Web Changes the Role of Offline Retailing

Should a retailer have a Web site? Sure, but that’s not the full story.

Every business of any size should have a Web site as a channel of information to post store locations and hours, special sales and other helpful consumer information.

For a retailer to open a business on the Internet is another matter. You have to keep in mind that retailing on the Net and retailing in the real world will become two different games.

Retailing on the Internet will become a price game. If all the customer really wants is the absolute lowest price, then the place to shop is the Net. Instead of reading a lot of advertisements or driving from store to store, a prospect can sit down at a keyboard and compare prices quickly for a similar item from many sources.

You also can use an “agent” to help you. Companies such as ClickTheButton, DealPilot and RUSure have developed software that scans various shopping sites for price and delivery data, then sorts it, most often by price. DealTime.com, for example, advertises that it helps you find “exactly what you want, at the price you want, wherever you want.”

Will most products be bought in cyberspace? Of course not. But the Web will drastically change the focus of most retailers.

Which retailer is the largest in the world? Wal-Mart, of course. And why is Wal-Mart so successful? Its prices are lower. “We sell for less,” say its advertisements.

Pick up any newspaper in the country and look at the retail ads. What do you find? It’s what the industry calls “item and price” advertising. Just a listing of the brand name, the product category, the size and the price. “Star-Kist tuna, 6 oz. can, 89 cents.”

Walk down any retail street in America and look at the windows. What do you see? “Sale” signs. We walked down a retail street recently and counted 12 stores in a row, all with sale signs in their windows. Physical retailing has nothing to fear from the Internet. But it has to change its current emphasis on price.

What retail strategies will work in the shadow of the Internet? The successful retailers of the future will need to play a service game, not a price game. They will need to become more like Nordstrom and less like Wal-Mart.

The successful retailer of the future will need to emphasize the twin aspects of the physical experience: touch and time, or what we call “T’nT.”

The touch aspect of the T’nT strategy involves the ability of the prospect to hold, feel, taste, smell, handle and try the product, not just see and read about it. (After all, you can see the product in full color on the Internet.)

Many retailers will have to make their stores a lot more “touch” friendly. Too many products are locked in glass cabinets or entombed in packaging that greatly discourages handling. In this connection, Saturn’s success in creating a more customer-friendly environment is a good pattern for traditional retailers to adopt. The Sharper Image also places a high regard on the touch aspect of its stores. Customers are encouraged to touch and try the variety of electronic devices in its stores.

The time aspect of the T’nT strategy seems obvious. Unlike the Net, you save time when you buy from a physical retailer because you don’t have to wait for FedEx or United Parcel Service to show up.

Yet, the time half of an effective T’nT strategy is subtler than that. In theory, you don’t wait for your purchases when you buy at retail. But in practice, the prospect is often frustrated because the store is out of stock.

The customer of the future will not tolerate a physical retailer with frequent out-of-stock problems. Many of these, of course, stem from the retailer’s emphasis on low price, which leads to special deals and special purchases. Abandoning a low-price strategy will help retailers concentrate on keeping their inventory up-to-date and complete.

Not counting supermarkets, convenience stores and similar establishments, roughly half of prospects walk out of a general retail store without buying anything. The major reason is the store didn’t have in stock what the customer wanted.

Most retail business probably will not be conducted over the Web. But the Internet revolution will force all retailers to adjust their strategies — from a price game to a service game.

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