The Truth About Internet vs Brick & Mortar Stores

The Truth About Internet vs Brick & Mortar Stores

The Truth About Internet vs Brick & Mortar Stores

So what’s the the truth about internet vs brick & mortar stores?

As the internet and ecommerce continues to become a large sector within our global economy, many entrepreneurs are stuck wondering what online success means for offline shopping channels. It is no secret that internet has pervaded nearly all aspects of modern society, and within the online shopping realm, e-commerce has grown about 15% in last year alone.

We can see from statistics on the both online and offline retail that online growth is set to outpace conventional offline retail sector growth by 3 to 1. This, in a lot of cases, would suggest that online shopping will eventually lead to the demise of the traditional brick and mortar approach to stores, making many investors and entrepreneurs hesitant to set up these types of stores.

Though ecommerce is the faster growing sector, many of these entrepreneurs are unaware about the truths behind the current marketplace. Here is some key truths and data that can help point you in the right direction when choosing whether to open an actual physical store front or keep your sales channels all online.

Market Size & Growth Projections

Though internet and online commerce is big, offline still makes up nearly 90% of the overall retail market. In 2017, $459 billion was spent online, which is up from $400 billion in 2016. Though this volume is huge, it is small in comparison to offline, which saw total sales increase to $4.87 trillion or nearly 10 times the amount of its online cousin. In fact, if you compare the numbers from 2016 to 2017, online actually shrank in overall market percentage. In 2016, online revenue was generated to the tune of $400 billion and offline was $3.375 trillion. This means that, in 2016, online represented about 11.85% of the overall offline market. In 2017, though online grew to $459 billion, offline grew to $4.877 trillion, which represents about 9.4% of the total offline market.

As you can see, even though the data would suggest that online is growing faster than offline revenues, the truth is the nearly 3 times higher growth rate for internet-based commerce is actually not enough to outpace the traditional brick and mortar industry. In short, offline is so massive that it would take much more than a 3x higher growth rate for online ever to achieve the same market value as offline. Though online is a growing industry and is definitely growing, the sector as a whole is growing far bigger and faster. Online will actually make up less of the overall retail market even though it may seem otherwise.

Customer Preference & Psychology

When you look at the top reasons that each channel is used, aside from the convenience of shopping online and the fact that they can compare a wide variety of competitors, customers prefer offline. This is mainly due to a few key factors. The first is obviously the tactile differences of shopping in person. For example, a shopper can feel, try-on or quality check a product far more effectively in person than online. Though online retailers attempt to use the product review and testimonial approach to build credibility, a variety of fake ratings and reviews do exist online. This, in turn, has made many shoppers weary of the fact that a product may not be exactly as described or depicted online.

Offline, a customer does not rely on the description or reviews of a product, but can check the quality and product in person, relying on their own judgment. This fact is even more compounded when the value of the product goes up. As a product’s price increases, the vast majority of people will prefer to make those larger sales in person.

When it comes to top reasons given for shopping in conventional stores vs. online, the tactile reasons are given by 55% of people. 41% have concerns that the product looks different and 24% state the product is to valuable to buy online.

Another top reason that customers give is the shipping times. 34% of people listed longer shipping times as a reason they prefer to shop in person and 25% say the shipping costs are too high. This is partially true; however, the psychology of modern humans would suggest it has a lot more to do with the fact that we want instant gratification. In most cases, shipping and savings from buying online equate to a total savings, however, the fact that we have to wait for the purchase to arrive, is generally another top reason people prefer to shop in person.

Online Boosts Offline Sales

It is a fact that 4 out of 5 smartphone users will turn to their phones for commerce informational demand. If ever you have “Google’d” a product to compare pricing or read reviews, you can attest to this fact. However, though we all have a tendency to look up products and services online, the vast majority of purchases are still made in person.

In effect, the business model looks something like this: first we look up a product we are interested in. Second, we research the product, comparing reviews and competitors. Finally, we make the decision to buy and, more often than not, we take ourselves to a local retailer to make the actual purchase. In effect, online is only boosting offline sales. For example, Wal-Mart, the American retail giant, has a lot of traffic to their site, and though people check availability and pricing online, they generally go to the store where that product is available to make the final purchase.

Omni Channel Solutions

Due to this trend of shoppers researching online but buying in person, a new trend of Omni Channel solutions has risen to meet the market demand. What an Omni channel does is lets a consumer find you online, read reviews and then compare prices, but once a decision to purchase is made, the consumer is directed to the closest in person point of sale. This has become a growing trend and has made the entire retail experience much quicker and easier from the customer’s point of view. Additionally, it boosts conversion and keeps the sales within the brand’s specific sales funnels. This is a great option for those brands and businesses looking to maximize on the online shopping trends without losing the ability to offer tactile observation, credibility and the speed of an offline store.

Though many entrepreneurs are still caught in the space of not knowing which option is best for their new endeavor, an Omni channel is likely the best option in most cases. For those that are looking to market to a global customer base, a web-based online solution is still likely the best bet. For those looking to sell a product or service in a local or regional marketplace, an offline storefront is still likely to convert much more consistently and have better ROI. Though online commerce is definitely growing, it is simply too small at this time to make any real effect on the offline market in terms of taking overall market share. So, if you are an entrepreneur wondering if an offline store is still viable, the simple answer is yes.

The Truth About Internet vs Brick & Mortar Stores

The UK, is another story, with online shopping skyrocketing. The trend is only upwards, read the article

The most astonishing and predictable trend in economics just got more astonishing and predictable

British consumers are leading the planet in a relentless march to switch all their shopping online. Britain is the No.1 country for online shopping. Right now, 29% of all shopping done by credit/debit card is done online in the UK. It was only 17% in 2011.

Bonnie Meisels
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