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What dot-com companies’ move to bricks-and-mortar stores could mean for retailersBy
Dot-com companies including Google and Amazon are reportedly trying out physical retail stores as a way to attract new consumers. Could the shift to bricks-and-mortar stores be a sign of the times to come for online retail?
Amazon is reportedly opening up a boutique location in Seattle that will sell its line of products, and Google has announced that it will be testing a physical retail location in Dublin. With Apple’s retail-focused strategy, it appears that other tech giants might be taking a hint to help mass market its products to consumers.
“There is a growing realization amongst the leading bricks-and-mortar retailers that the in-store customer and the online shopper are not distinct, siloed groupings – there is a very substantial overlap,” said Dr. Windsor Holden, principal analyst at Juniper Research, Hampshire, England.
“This rather belated recognition has certainly benefited companies such as Barnes & Noble, which is using the mobile device as a hub with which to marry the physical and digital worlds,” he said.
“So a number of online companies are arguing that the introduction of a physical channel can enable them both to widen their user base and to provide existing customers with an additional purchasing channel.”
Tech giants opening up retail stores to sell consumer electronics is an interesting concept since many consumer electronic stores such as Circuit City were pushed out of business by online retailers.
However, Apple is an example of a mobile manufacturer that has benefited from having retail stores because it makes the products more personable and shows consumers how to use them.
Therefore, Google’s Ireland store will prove to be interesting since the company has recently gotten into more hardware manufacturing.
For Amazon, a retail location could be a smart move to show users how products such as its Kindle Fire work as a hybrid between a tablet and an ereader.
However, with online retail continuing to boom, many have questioned the longevity of bricks-and-mortar stores and some argue that physical retailers will slowly demolish.
“I am not wholly convinced of the benefits of moving into the physical storefront space,” Mr. Holden said.
“There is a strong case for arguing that what is happening with the physical storefronts is really the beginnings of what may well be a prolonged end game — that they are in fact sweating their physical assets before there is an even greater shift to online purchase,” he said.
Although tech giants might be moving into physical stores to increase sales of their products, the move could also be more to show the mobile strength of the dot-coms.
For example, although both Google and Amazon have made great strides in mobile that have been recognized by the tech industry, consumers might not be aware that the companies own and operate their devices.
“It is interesting when you think about the different dynamics between a physical store that you can walk away from and a Web site,” said Peter Krasilovsky, vice president and program director for marketplaces at BIA/Kelsey, Chantilly, VA.
“If you are a brand, a store is more of a showcase of what products the company offers,” he said.
Similarly, LivingSocial, which is partly-owned by Amazon, also dipped its toes into physical retail locations with the goal of educating consumers about its services.
Although dot-com companies such as Amazon and Google have traditionally been seen as online-only, with more consumers comparison shopping and looking for deals, dot-coms now play in every retail space.
For example, Amazon recently began using newspaper circulars to drive consumers to its Web site.
In addition, a retail location could also help Google educate consumers on its mobile payment program, Google Wallet that works on Sprint Nexus S 4G mobile phones.
Mobile payments have been slow to catch on with consumers, but by showing mobile users one-on-one demonstrations on how it works, consumers might be interested to buy a Nexus phone.
Even though both Google and Amazon are equipped with high-end technology, some experts agree that an entrance into retail is not the best move.
When Apple decided to try its foot in retail in 2001, industry experts expected the effort to fail.
Therefore, it is important to remember that Apple is the exception to an online company being successful in retail, not the rule, according to experts.
“The basic story is that both of these companies will find retail much more challenging than the businesses they are in now,” said Carl Howe, vice president of consumer research at Yankee Group, Boston.
“For Amazon, it means dealing with location and customer service issues that they have never had to deal with before,” he said.
“Google, on the other hand, really is not structured for low-wage retail staff because it has made its corporate reputation on hiring the best and brightest with the highest GPAs. Retail will require Google to hire people who have more personal empathy and selling skills than it may be comfortable with. In both cases, this will require as much a change in culture as it will in strategy.”
Lauren Johnson is editorial assistant on Mobile Commerce Daily, New York
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