Over the past couple decades e-commerce has been taking over retail…. or has it?
One of the largest online retailers in the world, Amazon, shocked the world when they opened a bookstore in Seattle’s University Village last November. This single act has brought national attention to a sway back toward brick-and-mortar stores, as well as an “omni-channel” approach to retail (the seamless integration of online stores to physical stores).
Many other companies like Warby Parker and ThinkGeek have also decided to make the move to adding concrete locations, allowing customers to closely interact with the brand and their products.
But what is causing this trend?
I did a little research and have compiled this list of the top 5 reasons that brick-and-mortar retail is not only alive and well, but superior to e-commerce:
People Prefer to Shop in Person
The simple fact is that the majority of customers still prefer to shop in-store. They want the “experience” of shopping and the ability to touch or try on products.
Customers Spend More Time In-Store
Research shows that customers spend almost one and a half times longer in a physical location browsing products than they do when perusing an online website.
Browsing in a brick-and-mortar location results in one in five customers actually making a purchase. Whereas according to “Instore vs. Online” by icsc.org, online shopping is closer to 1 in 20 customers making a purchase after browsing a website’s products! Not only does shopping in an actual store result in more completed purchases, on average people also tended to spend a lot more in person than they do online.
More Cost Effective for Brand Awareness
It’s true that e-commerce has grown exponentially, but with it, its competition has grown exponentially as well. That’s because every company is trying to reach customers through the same Google search results. This has caused online advertising and keyword purchase prices to skyrocket. According to the Guardian, “Macy’s and Nordstrom’s spent an estimated $6.4 million and $4 million respectively, in paid search listings for the top 1,000 apparel-related keywords in the first quarter of 2015.” This has led many online-based companies to start using brick-and-mortar locations to expand their customer base and awareness. These companies have shown that physical stores can increase sales, brand awareness, and online traffic all at a fraction of the cost of Google keyword purchases.
In-Store Growth Rates Equal $144 Billion
In this handy infographic published by icsc.org, they explain some of the confusion around e-commerce’s seemingly huge growth. E-commerce’s current growth rate of 17% is calculated from only a tiny portion of total retail purchases, about 6%. And this 17% comes to about $38 billion in growth for e-commerce. In contrast, in-store retail only has a 3.5% growth rate, however they account for 94% of total retail purchases yielding about $144 billion in growth! This explains why people may think e-commerce is growing more quickly than in-store retail, but in fact, brick-and-mortar retail is still the king.
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A recent article on Al.com shared an exciting statistic. Huntsville is officially on track to be the largest city in Alabama within two years. This is an incredible achievement and testament to the ingenuity, entrepreneurial spirit, and supportive community that calls the Rocket City home.
With growth comes development, and progress is visible all over our city. The skyline of Downtown Huntsville is dotted with cranes, signaling more businesses on the way.
A common question in the commercial real estate industry is, “What’s trending?” Truth be told, it’s a difficult question to answer because each region or market has its own micro-trends that emerge—these may or may not counter overall national trends. But when it comes to general industry awareness, we do our best to stay on top of what experts are saying.