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E-commerce vs Retail

January 14, 2016
The big battle: E-commerce vs Retail

E-commerce vs Retail, who will win? E-commerce has become the go-to solution for a majority of mainstream consumers nowadays to buy everything from clothes to accessories. The digital revolution has completely turned the sales pipeline upside down for most fashion and luxury retailers as well. The rise of all-around retailers like Amazon or Ebay and more specialized modern luxury whole sellers like Farfetch or Yoox-Net a Porter has forever changed the consumer landscape. But where is the difference? Will eCommerce eventually swallow up brick and mortar retail completely or is there still something to be gained for brands by having a physical presence in some exclusive shopping district? Let’s look at the ups and downs of both forms:

E-commerce
E-commerce vs Retail

Net-a-Porter

Pros

  • Convenient
  • Easy to use
  • Large variety of presentable product stock possible
  • Easier to handle from a merchandising and sourcing standpoint
  • Cost effective through the use of server-client architecture. No sales staff required.
  • eCommerce shop can be re-designed with little downtime and is usually accessible 24/7.
  • Can be integrated directly into the digital marketing strategy through links and affiliates.
  • Easier to control and measure. (driven by BIG DATA)

Cons

  • Requires tech staff for maintenance
  • Hosting costs increase with traffic
  • The luxury service ideal (comfortable, exclusive, bespoke) can be hard to convey.
  • Accounting for international customs and currency rates as well as logistics in shipping can be difficult on a global scale.
  • Usually needs a strong network of national shipment and storage providers.
Retail
E-commerce vs Retail

Gucci window, Winter 2015 – Rue de Saint Honoré Paris

Pros

  • The possibility to try clothes on
  • The sensory experience of smell and touch (very important for luxury)
  • Trained sales staff can convert foot traffic more easily
  • Visual Merchandising creates opportunity for creative expression
  • Especially luxury benefits a lot from touristic shopping  (especially in major cities)

Cons

  • Staff salaries, rent and high upkeep costs (especially for flagship stores in prestigious locations)
  • Some store presences have to be maintained for brand reputation, even if they are losing money
  • Staff needs to be selected, trained and developed (low staff turnover is beneficial for sales in the long term)
  • Theft can become source of revenue loss
  • Cost intensive to set up for start- up brands
  • Traditional Out of home media must be combined with POS materials and digital marketing to drive foot traffic
  • Like in real estate, it’s all about location, location, location. Central locations can quickly wipe out any potential profits.
What does the future hold?

Even now, brands that are at the forefront of the digital revolution (for example Burberry or Louis Vuitton) are trying to merge the retail with the eCommerce experience by using Ipads in stores, CRM and loyalty programs.  We here at FM see already the couple next steps which are likely to become significant in the next 5-15 years:

  1. Wearable technology will play a bigger role in fashion (even for luxury)
  2. The “internet of things” will connect  the clothes and accessories to a wide variety of networks and devices which in turn will deliver more data to analyze and use for advertising or CRM.
  3. Augmented reality shopping in the form of holographic displays in stores (first prototypes already exist) or real time displayed offers on wearable tech will finally completely merge the digital and the retail experience and will make shopping instantaneously.
  4. Retail for major high street, premium and luxury brands will spread to untapped markets in Latin America, Eastern Europe, India and Africa.
  5. The  luxury shopper profile will become even more sophisticated and customer service will need to adapt to bridge the cultural gap even more.
  6. VR Devices like the Oculus rift will create a whole new playground. The roles of web designers and visual merchandisers will merge.

In future articles, we will explore some of these technologies further, so if you want to know what the future holds for fashion and luxury sales, follow our blog by subscribing to our newsletter or liking us on social media.

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