to buying directly from a retail store, but now over half of the population (59%) claim they will be buying most of their holiday shopping online. This is a huge chunk of the market lost to online shopping, and has increased from 41%.
So what are the driving factors persuading so many consumers to buy online? According to the same Accenture survey, free shipping is the biggest incentive at 74%, while 60% preferred the better discounts that can be found online. These two factors alone can be overcome by brick and mortar retailers to a certain extent, but the third incentive to online shopping was cited as a way of avoiding the crowds (47%). Crowds are good news for retailers, but understandably off-putting for consumers, especially in the run up to Christmas.
Recommendations for Competing with Online Shopping
60% of consumers surveyed said they wanted to find better discounts, and interestingly 54% of consumers who do go into stores will use a mobile phone to compare prices before buying. This indicates there’s a good market for providing technology so that consumers can do this in-store. Shopping center operator Westfield, did this by adding price comparison functionality to their in-mall mobile app, while some big name retailers including Home Depot, Nordstrom and Sam’s Club offer in-store Wi-Fi services whereby consumers can check prices online and read product reviews.
Those retailers who have an online presence can use it to their advantage by offering coupons and savings online that can only be used for in-store purchases, encouraging consumers to visit the store in person. And if consumers can shop online, stores can offer the option of a store pickup service, rather than, or as well as, home delivery.
One advantage to shopping in the real world is the instant gratification it gives consumers, and this is something that online shopping can never do. Retailers can take advantage of this simple fact by making the shopping experience as pleasurable as possible; employing friendly staff, and doing their utmost to encourage consumers to come back.
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