Business Strategy

3 ways traditional brick–and-mortar retailers are responding to the growth of online shopping

3 ways traditional brick–and-mortar retailers are responding to the growth of online shopping

Dedicated e-commerce companies such as Amazon and Zappos are disrupting the retail business in a big way—and traditional brick-and-mortar retailers are feeling the pinch in their earnings as a result. The old adage “go big or go home” simply isn’t as true as it once was: “go online or go home” could be much more applicable for many retailers today.

As mobile technology and location-based services fuel the growth of online commerce, listening to customers is becoming an even greater necessity for retailers. Despite industry buzz about ‘omni-channel’ retailing, the truth is that many retailers are still struggling to get online right, much less build a cohesive brick, online & mobile customer experience.

Plus, what omni-channel means to some consumers might be vastly different for others, and vary by retailer, region and banner. For these reasons, many of our retail clients are leveraging their proprietary Insight Communities to better understand customer expectations and preferences for mobile and online commerce. Building long-lasting relationships with customers in a community setting is guiding their strategy and tactics as potential disruptors enter the market.

So how are retailers rising to the challenge? As the following articles show, companies that have built their business through brick-and-mortar stores continue to experiment:

  1. Offering a wider range of products online.

About 80%-90% of products offered on Costco’s website are different from its store inventory. This prevents self-cannibalization between these two channels. Over the last year, Costco has added new product categories such as apparel, health and beauty aid. The retailer has also improved its shipment timings by shipping three depots instead of one. Costco currently operates its e-commerce operations in three international geographies – Canada, the U.K. and Mexico. As the company enters new markets such as Japan, Australia, Korea etc. in the future, its online business will get bigger. – Forbes.com

Tweet this: Retailer @Costco grows online business by offering products that are different from its store inventory: http://ow.ly/vBODQ

  1. Offering subscription services.

Sam’s Club is quietly testing a new subscription service that allows customers to order items like diapers and printer cartridges online, a sign that Web retailers are posing a threat in areas of retail that were once considered relatively safe.

Called “My Subscriptions,” the service mirrors Amazon.com Inc.’s Subscribe & Save program, which was launched in 2007 and has given the Internet retailer a foothold in sales of basic consumer products. Sam’s Club, a unit of Wal-Mart Stores Inc. is launching the service as Amazon prepares to move deeper into the business itself.

Until now, warehouse clubs like Sam’s had been mostly insulated from the onslaught of online retailers like Amazon. Their main traffic drivers are fresh food, groceries and basic consumer products, which Amazon either didn’t sell much of or sold at higher prices than the discount clubs.

But that is changing as Amazon expands into those areas and builds similar customer loyalty. The Web giant’s $79 yearly Prime membership has grown to 35 million to 40 million households, according to estimates from analysts at Sanford C. Bernstein—rivaling the more than 47 million-strong membership base at Sam’s Club. – Shelly Banjo, The Wall Street Journal

Tweet this: Wholesale club @SamsClub launches subscription service to beef up online efforts. More in this @visioncritical roundup: http://ow.ly/vBODQ

  1. Investing more in e-commerce.

Apart from expanding its store base in the U.S., Wal-Mart is looking to leverage its existing presence to sell more online. The company is rapidly improving its mobile apps, and employing strategies such as ship-from-store, pay-with-cash, scan-&-go, same-day-delivery and crowd sourcing. It is also utilizing its big stores as fulfillment centers to ensure timely delivery of online orders. Last October, Wal-Mart expanded its online grocery sales (order online and pick from stores) in Denver and received compelling customer response. More than 90% of the customers rated the service between average and outstanding. This indicates that Wal-Mart is slowly but steadily reviving the online grocery business, which has been a failure in the past for players such as Webvan. If the company manages to sustain its online grocery sales while expanding this service throughout the U.S., its e-commerce sales will increase considerably given that groceries account for over 50% of Wal-Mart’s revenues. – Forbes.com

Tweet this: Retail giant @Walmart to invest more in #ecommerce, mobile apps. More in this @VisionCritical roundup: http://ow.ly/vBODQ

Can big-box retailers conquer e-commerce? What should they do to thrive in the era of online commerce? Let us know in the comments. 

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