Nowadays you can almost buy everything online, that certainly proves e-commerce is not just the future but the present. If e-commerce is prevailing, what is becoming of face to face in-store commerce?
On its way to becoming the world’s biggest economy, Chinese e-commerce market is overtaking America’s. Alibaba is in many aspects the world’s largest e-commerce company. In 2012 alone, two of Alibaba’s portals together handled 1.1 trillion yuan in sales, more than eBay and Amazon combined. Therefore, the well-known journal, Economist, called this the Alibaba phenomenon.
In the US, electronic retailers who have physical presences, like Best Buy, Circuit City etc., have taken major hits. Best Buy reported earnings of $310 million for the fourth quarter of 2013, in contrast to a net loss of $461 million during the fourth quarter a year earlier. But sales at its American stores that were open for at least a year still went down 1.2 percent for the quarter.
Consumers still go to retailers’ shops, but they oftentimes turn around and buy online. The retailers in effect provide show rooms for their online competitors. Their operating costs are higher. As a result, retailers are losing out to their virtual competitors.
Are the physical retailers doomed? Is there a way out of this conundrum? The solution lies in either making who visit stay to buy or find manufacturers to share the cost of maintaining physical presences.
To ensure consumers buy in the stores is not an easy task. Consumers often need time to think about it after seeing and touching the in store samples. With the convenience of online shopping, once they make up their minds, they might not want to spend the time to travel back to the stores simply for completing the purchases. The best way seems to be letting manufacturers share the costs of display. Retailers should focus on building attractive stores that consumers would enjoy going to kill time and manufacturers are willing to pay for their products to be put on display.
Therefore, the key lies in building an attraction not a store where physical transactions take place. In-store commerce will never go out of business for sure. How much it will shrink depends on how successfully it transforms though.