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'Evolved' retailers more likely to succeed compared to pure-play business strategy

Retailers going only online, or only in physical store locations, are likely not going to achieve sustainable, long-term operational success.

January 26, 2016

Retailers must evolve to succeed and grow and should avoid a pure-play operational strategy, reveals a new L2 Intelligence Report. For online retailers that means moving into the brick-and-mortar environment in some fashion, and for brick-and-mortar stores it means getting up and operating online.

"If you want to increase the traffic to your website, open stores," said Scott Galloway, founder of L2 and professor of marketing at NYU Stern, in an announcement. "High-end malls continue to experience growth in sales per square foot, making them an attractive option for evolved retailers looking for brick-and-mortar spaces."

Sticking to a pure-play approach will put online retailers at a disadvantage given the high cost of marketing and shipping and a challenging and unsustainable long-term business model.

The report reveals online retailers that leverage physical locations driver higher organic site traffic and experience lower customer acquisition costs. The 'evolved' strategy also pays off in higher brand awareness. The synergistic benefits of omnichannel retailing bests the inherent limitations of an online-only strategy, notes the announcement.

The report includes additional findings:

• While pureplay retailers struggle in an ever expensive game of trying to drive awareness, evolved retailers with brick-and-mortar stores are reaping the dual benefits of both profitable new points of distribution as well as increased consumer awareness and online site traffic.
• Evolved retailers offering in-store pickup and returns have a competitive advantage. While pureplay e-tailer orders typically net 77 cents on the dollar (due to costly returns that average 23 percent of order value), retailers that offer both in-store pick-up and returns enjoy an accretive effect — whereby shoppers walk out of the store with 107 percent of their original basket size after exchanging merchandise and making incremental purchases.
• Digital shoppers report traditional in-store experiences are the most important touch point for purchase consideration. Nearly two-thirds of digital consumers cite the ability to see, touch and try merchandise as a main factor for preferring in-store purchases, while over half appreciate the ability to get products immediately, and one-third turn to stores to be certain about the fit and suitability of items as well as in-person advice on fit and style.