The internet has revolutionized the world of retail (and countless other consumer-facing industries), but it may not be as dominant and all-consuming as we previously thought. Online shopping is still on the rise—some surveys suggest that up to 51 percent of consumer purchases in the United States are now done online—but that doesn’t mean that physical stores are out of the running entirely. In fact, as more retailers invest heavily in new online platforms, online-exclusive retailers like Amazon are starting to open physical stores of their own.
What’s going on here? Companies are starting to realize that if they want to achieve the highest profitability and retain customers for the long term, they need the best of both worlds—a “bricks and clicks” model. But why is this occurring?
Urban Centers Are Growing
One of the biggest influencing factors here is the growth that urban centers have seen in the past few years (and their projected growth in the future). Thanks in part to millennials, residents are moving from suburban areas and gravitating toward city centers, increasing the population density and increasing both walk-through traffic and demand for shop owners within city limits. This makes physical stores more enticing, and offers more profitable locations to aspiring physical-storefront entrepreneurs.
Consumers Still Love Instant Gratification
Online retailers, despite growing attempts to achieve faster drone delivery, still aren’t able to give consumers the instant gratification they crave from their purchases. In fact, according to the Boston Globe, the internet is responsible for making us more impatient and more demanding of instant gratification. This growing cultural impatience sets a threshold for the convenience and availability of online shopping; no matter how good of an online experience you can offer or how inexpensive and reliable your products are, you won’t be able to give customers an immediate reward for their purchase unless you have a physical storefront that can give it to them.
Corporations Want a Bigger Market Share
Despite the fact that people are making more purchases online than ever before, the whole of online shopping still only accounts for about 10 percent of the global market. There are people who shop online exclusively, but there are also some people who avoid online shopping altogether. Any business that only pursues one of these avenues is going to severely limit its potential audience, and therefore, its potential revenue. The “bricks and clicks” model offers a hybrid approach–one that caters to the full spectrum of consumers.
E-Commerce Is Competitive
E-commerce offers many advantages to retailers, including lower setup costs, less management, and higher convenience for consumers, but let’s not forget how competitive the online space has become. Millions of companies and individuals have flocked to the web to open up online storefronts and market their businesses, and as a result, competition has grown fierce. Investing fully in online retail, without a surefire strategy to topple the giants or differentiate yourself from the crowd, could be harmful. Physical retailers have dwindled in recent years, so the physical space represents a less competitive opportunity for companies looking to expand their presence.
Online Operations Still Need Physical Hubs
Finally, consider that most online retailers still need physical establishments to remain in operation, potentially including factories, warehouses, and distribution centers. If you’re going to invest the money in opening and managing these locations anyway, you might as well allow them to become physical storefronts. You’ll be paying for the location, you’ll have it branded to represent your company, and most importantly, your physical goods will already be available there. Because even online shopping has a foot in the physical world, it’s simpler for online-exclusive retailers to convert to the hybrid “bricks and clicks” model.
For years, economists have argued with one another about whether physical stores would be around forever, or if online shopping would eventually dominate the market. The real answer, it seems, is somewhere in the middle. As the bricks and clicks model grows in popularity, we’ll likely see more shopping options from all our favorite brands—and it’s going to be good for consumers, businesses, and the economy in general.
This post is part of our contributor series. It is written and published independently of TNW.
This post is part of our contributor series. The views expressed are the author's own and not necessarily shared by TNW.