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The Local Store Advantage In An Online World


Offline retailers have been struggling with the move by many consumers to doing their shopping online. The move online is continuing so rather than lick their wounds these supposed retailing dinosaurs are finding that they may actually have an advantage or two to exploit over the pure online play.

Many online retailers will put their hand on their belly, lean back and give their best “Oh, that’s rich!” accompanied by the look of derisive sarcasm at the mere thought that a physical store can be an integral part of the increasingly online world. If a recent article from the New York Times is to be believed that is a mistake of youthful arrogance that may come back to haunt them. With new attitudes and approaches even the practice of ‘showrooming’, where shoppers look at items in a store then buy them online from elsewhere, can be combatted.

Now some big retailers are taking a new approach to the dreaded showrooming by transforming their stores into extensions of their own online operations. Walmart, Macy’s, Best Buy, Sears, the Container Store and other retailers are stepping up efforts to add Web return centers, pickup locations, free shipping outlets, payment booths and even drive-through customer service centers for online sales to their brick-and-mortar buildings.

So is there hope for retailers with physical stores? Well, there is and for reasons that some online retailers would actually have a tough time fighting. The first are customers that like to use cash whether by choice or necessity.

In April, Walmart began allowing shoppers to order merchandise online and pay for it with cash at a store when they picked it up.

Even without the cash option, in the six years since Walmart has allowed online items to be picked up in stores, customer demand has been high. More than half of the sales from Walmart.com are now picked up at Walmart stores, [Joel Anderson CEO of Walmart.com] said.

With the cash option, Walmart was trying to appeal to customers who did not have bank accounts or credit cards. Walmart says the majority of in-store purchases are made with cash or debit cards, and that about 15 percent are made with credit cards.

In a world where consumers are finally grasping the evils of credit cards this type of approach rips directly into the heart of ecommerce players and should be something to take note of for marketers of all stripes and sizes. There is even another area that might help people decide that ordering online and picking up at a local store is a good thing besides the obvious one of getting their purchase even quicker than the quickest next day delivery option. It’s security.

In the first weeks of the cash option, Walmart noticed that a different set of customers also found the service appealing. About 40 percent of the customers who paid with cash when ordering online ended up using noncash options, like a credit card or check, when they arrived at the store. They simply had not wanted to provide that financial information online. “There’s still a large segment of people out there afraid of identity theft or just plain putting their credit card online,” Mr. Anderson said. The service already accounts for 2 percent of Walmart.com’s sales.

Of course, not everyone fears this but increasing identity theft and credit card fraud rates could make some ‘it’ll never happen to me!’ types think twice.

Even with high end retailers the online and offline mixture is starting to work with stores like Macy’s and Nordstrom’s integrating their online and offline inventory to further enable the online shopper to get what the want, when they want it and without some of the hassles of delivery, including the high cost of delivering larger items.

To be sure, it’s not as if online retailers should be shaking in their boots. There are still many advantages to their model over that of those who have the cost associated with physical store locations. These advantages, however, can quickly look less enticing as offline retailers stop sitting back and taking a beating regarding their disadvantages but rather learn to adapt to the online world in a decidedly offline way.

So each camp has things to consider. Offline retailers can continue to adapt by implementing more integrated online and offline efforts. Meanwhile,online retailers (well, at least the smart ones) will become a little less arrogant about their advantages and
see where those dinosaurs may sill have some life left in them and how they will respond.

What’s your take on this? Is the pure play online retailer actually exposed in some ways or will the march toward physical stores becoming extinct roll on unhindered?

  • sebastian

    I’ve been waiting to order things online and pay for them instore for a long time. It makes way more and sense and it will also provide the buyer with some insight to the geographic location of the store. I’ve had a couple years experience in retail management and often the buyers are way off the mark in what they think will be big in our location. Using online tools to monitor what your market is saying and the sentiment they have towards your company and carried brands is also getting much more effective with My Viral Web
    Thanks for the article, I just can’t wait till options like Wal-Mart’s become available at the stores of my choice
    A