How The Internet Affects Retailers

Consumers are always looking for the best deal, the best merchandise and the easiest way to access their favorite stores and products. Before the advent of the internet, retail brick and mortar stores were the only way to preview and buy goods, making it harder for consumers to buy what they really wanted and difficult for retailers to offer a wide variety of products. There was a limited amount of space for inventory, fewer stores and higher costs as retailers had to plan around their limited retail space. Once online shopping became mainstream, these shortcomings became a thing of retail past. Now customers and retailers are experiencing the many rewards from offering online outlets as a way to buy and sell consumer products.

As the internet marketplace continues to grow, more and more consumers are purchasing items online and retailers are utilizing the online community to grow their businesses. In America alone, the online market is estimated to make between $150-200 billion annually and consumers are purchasing online at a higher rate than ever before. For retailers there are many advantages and disadvantages to opening online stores or moving their inventory to online shopping websites (like Amazon).

Advantages for Retailers

Instead of only having physical stores to express their brands and showcase their goods, retailers now have a seemingly unlimited opportunity to connect with potential customers. This makes it easier for brands to grow into larger entities and offer more products to their customers via their online stores. When they do ship inventory into stores it can be tailored to fit a particular community or local region offering the latest, geographic-conscious styles. The brick and mortar stores can be updated regularly and instead of having to hang on to unsold inventory. This means they can ship unsold goods back to the warehouse for online distribution - freeing precious retail space. The online stores can also offer specific collections and tailor garments or products to the customer’s specifications.

The transparency of the brand and products allows for customers to interact with the brands at more intimate level than in the store. Retailers are able to offer their customers more options in regards to home delivery, pricing and coupons. The online stores expose the brand to more potential customers because of the wider range of products, a privacy when shopping, and more convenient shopping (at the click of a button or even on smart phones). Utilizing less time when consumer’s schedules are busier than ever allows for more purchases and helps customers reorder bulky goods rather than buying them in the store and lugging them home. This convenience also means that retailers have more time to sell their goods. Instead of just being open during business hours and on business days – the online marketplace allows for orders to be placed any time of the day or night. Customers can check on product availability in the store before spending time driving to the location, they can also check on the web for store locations choosing the closest one to make their purchases easier and less time consuming.

There is also an uprising of specialty online stores. With the ease of creating an online store and presence the marketplace for Mom & Pop specialty shops is growing. This gives new, unknown retailers a chance to develop their products and expand their brand without having to open a physical store and incur large upfront costs.

Disadvantages for Retailers

With the invention of online stores retailers are feeling the purchasing power of consumers now more than ever. Not moving their store to online outlets can cause the demise of the store as we have seen with big box stores like Borders, Hastings and Circuit City. It is very important for stores to have both online and in-store connections with the customers. Without these connecting points, retailers could neglect to build a relationship with the customers which could damage profits and brand loyalty.

Another disadvantage to online retailing is the widespread availability of products, specifically electronics, clothing, books and children’s items. This makes it even more important to allocate larger advertising budgets and marketing efforts since there are so many outlets to buy the same product. In store retailers are also at risk for “showrooming” which is where customers come into the physical store to preview the product and then buy the product elsewhere for a cheaper price. With stores like Apple, who utilize their store as a showroom is a way that retail stores can combat the stigma of showrooming and offer their products in their store and online.

Consumer spending is increasing online more than in the physical store which means that retailers must have a presence to stay relevant and a presence to the customers. They also must be aware and utilize social media platforms, which places even more responsibility on retailers to remain in their consumer’s eye.

The use of shopping mall space is declining and shoppers are preferring a mixture of retail spaces with other communal activities like restaurants, art, theaters and cafes. This is another potential challenge to retailers to innovate their spaces and go into those unique outdoor malls or renting a retail space mixed among other types of stores. Overall, there are less people going to stores preferring to do shopping online, therefore the store must have a unique experience that the internet cannot offer. These unique experiences can come in the form of electronic innovations like iPad inventory selection, virtual dressing rooms or limited edition collections or coupons exclusively available only in stores.

Now retailers are also competing with their own customer. These C2C (customer to customer) interactions – like with Etsy, Ebay and Amazon consumer stores – are influencing the way that people buy from corporate stores and with each other. The customer can communicate with another customer faster and be able to resell new or gently used products when before they would have to return them to the store or donate used goods. This makes the resell value of some items higher while lowering the value or newer products.

For the first time ever products are reviewed by real people in real time – if the product is great or the brand is genuine - this is an asset. If the product has deficiencies, the brands are held accountable and forced to acknowledge the weakness which can hurt the brand’s reputation and profits.

The logistics of online stores also has some adaptability difficulties. Retailers need to be aware of return policies and since returning items online is easier, they may be at risk for some consumers to take advantage of lenient return policies. They also must invest time and energy into online security programs and software like for credit card processing. Online retailers must have updated and secure ways that customers feel comfortable spending their money and not threatened by fraud or identity theft.

In this day and age, retailers are having to innovate the way that they offer products to consumers. Instead of using the brick and mortar store as their only means of selling a product, the online marketplace is predicted to outperform the physical store. Brands need to innovate the way they offer products, showcase new items and interact with their customers to stay relevant in retail spaces and in the online marketplace.