Why is e-commerce winning against retail?

E-commerce is growing at a very fast pace, eating the shares of traditional retail. In certain product categories, the online/offline ratio is still vastly in favour of offline shopping, however, the situation is different in some highly competitive verticals.

Why is e-commerce winning against retail in certain categories? The majority would say because of price. I tend to disagree with this statement, and I explain why in this video.

 

This video is about the competition between online and offline. It’s under everyone’s eye that e-commerce is winning the battle against retail, at least in consumer electronics, fashion, cosmetics, and other key verticals. Don’t get me wrong….more than 90% of total sales are still made offline. But if we look at categories historically with low margins, like consumer electronics, this competition is already going towards a precise direction, where e-commerce will take the lead.

When we say e-commerce it still sounds like something new, however, we should keep in mind that companies like Amazon or eBay were founded almost 25 years ago, 3 years before Google…!and therefore e-commerce is not that new.

I would define the key reasons being:

Price: Products online are almost always lower than what you can conveniently find in your geographical area. E-commerce companies run on lower costs compared to retail, and this is reflected on the final price, that becomes very attractive for us.

Availability: it’s not possible for classic retail to have the stock that you can find on Amazon. If you are looking for something specific, or something hard to find in your region, then you’ll most likely find it online.

Time-saving: most of the people that are shopping online are trading immediate gratification of getting the product straight in their hands, for time and price savings. You can look at the success of Amazon Prime or, here in the Netherlands, to companies like Coolblue, that offers 2-hours delivery. You can basically order during your lunch break and have things delivered to your office in the afternoon, going home with your purchase.

Product reviews: this is probably the most important reason why we shop online. Is there any retail store where you can ask hundreds or thousands of customers about their experience with a product? Obviously not…but at the same time you can easily read reviews online, right next to the buy button.

Reviews have become the most important driver of purchase both for online and offline, in fact many offline buyers read online reviews before going to the physical store.

It’s all about the experience, the sensations, the emotions of buying offline. Brands that invest in the in-store experience will be able to compete, and in certain categories, continue to win against online.

Unfortunately, the majority of traditional retailers doesn’t seem to care much about this. A few days ago I went to Mediamarkt, here in Amsterdam, to buy a smartphone. I had to wait 20 minutes before someone was able to help me out. The salespeople seemed almost bothered to see customers entering the store, as this was more work for them.

Last week, I was in Italy and I entered in Mediaworld to purchase a Chromecast Audio. After asking 3 people that didn’t know about the existence of this product, I finally found the expert, who told me it has been discontinued by Google, and therefore they didn’t have it. This isn’t the case, as the device is currently sold everywhere, but Mediaworld.

Offering a great in-store experience is essential for retailers to survive. Customers would still go and buy offline if they would find attentive service, honest and expert advice, and warm human interaction.

If you think about what we just said, you’ll realize that retail is not suffering the competition of e-commerce because of the price, or at least, not mostly because of that…but essentially because retailers are missing out on the good customer experience.

Learn more about the influence of e-commerce in retail here.