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Wednesday 11 December 2019

Is e-commerce the reason why
physical stores have to close?

Last weekend, you couldn't miss it: Black Friday and Cyber Monday were everywhere. Still, the question arose (and rightly so?) if this shopfestival doesn't destroy our local economy. People would buy too little in physical stores, which in 10 years time has already made more than 10,000 stores disappear. But is that really the case?

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If we are to believe the newspapers and media, the end of the shop as we know it is near. No less than 10,000 stores closed their doors in the past 10 years. Disastrous figures that will increase, because every medium proclaimed the same message loudly: 'this is only the beginning'! The blame is pointed at the rise of e-commerce, online shopping. But is e-commerce really the culprit of the story?

15% less physical shops

If we take a look at the numbers from research firm Locatus, it's clear that retailers are having a hard time. In 10 years' time, no less than 10,000 shops have closed, accounting for 15% of the Belgian total. The biggest victims are travel agencies, clothing stores and electrical stores.

Moreover, chains increasingly dominate the remaining stores. In 2009, only 17.3% of the stores came from a larger chain. A decade later, almost 1 in 4 stores (24%) belongs to a major player such as Zara, H&M or Media Markt.

Smaller retailers and local stores in particular therefore have to endure a hard time.

Many traders blame the rise of e-commerce. People buy more and more online: in Belgium, the figure for e-commerce rose for the fifth year in a row. Research by the BeCommerce Market Monitor in 2019 once again shows an increase of 8% compared to the same period in 2018, which means that we seem to be heading for a total online expenditure of no less than 14 billion euros for 2019.

E-commerce is therefore clearly gaining momentum. After all, online shopping is possible 24 hours a day, makes it easy to compare prices and usually also saves time and money. What's more, the rise of smartphones makes it even easier to buy online, thanks to our constant connection.

However, the question arises as to whether e-commerce will be able to completely replace physical stores. 80% of purchases are still made in so-called brick and mortar shops, and that has its reasons. Consumers indicate that they can see and touch the products in a physical store (56%), try them out (55%) and immediately seek advice before buying. For one in four, the shopping experience also continues to play an important role.

Responding to new generations

And let that shopping experience be the reason where it gets the problem. A study by Harris Group revealed that over three-quarters of the generation of millennials (78%) would rather spend money on an experience or event than on a tangible item. So when deciding to buy a product, they expect more than the typical sales pitch. The full customer experience is becoming more and more important and the experience of buying itself will therefore have to play a bigger role.

While many merchants cling desperately to the classic customer support in just the physical shop, the customer experience reaches much further. Embracing the new forms of shopping is therefore necessary. It is no longer one or the other, a physical shop or a webshop, but a complement to each other: a physical shop and a webshop.

‘Phygital’ shopping

The shift in consumer shopping behaviour has become visible in the last few years. Consumers no longer see shopping as a single event, but as a story - an experience - in which they come into contact with a brand or product through different channels and at different times.

The shopping experience between the physical and digital channels ('phygital') must therefore merge seamlessly. For instance, more than one in two consumers look up information online before making a purchase in a store, 56% even look up information online while they are already in the store. Denying this revolution is useless, a new strategy is imperative.

And so, the purchase of products in a physical store must become part of the overall experience: an experience in which physical and digital merge seamlessly. This means that merchants must concentrate on offering the full customer experience both online and offline, as favoured by the newest generation.

That's how we end up with omnichannel. Where once the company chose the channels through which a message was delivered, it is now the consumer who chooses the channels through which he looks for information and makes a purchase. An omnichannel approach of retailers should ensure a uniform message and shopping experience across all channels: online, mobile and in-store.

Nonetheless, the demise of thousands of stores shows that not all traders have yet adapted to the changing society and the preferences of the latest generations. In other words, they still have a lot of work to do.

This article was written by Natascha Derese, marketing manager, and Denis Bavay, e-commerce expert, at SQLI Belgium.

Article originally published on ShopFacts on 04/12/2019.

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