Offline stores not necessary for e-tailers

Brick-and-mortar presence not necessary for online firms, which should focus on customer service, analyst notes. But retailer says bricks enhance visibility, trust.
Written by Liau Yun Qing, Contributor

It is not necessary for e-commerce vendors to establish a brick-and-mortar presence to compete with offline stores, as customers shop with "retailers who serve them well, regardless of the channel", says an industry analyst. But retailers note that physical presence can boost sales and customer confidence.

In an e-mail interview with ZDNet Asia, Patti Freeman Evans, vice president and research director at Forrester Research, said e-commerce businesses--whether they have offline stores or not--have a good shot at success as long as they keep a clear focus on customer service, maintain a strong and differentiated product mix and pricing value, and are easily accessible.

"From a business standpoint, the benefits [of having offline stores] depend on the overall cost and organizational structure of the company," Evans said. However, she acknowledged that e-commerce vendors with multiple delivery channels can benefit from being better able to serve the immediate needs of customers that want their products immediately.

According to a recent report by the U.K. Times, Amazon was looking to set up offline stores in the United Kingdom in a bid to enable customers to click-and-collect their purchases. The e-commerce pioneer later denied having plans to do so but declined to comment on future plans, Reuters reported.

Two retailers say offline stores can help boost sales as well as bolster the company's visibility.

ZDNet Asia spoke to global book retail chain Borders, which offers its U.S. customers ship-to-store and ship-to-home services.

In an e-mail interview, the company's spokesperson in the U.S. said the different shipping options offer its customers convenience and has "no real advantages for Borders". However, she said, the ship-to-store service provides further sales opportunities when the customers visit the store to pick up their orders and at the same time, may browse and purchase additional items at the outlet.

She added that customers benefit with the ship-to-store option as they do not need to pay for shipping charges, but noted that home deliveries are also free if the order is above US$25.

The Borders spokesperson noted that customers living in cities like the ship-to-store option because they "know their orders will be safely housed at the store…ready [in good condition] and waiting for them to pick up the next time they come into the shop".

Bricks enhance corporate brand

For FarEastFlora.com, combining an e-commerce model with offline stores can boost visibility, customer trust and confidence for the company. The Singapore-based florist launched its online presence in 2000.

Ryan Chioh, FarEastFlora.com's executive director, said in an e-mail interview that the company faced challenges when it expanded its business to Hong Kong.

"We started out in Hong Kong selling only through [our Web site] and catalogs, but we had a fair number of enquiries that asked where our store was or where they can see the products. This was not possible because we did not have a physical store," said Chioh, adding the company had to work harder to convince customers to trust the florist.

However, responses were "much better" after FarEastFlora.com launched its retail store in Hong Kong in July last year. Chioh explained: "The physical store became a new channel for us to interact with our customers. [For the customers,] seeing is believing. We even saw growth in the number of customers ordering from us online after the launch of our physical store."

In fact, he believes more e-commerce businesses will move into the brick-and-mortar space. "Eventually, to be positioned top in the mind of the customer, one must be seen in more places than just online. With that, you have a better chance to win the game," he said.

After building its business as an online PC distributor, Dell Computer in 2007 tweaked its sales strategy to include offline stores, partnering major retail chains and setting up its own physical outlets.

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