The rise in online shopping has been well documented as e-tailers have been increasingly successful in luring shoppers away from the mall with steep discounts and free shipping offers. During the 2011 holiday season, U.S. online retail sales rose 15 percent from the year-earlier period, bringing total spending to $32 billion so far. Sales have stayed strong longer than usual this year as roughly 50 percent of online shops offered free shipping or have taken pains to insure last-minute shoppers can still pursue online options.
The recent dominance of online shopping and its strong growth trajectory have spurred discussion of internet boutiques and major sites slowly replacing physical locations. Will we one day do all of our shopping on the web and leave the mall behind forever? It doesn't look like it. There remain a number of significant draws for going to the mall that even technology can’t replicate. Digital renderings of a person’s body in jeans or a full outfit, long lauded as the wave of the future in online shopping has yet to really catch on in spite of availability.
Some parts of the shopping experience can’t be replicated online whereas others are more easy to dismiss in favor of convenience. For the first nine months of 2011, just eight percent of all sales took place over the internet, and while that will increase in the coming years, there are certain parts of the retail experience that will hold up better than others.
Shopping for clothing will likely continue to draw people into malls and boutiques, especially when that clothing is for the buyer themselves. Not even magnifying zoom features online give an accurate representation of what a garment is going to look or feel like once it’s taken out of the box. Luxury garments especially, in spite of the success of such high end sites like Net-A-Porter and its brother shopping portal Mr. Porter, seem to draw people into stores. The experience at such top notch boutiques is one the consumer enjoys and for that reason will continue to be prevalent.
The purchase of electronics online; however, seems to be rising in prominence. A plasma TV is just that and online reviews can be enough to give the consumer a clear idea of its basic elements like picture quality and other factors. For this reason, online sales of consumer electronics have been rising dramatically against their brick and mortar counterparts like Best Buy (BBY) and RadioShack (RSH). The best deals can often be found online and with apps like Amazon’s (AMZN) price check, it’s easy to use the internet to find the best deal. Add the convenience of no lines and not having to carry a giant TV to the car and its clear why this area has thrived.
One of the consequences has been flat sales at the likes of Best Buy and Wal-Mart (WMT) that some fear will lead to increased peril in the coming years, with the rising prevalence of price comparison apps and online discounts.
The growth in e-tail seems to be rooted in two basic factors, people in search of the best deal and those attempting to avoid inconvenience. Investigating those retailers that have the highest level of hassle or those struggling to offer competitive pricing can give us an idea of the areas of business which will be overtaken by the internet. The desire for consumers to avoid mall madness made itself especially this year as consumers spent billions online on Black Friday and Cyber Monday. It’s unlikely that online shopping will ever account for a majority of total sales, but it does seem to be narrowing margins for Brick and Mortar by taking a good bit of business from them on major shopping days.
For certain industries though, internet shopping will or already has eclipsed the physical shopping destinations. Booksellers, like Barnes and Noble (BKS), Walden Books and Borders (BGPIQ) were among the first to fall victim to internet buying. All three, as purveyors of traditional books are not able to compete with the pricing of the books being sold on Amazon digitally for iPad and Kindle, making them ripe territory for an internet takeover.
As can be easily observed, record and CD sellers like the dearly departed Tower preceded them, some areas simply fall victim to the web. The question is what's next? Has internet shopping imperialism gone as far as it can or will it begin to usurp large parts of other businesses like furniture and living stores, generally inconvenient in that it often results in large and unwieldy items being taken to the car?Additionally, such stores, as they are usually large in order to support the size of their merchandise can be expensive to maintain. If more people began shopping online for their home goods it could be difficult for them to maintain their showrooms or the cost/sale ratio could fall out of sync.
Overall, e-tailers will slowly account for more market share, creeping over its current 8 percent mark, but customers have exhibited their enthusiasm for the actual act of shopping and seem to have, by this point, pledged allegiance to certain areas in which they will shop in-store. Other regions of the market remain increasingly exposed to the more advanced technologies and increasing convenience, from the price check apps to the free shipping.
This act in itself seems to both eliminate and create opportunities in the market. Margins for brick and mortar stores without online support may suffer, but opportunities are sure to arrive in the coming years for the businesses that discover the next area of the retail market that could thrive online.
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