Physical store presence still crucial

Despite the recent surge in online retail sales, recent reports are still extolling the virtues of a physical store presence. In the 2011 edition of ‘How Global is the Business of Retail,’ 320 retailers surveyed in 15 countries around the world were

assessed to gauge the current online capability of retailers, the growth potential of the online sector, and the importance of multi channel retailing. Research found that the only internet retailing method caused supply chain problems and thus although an online platform is a must for business’ looking to expand, a physical store presence is still integral for good sales performance.

It also highlighted that retailers with a physical store presence were more likely to have a better online transactional capability. In most cases, the physical store had arrived first, with the online operation set up later to help maximise sales potential and create a multi-channel platform; however, an increasing number of retailers were now using their online operation to enter and test new markets before committing to a physical store presence. Of those retailers that had a physical store presence, 40% were able to deliver online goods in that market – this compared with just 26% of all retailers.

Peter Gold, head of cross border retail at CB Richard Ellis (commissioned to carry out the report) said ‘The presence of a physical store makes it easier for a retailer to operate an online platform. Not only is the store a place for buying or viewing a product, it is also the location where consumers go to pick-up goods that have been bought online. However, while those with a physical presence are more likely to have an online transactional capability, some retailers such as Top Shop in the US or Next in Germany began trading in those markets using internet only and J. Crew recently announced they would be coming to the UK this year – but just with online.’

He continues, ‘There is no doubt that ecommerce presents an important sales channel for retailers as it hugely increases a consumer’s awareness of brands and the choice of products available to them; however, retailers are still concerned about how to capture the essence of their brand and whether the internet represents incremental or cannibalised sales. The effective distribution of goods bought online also remains a key challenge; therefore, the extent to which ecommerce will change the fundamentals of retailing remain to be seen.’

The report also showed that Value & Denim retailers (43%) are the most likely to operate a delivery website, largely due to a low price offer and the ability to provide further discounts for online purchases across a range of markets and consumer types. Mid-Range fashion (26%) and Luxury & Business Fashion (32%) retailers are also likely to operate a delivery website, although these figures are relatively low and suggest that significant opportunities exist for growth in the online fashion sector.