E-tail-Retail Battle: And the Winner Is…

Some time ago, I wrote a couple of articles on the battle for supremacy in the consumer ring between retailers and e-tailers. At that point in retailing history, it seemed that the first round went to the retailers, as online shopping was just too new for the average consumer to feel comfortable with.

Then the second round seemed to be going the e-tailers’ way. Online shopping was by then an everyday household possibility, and the e-tailing hype associated with so many online launches, distracting site publishers from their consumer care duties, had subsided.

However, a recent Forrester Research report on e-tailing inspires me to revisit the situation in the ring and report on the third and final round.

According to Forrester, by 2002 almost all pure e-tailing will be dead. I still maintain, as I did in my previous articles on the retailing/e-tailing battle, that e-tailing has never really gotten off the ground.

The first real test for e-tailing was during the 1998 and 1999 holiday seasons. Unfortunately, the weaknesses that led to the failures that dominated the online experience for most shoppers during those two holiday seasons have yet to be addressed. In fact, the pure online e-tailer’s shortcomings have been solidified since then, and this is an impression shared by the market. E-tail share prices have been decimated in the last few months, suffering particularly savage cuts during Nasdaq’s April nightmare earlier this year. So far, not a happy life for the wunderkind that we all thought would take over the world.

Let’s look at the third round’s progress.

The brick-and-mortar retailer really has overcome the online adversary, so much so that the promise of online-led cooperation, in the form of clicks-and-mortar enterprises, has been overturned by retailing’s resurgence. Now the term for “cross-channel cooperation” is likely to be “clicks, bricks, and brands.” And the shift suggested in the translation of the former term (clicks and mortar) into the latter (clicks, bricks, and brands) lies in branding power.

Brands have shown themselves to be the key component in keeping offline retailers afloat and pushing online e-tailers further out of their depth. Established brands have been the retailer’s life buoys. Enjoying a high degree of consumer awareness, established brands have saved offline business from the huge consumer-acquisition costs that have so crippled the online merchants.

In 1999, online pure plays spent an average and unsustainable 118 percent of revenue on marketing. By leveraging established brands’ consumer awareness, consumer trust, and offline partners’ existing infrastructure, clicks-and-mortar enterprises fared much better. The brick-and-mortars’ hold on street-level contact with consumers and their embrace of established and trusted brands are among the characteristics that have helped online partners through the punishing second and third rounds. Amazon.com/Toysrus.com, drugstore.com/RITEAID.com, and yahoo.com/bn.com are examples of the success of clicks, bricks, and brands.

The strength in these unions is the bricks, not the clicks. The backbone of online/offline entities is the real-world infrastructure, centered on the store. From the online end of the operation, a range of channels could reach into the world. One of these is called e-commerce; the other is m-commerce. But these valuable means of global penetration are simply channels that depend for their life and support on a well-established central point: the offline partner and its branding and infrastructural resources.

Selling everything online is never going to be the case. Write me an email 10 years from now if my guess is wrong. What’s my guess? That in a decade’s time, a maximum 25 percent of all commercial enterprises will have an “e” in front of their names. Some things work online; others don’t. It took us five years to figure out the clicks-and-bricks formula. It’ll take another five years for us to make it work perfectly.

So the conclusion is that the third-round winner is, again, retail. But this isn’t bad news. The rounds haven’t been walkovers. The second round, particularly, saw dot-coms give retailing a good shakeup. Offline businesses found themselves questioning their processes, attitudes, and goals, all of which can only benefit the consumer. And what’s good for the consumer should be good for the retailer.

Retail now has access to online channels, broadening the customer base and introducing retail to consumer-driven innovations and responses. The Internet has introduced retailing to a cost-effective service-delivery revolution. In five years, dot-coms have become a vital part of consumer expectations and retailing growth. So the bout’s winner is, in fact, the referee: the consumer.

What more could you ask for? A recipe for ongoing retailing success, one that rests upon the right mix of clicks and bricks and is achieved in just 1,800 days.

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