Physical stores hold own against online sales

FACE TO FACE: Scorpio Books owner Dave Cameron says customers still prefer to buy books at the Riccarton store rather than online
FACE TO FACE: Scorpio Books owner Dave Cameron says customers still prefer to buy books at the Riccarton store rather than online

Many quake-displaced Christchurch retailers turned to online sales, took their first foray into Facebook or at the very least beefed up their company websites as a way to keep their businesses alive after the February 2011 quake.

But many also found online selling was no silver bullet.

A new survey of 11,000 people in 11 countries by PricewaterhouseCoopers reveals why.

The report debunks what it calls the 10 myths of multichannel retailing, which include beliefs that social media will soon be an indispensable retail channel, online retail is cannibalising sales in other channels, and physical stores will become simply showrooms in the future.

In fact, social media is not likely to become an important retail channel any time soon, the survey shows.

Seven out of 10 respondents said they never shopped through social media platforms, although nearly 40 per cent of respondents were following their favourite brands or retailers online, up from 33 per cent last year, as brand lovers were using social media as a "warmup" for future online or physical store shopping excursions.

Nick Paulsen, owner of clothing boutique Clash, said the business used social media mainly to develop the brand and personality of the business but it did not equate to sales.

Clash's Facebook page has 1249 "likes" and is focused on personality and style, music and trends.

"Sometimes we post pics [of new products] but we are not putting price points on there.

"I really want to develop a high level of customer service.

"I believe interaction between customers and retail staff members is so important.

A Facebook community took time to grow and was not a quick fix, Paulsen said.

Social media had limited impact on sales so far. "It's not as reactive as people think."

According to the report, other myths are that physical stores will become mainly showrooms in the future, and online sales are cannibalising sales in other channels.

In fact, respondents said although they researched online, they still preferred to buy products at a physical store.

And shoppers were spending more with their favourite multichannel retailers, not just shifting some purchases to a different brand.

For example, 23 per cent of respondents surveyed said they researched consumer electronics online and then went to a store to buy the product, compared with only 2 per cent who did it the other way around.

Clash does not sell items online.

"To me, online shopping is a real trend.

"I believe people want that interaction with a staff member on the shop floor.

"Online shopping doesn't give you that."

Christchurch bookstore Scorpio is holding its own against online competitors.

Scorpio Books co-owner David Cameron said most sales still came from traditional sales at its physical stores.

Scorpio Books has a website and online sales capacity but online sales were only a small part of the business, Cameron said.

"We do have a Facebook page and we put some quirky stuff up there and we get some favourable responses.

"But it is still not a great marketing tool.

"Despite all the hype about new technology, there is still strong demand for a range of titles that people can come and inspect at their leisure."

Cameron said he expected the trend of online sales would continue to grow but for now online sales were a "relatively tiny" part of overall sales.

After the February 2011 earthquake he had thought the company might have to push online sales but once the business established itself in Riccarton, it had not been necessary.

"The bricks-and-mortar sales have kept up with what we were doing in town, which was a good surprise."

Savoir Lingerie and Swimwear owner Kirsten Billcliff does not place much faith in selling online or using social media to drive sales.

Billcliff said the Merivale swimwear and lingerie boutique used its website to provide customers with information but did not offer online sales because it wanted to maintain relationships with customers.

"We do have Twitter and Facebook. Twitter I barely use at all, and Facebook I use . . . as a medium to keep customers up to date with the latest arrivals in stock," Billcliff said.

"It's about having a relationship with a retailer.

"And specifically, lingerie - it is one of those particular purchases that can't effectively be done online.

"A lot of women are left fairly dissatisfied with online purchases."

Facebook was great for things like getting information out quickly but the business did not "push it".

"We work on the basis our customers are busy, intelligent people. We don't consider our business the be-all and end-all in anybody's life.

"People don't need to spend more time sat at a computer."

Since the earthquakes, customers were doing a lot more pre-purchase research on Savoir's website before coming into the store, because it was harder to get around town since the earthquakes.

Billcliff had improved Savoir's website gallery so customers could have a look online and then come into the store.

However, other Christchurch retailers are reporting strong growth in online sales, include gift and homewares retailer Redcurrent, fashion retailer Lynn Woods and larger companies such as outdoor gear retailer Kathmandu, department store chain Smiths City and clothing retailer Hallenstein Glasson.

And for Christchurch confectionery business The Fudge Cottage, online sales are growing and are likely to be a major part of the business's revenue stream before too long.

The Fudge Cottage managing director Kevin Burns said that after the business was forced to leave its central Arts Centre premises and move to the Bishopdale Mall, the business had become a bit isolated from its central-city customers.

To "fill the gap" created by less foot traffic in between special occasions and seasonal events, and to reconnect with former customers, Burns invested in a responsive, shopper-friendly website designed by Christchurch web design company LeftClick.

Internet orders are already about 10 per cent of total sales, and the business is looking to grow that.

It has a wide network of customers overseas and elsewhere in New Zealand and it has just had its first direct order from Australia.


■ Social media will soon become an indispensable retail channel. On its own, social media isn't likely to become an important retail channel any time soon.

■ Physical stores will become mainly showrooms in the future. Many multichannel shoppers research online, but more still prefer to buy at a physical store.

■ The tablet will soon overtake the PC as the preferred online shopping device. Shoppers are still overwhelmingly using their PCs to shop online.

■ As the world gets smaller, global consumers are becoming more alike. A wide range of local differences in consumer behaviours exists.

■ China is the future model of online retail. China is leading in some key trends, but its multichannel and online model is unique.

■ Domestic retailers will always have a "home field" advantage over global retailers.. Foreign retailers are making inroads into consumers' lists of favourite multichannel retailers.

■ Global online players such as Amazon and eBay will always have a scale advantage over local online players. Many domestic pure players are holding their own.

■ Retailers are better positioned than brands because they are closest to the customer. Consumers are shopping directly from manufacturers and many no longer distinguish between retailers and favourite brands.

■ Online retail is cannibalising sales in other channels. Consumers are actually spending more with their favourite multichannel retailers, not just shifting some purchases to a different channel.

■ Low price is the main driver of customer spending at favourite retailers.Customers value quality, innovative brands over price.

Source: PricewaterhouseCoopers

Fairfax Media