Bricks to Clicks and back again

Bricks and mortar retail is coming back into fashion - NYT:

After years of criticizing physical stores as relics, even e-commerce zealots are acknowledging there is something to a bricks-and-mortar location. EBay and Etsy are testing temporary stores, while Piperlime, the Gap Inc. unit that was online-only for six years, opened a SoHo store this fall. Bonobos plans to keep opening stores, and Warby Parker, the eyeglass brand, will soon open a physical location.

The companies say they are catering to customers who want to see what they are buying in person, and who see shopping as a social event. As they build the locations, though, the retailers are reimagining some long-established rules — carrying less inventory, having fewer staff members and embracing small and out-of-the-way locations. In the process, they are creating what could be a model for efficient in-store operations: the store as a showroom.

Why? Well, in the words of the proverbial bank robber, "it's where the money is"

“Well over 90 percent of sales still happen in physical stores, so there is a huge, compelling reason to think about the physical store as a driver of sales,” said Sucharita Mulpuru, an analyst at Forrester Research. She said Web retailers had advantages over traditional ones: they are not stuck with old cash registers and sales software, and the weak commercial real estate environment combined with their Web sales history allow them to get leases on good terms.

Or to put it another way, the dog days of the biggest recession since 1930 is a good time to score some cheap retail space, and come in with low cost retail techniques.

I'd also look at it strategically - it was always predictable that the online world would succeed with low cost, low uncertainty goods; i.e. where you don't need to experience it first, either because it is a commodity (or at least least getting product testimonials was fairly low hanging fruit, eg books, movies, white goods etc) and/or the risk of getting it wrong was low. But getting out of that bottom left box (see graphic above*) was always going to be much harder. Pre Internet, catalogue retailers used devices like self measurement, lots of photos, no hassle returns (satisfaction guaranteed, or your money back), "lifetime" guarantees (some to extraordinary lengths), and of course discount pricing. Online retailers are experimenting with all these, and new ways to reduce uncertainty (brand trust is playing a big part here), Amazon succeded largely by building an extremely well oiled end to end supply machine (as has iTunes in the digital world, by the way). But even so there comes a point at which you have to experience the product first, before buying, and as online retailing starts to saturate the low cost, low uncertainty (aka low risk) box, it needs hybrid strategies to do this. As yet there is no way of seeing if your bum looks big in those jeans, or that car is just "you" (and not a lemon), without trying it. At that point only trying it on or out yourself will make the sale. Also, there are still large areas of the retail market where only a relationship (high touch) will work.

And since the higher value demand mountain isn't coming to Mahommed fast enough.....here we are, the online players are gettin' on down(town). This is happening while some old Bricks and Mortar retailers are coming in the opposite direction, so it seems like a New Retail World is potentially emerging - New Argos, anyone?

Thing is, bricks and mortar have higher costs, and are easier to tax - so these hybrid retailers need to ensure that there is extra margin to cover them. Maybe temporary stores avoid this, still - one to watch....

(*That graphic, by the way, is about 20 years old, I first did something like it in the mid 90's)