Not everything sells equally well on the internet, and physical stores won’t necessarily disappear just because consumers can shop on their cell phones
There is a philosophical debate (although an amusing one) among consultants and managers of large distributors. It’s true that sometimes this debate often looks more like betting on a horse race or even a boxing match. On one side of the ring are those who assume that the future of retail is exclusively in e-commerce. They believe it is taking over everything and that you will soon see internet sales reach the frequency and revenue of traditional channels’ sales. For these people, there is nothing that can’t be bought via a cell phone. On the other side of the ring are those who say that there is no way the digital world can replicate the experience of going to an actual store and, for just this reason, even though most anything can be sold online, most people won’t want to buy it that way.
Each side puts their reasoning out there. The first group is driven by the ease of receiving everything at home with just a click, by the unstoppable growth of e-commerce numbers, by limitless internet inventory, and by the belief that Amazon and Alibaba will end up making their sales experiences similar to those of physical stores. Future technology—perhaps in relation to virtual and augmented reality—will spread like wildfire to the rest of the sector.
Naturally, their rivals in the debate believe that the experience of buying in a good store from a good salesperson cannot compare to the web and a chatbot. Maybe it will in the future, they suggest, but for now this is so true that Amazon, Alibaba and JD.com are opening thousands of brick-and-mortar stores.
Who will end up being right? It’s best to look at what we already know with some certainty about the future of retail. For starters, the growth of e-commerce is slowing down (sales on Amazon have been declining for two years), and spectacular growth—in both sales and in percentage of total retail sales—is becoming less common. At the same time, there are five categories that resist being sold via the internet. As revealed in a survey by PwC, those are food (especially fresh varieties), furniture and domestic articles, products to improve and decorate the home, home appliances, and jewelry and watches. Finally, according to a study by Deloitte, all generations prefer going to physical stores for buying most of what they consume.
Of course that doesn’t mean that e-commerce will not continue to grow or reach fabulous numbers over the short term in many countries. For example, in China it is expected to represent a third of total retail sales this year. Other countries will follow and e-commerce penetration will spread to every product. In addition, more and more people around the world use the internet to first research a product before going to a physical store, something that also affects the five categories of products that tend not to be bought online. We may not buy a table or a wristwatch with our cell phone, but when we get to the store, we know exactly the style and line we’re interested in.
And what about the claim that all generations prefer to buy in physical stores? While it’s true that certain products resist being purchased online, it’s also true that both millennials and Generation Z want those same establishments to offer them the possibility of buying on the internet, picking up and returning to these stores any defective merchandise they’ve received at home via the web, and, finally, of enriching the experience of buying in a physical store with powerful mobile apps.
Yes, they prefer the stores, but they want them to be digitized.
Regarding the question posed in the title, the most direct answer is probably that, at least for a few years, there will be product categories that are typically not bought via the internet. However, even in those categories, consumers will be influenced by what they have researched on their cell phones. Physical stores—after a careful digital transformation—will continue to be crucial for millions of consumers and products, and are without a doubt part of the future of retail. Why? Because they will combine many advantages of e-commerce (such as infinite inventory, payment by mobile phone and without lines, and augmented reality apps) with some experiences that the web can’t offer: the opportunity to touch and try on the merchandise, the surprise of discovering something that you love on a hanger, or the shared pleasure of shopping with friends.