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Monday, August 4, 2014

Methods brick and mortar companies use to retain market share

Ecommerce vs. brick and mortar business
Online retailers can't offer in-store samples or fitting rooms
As online shopping continues to increase e-retailers' market share, offline retailers or brick and mortar retailers have had to devise strategies to stay competitive and prevent their profit margins from shrinking.

There are many examples of businesses that have lost business to online competitors. For example, in 2011, Borders Group filed for bankruptcy, in large part due to an increase in online sales from retailers such Amazon (AMZN).

Another industry competitor, Barnes & Noble (BKS) is still struggling to compete with Amazon (AMZN), in part by establishing its online presence, but also through product line innovation.


Enhancing services is a method implemented by offline retailers to prevent online shops from acquiring a larger share of industry revenue. For instance, according to the New York Times a majority of offline retailers surveyed are interested in implementing mobile point of sale solutions to improve their customer service. Integrating this and exclusively offline services such as product demonstrations into a retail operation not only adds value to the business, but also provides an additional incentive to visit the location. This in turn increases the probability of increased shares.


Keeping demand high ensures an increased interest in goods and services. Demand is manipulated in various ways, one example being outlet malls that offer brand names at discounts. These outlets effectively increase demand for a product by attracting price minded shoppers. So long as the discounted prices lead to revenue that exceed costs by a margin equal to, or greater than standard business modeling, then discount outlets are a way to increase demand and compete with online retailers. Lowering operating costs via closing of non-profitable store locations is another way to increase profit margin. A recent example of this is Best Buy, which according to CNN Money, decided to close 50 retail locations.


Interest in offline store products or services is increased via promotions and marketing that demonstrate the advantages of in-store shopping. Things like trying on clothes, touching and seeing a product in person, not having to wait for items in the mail and being able to interact with store personnel are all advantages for brick and mortar retailers. An online presence is also an advantage per Web Pro News, which states listing inventory online is an advantage to brick and mortar shops. Promotional offers such as sales that discount select items also help offline retailers compete by increasing the traffic flow of customers.


Being on top of trends also helps offline retailers compete with online ones, and can even have customers lining up at the door before it opens. For example, exclusive offline distribution deals, or obtaining new and limited edition products ahead of general market release catches the attention of consumers looking for the latest great thing. This is illustrated by CBS, which filmed and interviewed customers lining up and camping outside a store hours and days before it opened. More specifically,  these customers were seeking a Nike shoe called the Foamposite Galaxy All-Star shoe.

Image license: Pixabay/PDP; US-PD