Amazon is one of the biggest companies operating in the pureplay retailer category, with 304 million active customers worldwide and net sales of US$107 billion in 2015.
Yet there were many raised eyebrows when Amazon, a company that was blamed for damaging the sales of bookshops worldwide, opened a physical store in Seattle in the US.
Amazon joins a long list of once online-only stores that have set up shop in the real world, including Warby Parker, Casper, Birchbox, Trunk Club and Nasty Gal.
So why are pureplays increasingly expanding into physical stores?
One of the reasons being attributed to this shift is the online landscape is getting too crowded.
A report by business intelligence firm L2 called ‘Death of Pureplay Retail’ says that pureplay retailers face stiff competition online, as big players like Amazon maintain a huge cut of organic searches on Google, pushing smaller businesses out.
“‘Walk in traffic’ in an online capacity is non-existent for small and mid-sized retailers, as most lack the first-page visibility required to drive organic search traffic versus scaled competitors,” it says.
Even with paid search listings, bigger players tend to be prioritised because of the money they spend.
L2’s report says Macy’s and Nordstrom spent an estimated US$6.4 million and $4 million in paid search listings for the top 1000 apparel-related keywords in 2015’s first quarter.
Seeing as Amazon is regarded as the beacon for all things ecommerce, it begs the question: If it opens a physical store, should everyone follow suit?
Going by the New Zealand market, it seems not. Mighty Ape, New Zealand’s biggest shopping site, gets by just fine by being ecommerce only – though it does have some flexibility with the option to pick up items from its factory in Albany, Auckland.
Several New Zealand stores were once purely online before moving into the bricks and mortar space.
Homeware and accessories store Let Liv Wellington started as an online shop before opening a store in Wellington’s CBD in 2014 , while adventure sports business Torpedo7 expanded into physical stores in 2014 after being bought by The Warehouse Group.
Online beauty shop Beauty Bliss also opened a store in Wellington late last year.
Beauty Bliss founder Toni Cox says she opened the store after listening to her customers, who wanted to be able to test the products the website stocked in person.
She says pureplay retail is definitely a competitive landscape, as it takes seconds for shoppers to compare prices between websites.
In terms of the online marketplace being too crowded, she says it all depends on what your point of difference is to everyone else.
“We try and import indie brands that are starting to trend online, rather than sell the exact same things everyone else stocks,” she says.
The safe middle ground touted by most is omnichannel for retail stores that started out as bricks and mortar, and showrooms or pop-up stores for pureplays, as companies are finding increasing success by being across both channels.
According to L2’s report, customers still regard the traditional instore experience as the most important when making a purchase (72 percent) followed closely by the store’s website (67 percent).
However, Beauty Bliss’ Cox says she doesn’t think it’s necessary for all pureplays to have some sort of physical outlet.
“I think it really depends on the nature of products being sold. If you’re a store selling something like televisions or laptops, it may be less important for your customers to view the products in person before making a decision. With cosmetics, our customers enjoy being able to match products to their skin tone or hair colour. It’s tricky to do this online,” Cox says.
“In saying that, I feel any online retailer could benefit from having a physical presence whether it’s permanent or temporary. There are scams and unreliable off-shore websites that make people worry about online shopping – having a physical presence can help ensure your customers that you’re a legitimate business that’s here to stay.”
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