Written by Kristin Sippl
As the holiday shopping season kicked off in America, Civic Series produced a timely event titled “Online Shopping: Friend or Foe?” Held on December 3, 2018 at The Alley in Harvard Square, the event attracted a diverse audience of business owners, college students, and consumers eager to discuss the future of retail with MIT Sloan Senior Lecturer Sharmila Chatterjee. The takeaway: online and offline shopping can thrive as complements if brick-and-mortar stores ditch deep discounts and invest in customer experience. Chatterjee—an expert on brands, marketing, and distribution channels—came to this argument through a review of published research on retail’s past, present and future.
Using the case of Sears, Chatterjee showed that the retail landscape has always been in flux, and survival depends on smart adaptation. Sears began as a mail-order catalogue company back in 1893, providing a close historical corollary to Amazon and online retailers today. They expanded to brick-and-mortar stores in the early 1900s and went online in the 2000s, only to dissolve in bankruptcy in October 2018. What went wrong? Most media coverage vaguely blames the ‘rise of e-commerce’ generally, but Chatterjee argues that Sears made mistakes on the ground.
Today, despite the appeal of shopping from home in our pajamas, 90% of retail sales still come from brick-and-mortar stores. And tales of the ‘brick-and-mortar apocalypse’ are largely unfounded—for every company closing offline stores, 2.7 companies are opening them. Consumers still love the idea of offline shopping. When done well, it can be social and provide instant gratification, multi-sensory experiences, and surprises. When not done well, consumers face out-of-stock shelves and can’t find the human help they need, wasting precious time and energy.
Unfortunately, this latter customer experience is increasingly common because offline stores are trying to compete with online stores by offering deep discounts, e.g. Black Friday deals. This, Chatterjee explains, is a mistake: retailers are sacrificing the income they need to invest in the offline customer experiences people crave. Chatterjee believes Sears made this mistake, driving more of its customers online, a trend with many drawbacks.
Succeeding online is tough for companies because of the higher costs of deliveries and returns. More partially-filled trucks on the road are not only expensive, but create problems for humans and the environment by way of increased urban traffic and pollution. And consumers themselves have mixed feelings about adding even more screen-time to their lives and severing connections with their products and communities.
But the future of retail need not be bleak! Chatterjee sees online-offline partnerships and hybrids as the solution to delivering the customer experiences that drive long-term retail growth. For example, buy-online-pickup-at-store (BOPUS) programs are good at lowering costs and lifting revenue. Nordstrom is using these in their experimental “Nordstrom Local” stores, which are small, hold no inventory, and act as hubs for a variety of services, including BOPUS. Retailers can also use consumer data gleaned from online shopping to ensure they have the right products in the right place at the right time to enhance the in-store customer experience. This creates positive feedback loops that make both companies and customers happier. And with Millennials surpassing both Gen-Xers and Baby Boomers in their propensity to shop at brick-and-mortar stores at least once a week, the future of both offline and online retail could be very bright.
Chatterjee’s overview and recommendations energized the audience, who enjoyed a robust Q&A session following her talk. The challenge of designing return policies that work for consumers, businesses, and the environment received deeper attention, as did Amazon’s shift to brick-and-mortar stores, and the potential role of 3D printing in retail. After the talk, the audience enjoyed relaxing together over beers donated by local brewery Aeronaut, chatting about the role of retail in their lives, and planning to meet at the next Civic Series in January on the rising costs of college education.
— Kristin Sippl, Civic Series Co-Organizer