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Posted Date: 1/30/2013

Is Bricks-and-mortar Dead? How to Thrive in Today's Retail Environment

By Lindsay Carpen, Director, Retail Practice, Junction Solutions
It's a familiar theme in the media and throughout the retail industry: "e-commerce is killing bricks-and-mortar retail." From a customer's perspective, e-commerce simply means it is easier to shop around and find the best price. Absent of any other means of differentiation, prices will continue to fall to benefit the customer and thus further reinforce online retail's resounding success.

What's more, e-commerce also allows customers to easily shop across multiple retailers with less effort than going to a single bricks-and-mortar store. Combine these benefits with the current e-commerce trend of offering free shipping (and often returns) and frequent tax-free transactions and it's a wonder why anyone would choose to shop in a physical store. Some companies such as Best Buy are especially vulnerable to these trends, and accordingly have suffered a significant impact. Unquestionably, there is plenty of hype on this issue, but do these trends affect every type of retailer equally? More specifically, how do these trends affect apparel retailers?

It's important to emphasize that only certain product types are more vulnerable to these trends than others. Certain product types are especially vulnerable to online competition for three reasons: when it is easy to compare prices, when the customer has the same expectation for product performance regardless of retailer, and when there is a somewhat higher tolerance for delayed gratification in receiving the product. Bricks-and-mortar retailers that primarily carry these product types will continue to see their market share and sales erode to online competitors that are set up to compete on price.

Consumer electronics is one product category that would be extremely vulnerable. Arguably, however, the apparel business is not under that same pressure. Apparel products differ from consumer electronics in a number of important ways. For instance, in fashion retail there is constant product refresh, comparisons are more subjective, and quality is difficult to assess online. Understanding these differences and using them to position your business is a key strategy to compete effectively against online players.

There is a catch, though. Despite the potential for apparel products to hold an advantage over product types such as consumer electronics, manufacturers must recognize these advantages in order for retailers to benefit. Simply put, some manufacturers are more deliberate at protecting their products than others.

For example, when looking at products offered by Lilly Pulitzer, the product assortment on both Amazon and Zappos was limited, but where there was overlap, the prices were the same. For Anne Klein, however, products were offered in several places even beyond Amazon and Zappos, and the prices were wildly different. The point is that if a retailer is going to carry products from a manufacturer, consideration should be given to the manufacturer's effectiveness at protecting its brand and pricing. If a bricks-and-mortar retailer carries apparel products from manufacturers that are guarding their brands and pricing, the retailer then is able to differentiate on other dimensions such as the service experience.

There are a couple of strategies that are better executed in a bricks-and-mortar world and are especially suited to apparel retail, especially in the case of the boutique apparel retailer. These include a focus on discovery and comfort. From the customer's perspective, discovery is the process of finding something new and exciting. The advantage that bricks-and-mortar retailers have in this area is that they can better facilitate the process of discovery. There is nothing quite like taking customers through a clothing line or assortment and seeing their eyes light up when something excites or catches their attention.

Buckle is an excellent example of a bricks-and-mortar store providing a great discovery experience to its customers. Buckle associates have a way of making a real connection with customers. They take the time to make their customers feel special by finding the things that make them feel and look the best. If you look at how online retailers approach discovery, it is a very calculating process. Online actions are aggregated and scored and calculated and new products and promotional offers are mechanically provided in a flood of email blasts to customer inboxes. There is no intuition or human interaction involved, nor is there any real opportunity to connect.

The other major advantage for bricks-and-mortar retailers over online retailers is the ability to provide comfort. From a customer perspective, comfort simply means a feeling that you are being taken care of by the retailer. Online retailers work very hard at countering a lack of comfort that customers have with online purchases. Bricks-and-mortar retailers have the advantage of having a one-on-one interaction with a customer, the opportunity to make a connection and make things comfortable.

Indeed, there are several strategies a bricks-and-mortar retailer, especially in apparel, can execute to compete and thrive against online retail. As discussed, first, align yourself with manufacturers that will allow you to compete on things besides price. Second, focus on the discovery process with your customers by offering fresh and continually changing assortments and hire enthusiastic associates to give customers the grand tour and personalized attention. Third, focus on comfort by building a long-term relationship with the customer based upon trust. Contrary to the "gloom and doom" hype, bricks-and-mortar is far from dead, and in fact, will continue to thrive even as online retail grows.

Lindsay Carpen is director, retail practice for Junction Solutions.

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