Trends & Guides

Why Online Retail Stores Isn’t a Replacement for Physical Stores

04 January 2019 | Najwan Nazim
  • Physical stores and online retail stores both have different benefits which they bring to the table. Sure, consumers have their preferences but combining the two would double the benefits for one business.
  • E-commerce provides multiple benefits to physical stores with an opportunity to grow faster, a more flexible business, improve C2B and B2B relationship, keeping consumers well informed of current trends and promotes repeat purchase.

Physical stores are important when it comes to delivering a decent experience to the customers. However, as technology evolves around us, so does the nature of the business. Nowadays we see online retail stores like Taobao, Tmall, Amazon and many more. Some businesses that are still practicing the traditional way might wonder whether they are over shadowed by online retail stores. With the growing popularity and the convenience that comes with online shopping, what is the fate of physical stores?

Convenience is a great encouragement towards consumers as it is psychologically appealing in a way that it takes away the burden which comes when shopping in physical stores like driving, walking and locating the desired goods. It may seem like a lazy reason for why e-commerce platforms are created but technically it is not. The reason for this is because, there are other reason why online retail stores or e-commerce platform are the preferred choice for consumers to shop.

Taken from smartinsights.com

It is important for entrepreneurs to take note that online retail stores help to eliminate time wastage. Time is an important element in life and it is wise to manage time with care. Based on a research carried by KPMG International, the most popular reason why consumers tend to prefer shopping online is because online retail stores are available “24/7”. Nowadays consumers don’t have the freedom of time as they are always working.

According to an article written by Yupina Ng from South China Morning Post, employees in Hong Kong had put in some of the longest hours in the world. She later shared that an “event manager” by the name of Samantha Chan had no choice but to work for 36 hours straight.

An article by Hong Kong Business stated that in 2018, the salary for employees in Hong Kong had increased by 5.7% however they would have to “suffer longer working hours”. On the brighter side this would mean that the population in Hong Kong would have a higher purchasing power, thus giving more opportunities for businesses.

On the other hand, there are still a high traffic for those who frequently visit physical stores, upon reviewing a survey by KPMG International, it shows that there are quite a number of consumers who still prefer shopping the traditional way through brick and mortar rather than purchasing goods online. From the survey, it is understood that although online retail stores are convenient, it is almost impossible for it to mimic the experience gained from shopping in physical stores.

Taken from KPMG International

If online retail stores are convenient and physical stores provide better customer experience, what should businesses and entrepreneurs do?

Some might find that online retail stores are the future of B2C and B2B trading. Does this mean that physical stores are obsolete in the future? As a matter of fact, the probability of physical stores being obsolete is far from the truth. The introduction of e-commerce platforms is not a replacement for physical stores but rather enhances the business’s potential.

Here are 5 reasons why and how e-commerce platforms and physical stores complement one another

1. Opportunity to grow faster

During the launch of their new office in Malaysia in 2018, tech giant Jack Ma of Alibaba stated in a press conference, “digitalising local businesses would help to empower the business, giving them the opportunity to grow faster”. Jack Ma further explains that “information technology time (IT) is to empower yourself and Digital Technology time (DT) is to empower the others”. He strongly believes that by empowering the partners and making them successful, then and only by then will “you” be successful.

Entrepreneurs and small businesses that are relatively new to the market are able to learn from more successful entrepreneurs or use their reputation to helps boost their own. For example, Alibaba is a company which provides a platform that connects businesses to the consumers and other businesses. Since Alibaba is a popular platform for these businesses, start-up entrepreneurs are able to grow faster from the network which Alibaba had created.

According to an article by Dan Conboy from statement, both consumers and businesses realise the convenience e-commerce business platforms brings to the market. By offering convenience to the consumers, online retail stores tend to be a short cut to globalisation for businesses to take advantage of. For example, Malaysian products are not relatively popular within the Hong Kong or China market.

According to Jack Ma from Alibaba, by using Alibaba’s platform small businesses in Malaysia are able to display their products to the Hong Kong market which includes Malaysian movies and Malaysian food. Jack Ma stated “the Alibaba platform would help to empower young Malaysian’s to conduct business globally and would also help to empower farmers from the rural area. China consumes over 8 billion chickens every year. This also shows changes in which China is shifting from exporter to importer”.

Therefore, not only are the new start-ups able to reach consumers fast by globalisation, online retail stores are even able to empower farmers from rural areas. Farmers in Malaysia are able to make money selling from to the locals and also from foreign markets by using the Alibaba platform thus, doubling their income. This is truly an eye opener and proof of why and how physical and online retails complements one another.

2. Allows the business to be more flexible

Jack ma stated that the future of businesses will no longer be B2C but C2B. Everything would be tailor made accordingly to the specifications requested by the consumers. This will not only maximise customer satisfaction but also enhance market opportunities by offering product “personalisation” which is relatively a new market offering.

Taken from KPMG International

Furthermore, online retail stores are also able to save physical stores as their back up plan for when the physical store fails. For example, Shop Direct is a retail group that had a physical store back then and due to the rising popularity of e-commerce businesses, their physical store had declined dangerously and they had no choice but to close their physical store and remain as a “fully online subsidiary”. Today Shop Direct remains as one of UK’S largest integrated digital retailer and financial services provider.

This is possible mainly because e-commerce platforms are available for the consumers 24/7. Some customers are busy with their work and they would not have the time to make purchases through physical stores. Online retail platforms would give them the ability to shop from their workplace which enables multitasking. Or they could even make purchases after working hours.

This would also enable consumers from different time zones to shop as they are able go through the product listings and make purchases which would all be recorded by the system of the e-commerce platform which is very convenient for both parties, “win-win situation”.

According to Retail Dive, the modernisation of businesses with both online and physical stores, act as one affective business platform in which it is stated in the article that, physical stores are evolving to become the “showroom” and online stores to be its main platform for which consumers tend to make their final decision.

Taken from KPMG International

As discussed earlier, study shows that there are still consumers who prefer to shop at physical stores as they find that shopping online does not give them the same experience as physical stores do. It was later discussed that the age of the consumers also influences consumers purchasing behaviour as younger people are more comfortable purchasing products online compared to older people.

3. Fast-Tracks B2C and B2B Communication

Having an online platform helps the customers to keep in touch with the businesses. Communication between the consumer and the business is very important for the business to be successful. Take a look at Alibaba, as mentioned by Jack Ma “it is important to know what you did wrong and what you did right. This would help the company to move forward and evolve from what it is today”.

Alibaba does a review on the company every quarter of the year. This could perhaps be a tip for entrepreneurs to take note of. This would also help to create a society which is loyal to a certain brand which is highly beneficial for the business in the long run. Mostly beneficial to its brand image which in time creates brand value.

Business can achieve this by listening to feedback which not only lets the consumers know that the business is listening which improves consumer relation but also helps to improve on the business in general.

Taken from KPMG International

The most suitable platforms are social media sites which contains a high volume of users. According to the survey by KPMG, the most popular social media platform in Hong Kong is Facebook. Everyone is glued to social media sites nowadays. Even companies use social media to communicate between colleagues for work purposes. It would be wise to use social media to keep the business closer to the consumers.

Let there be a community for the company where both the business and the consumers share a voice. This would show that the business has value, worthy enough for the consumers to take an effort to be a part of a community with the business which is very beneficial for the long run. Social media platforms can be used to create a loyal society which can help to support the future and direction of the business.

4. Keeps consumers up to date with ongoing trends

Trends would help the business to evolve and also a chance for businesses to make themselves more appealing to the customers. How this works is that the customers can always be kept up to date with the daily promotions and offerings which the business is currently offering.

As discussed previously, social media helps to provide the business a society which enables them to communicate with the consumers. By being a part of the community, the business is able to share new promotions, products or service to their consumers fast and wide. For example, Circle K’s Pokémon advertisement in which they encourage Hong Kongers to “catch ‘em all” by claiming the Pokémon dolls through Circle K’s mobile app and to be redeemed at the physical store.

The advertisement was on YouTube and had given them a memorable spot in 2017’s top Hong Kong ads. The thing that makes this advertisement so special is that it manages to successfully target consumers that use social media a lot and shared similar interest towards Pokémon within Hong Kong’s community.

Consumers are active in social media sites. Trends may arise within social media sites like in YouTube, Facebook, twitter and Instagram. According to KPMG, Hong Kong has a high rate of Facebook users. With high usage of social media sites, there is a high chance for the consumers to be exposed with the trends which provides a brief door of opportunity for the businesses to improve on their future strategies and ideas with a lower cost of advertising compared to billboards and posters.

5. Promotes repeat purchase

Repeat purchases can be established because having both a physical store and an online store would help to create a friendly environment for the consumers which makes their visit to the business easier. Information about the business can easily be accessed by the customers through their smartphone devices which means they are able to shop wherever they are.

Convenience had been mentioned multiple times before and it will be mentioned multiple times again. According to a survey by KPMG to find out on the specific development organizations need to focus on in order to maximise consumer convenience is by “improving the consumer journey and user experience”.

Taken from KPMG International

By creating a convenient environment for the consumers, it is important for businesses to portray a memorable experience which helps the business to obtain “loyal customers”.

Businesses can do so by providing perks for consumer that tend to purchase goods online. Businesses could give consumers shipping discounts or perhaps a voucher for when a customer makes a purchase through the online store and to be redeemed at the physical store. Most importantly, it is absolutely crucial for businesses to promote security in their terms of sale. The reason for this is because, one of the reasons why consumers remain shopping traditionally which is in physical store rather than online is because they lack trust towards online retailers.

Being able to successfully promote a safe environment for the consumers to shop online would definitely helps build a positive image towards the business. For example, Lazada’s return policy which supports cross-border returns and easy refunds applicable for any unhappy customer helps consumers to feel more encouraged and safer to shop online as they know that they are under the care of Lazada. This is the reason why Lazada is very popular in Malaysia and ranked number 1 according to our Map of E-commerce

All and all, physical stores and virtual stores both provide different consumer experience but have the same goal. Nonetheless, with the evolving market trend, e-commerce platforms are an essential tool for entrepreneurs as it provides that extra edge which helps them to compete with other fierce competitors. Having this edge would not only help to promote both physical and virtual stores but also attracts customers to check out the goods offered by the business which also increases the probability of someone making a purchase.

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