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Consumers still choose in-store shopping over online

April 11th, 2013

Coming soon to Beachwood Place is a store many of us are surprised to see coming. On Saturday, April 13, Microsoft will be opening its doors to customers in the Cleveland area. Upgrading from their current kiosk for customers to ask questions about their products, Microsoft will become a full brick and mortar store starting this weekend.  Why the sudden change for Microsoft, who is known for being a primarily online company?

More and more, online stores are starting to create “brick and mortar” stores, with dreams of increasing profits. This is the opposite of what many business analysts assumed would happen due to the increased technological abilities of the Internet and smartphones.

Companies like Microsoft, which was only an online retailer at one point, are now joining the “brick and mortar” world. They are doing this by showrooming, which means allowing customers to visit physical stores only to have them buy the product online at a later time.

Sucharita Mulpuru, an analyst at Forrester Research, said, “The single biggest reason people don’t buy online is that they want to touch and feel merchandise. A store helps to resolve that issue, at least for the people who live near that store.” Consumers want to try out large ticket purchases, such as computers, to make sure they are quality products that are easy to use.

IBM, a global retailer, found eight out of 10 shoppers made their purchase in-store, versus buying online. This only highlights the amount of consumers who like to physically see products in person instead of only online.

The vice president of International Business Machines said, “If there’s one thing showrooming teaches us, it’s that consumers still want to see what they are buying in person—whether it’s checking the fit of a pair of pants or judging an item’s quality—so naturally, e-tailers are deciding to set up physical stores.”

It’s not just technology and computer stores that are opening locations around the country; clothing and beauty product ‘e-tailers’ are also starting to show up. Retailers such as Etsy, Bonobos and Birchbox are now allowing customers to see and test their products at physical locations around the country.

Bonobos CEO Andy Dunn stated, “In 2007, we started the company, and we said the whole world is going online only. All we’re going to do is be online.But what we’ve learned recently is that the offline experience of touching and feeling clothes isn’t going away. People still want to try stuff on, and so for a brand like ours, that’s built on fit, we want to provide that.” Dunn has changed Bonobos’ business model to reflect their change from being an online retailer to providing both online and physical locations for customers to shop.

However, allowing customers to view a product in person comes with increased expenses. Maintaining a retail location involves high fixed and variable costs, like paying a mortgage, employee wages, inventory costs and electricity, to name a few. They also tend to carry less inventory compared to what the company offers online in order to cut down on expenses. Marketing and advertising these new brick and mortar stores have not been easy, either.

Changing a consumer’s image of a brand only sold online to a physical location has proven to be these companies’ biggest challenge. Microsoft has made a smooth transition from e-tailer to brick and mortar store by testing out how kiosks in malls were received by customers.  Business analysts may say the Internet is the only way consumers will shop in the future; but for the time being, consumers are proving them wrong.

Information from CNBC News was used in this report.