Public Relations & Social Marketing Insight

Retail profits are plummeting. Stores are closing. Malls are emptying. The depressing stories just keep coming. Reading the Macy’s, Nordstrom, and Target earnings announcements is about as uplifting as a tour of an intensive care unit. The Internet is apparently taking down yet another industry. Brick and mortar stores seem to be going the way of the yellow pages.

Sure enough, the Census Bureau just released data showing that online retail sales surged 15.2 percent between the first quarter of 2015 and the first quarter of 2016.

But before you dump all of your retail stocks, there are more facts you should consider. Looking only at that 15.2 percent “surge” would be misleading. It was an increase was on a small base of 6.9 percent. Even when a tiny number grows by a large percentage terms, it is often still tiny.

More than 20 years after the internet was opened to commerce, the Census Bureau tells us that brick and mortar sales accounted for 92.3 percent of retail sales in the first quarter of 2016. Their data show that only 0.8 percent of retail sales shifted from offline to online between the beginning of 2015 and 2016.

So, despite all the talk about drone deliveries to your doorstep, all the retail execs expressing angst over consumers going online, and even a Presidential candidate exclaiming that Amazon has a “huge antitrust problem,” the Census data suggest that physical retail is thriving. Of course, the shuttered stores, depressed execs, and tanking stocks suggest otherwise. What’s the real story?...

Most retail outlets — whether conventional brick-and-mortar shops, digitally enhanced stores like Macy’s in the U.S. or Burberry in the UK, or online stores — assume a traditional three-stage consumption model. The customer experiences a need, shops to satisfy the need, and then consumes or uses the product purchased (I need shoes, I buy shoes, I wear them).

TThe vocabulary of retailing reflects this model, assuming in particular that shopping is the central component of this model. Marketers will talk about shopping trips, shopping missions, shopping baskets, shopping lists, and destination trips. What’s more, current practice for the most part still rests on the idea that many decisions on which particular product to buy are made in the store — whether physical or online.

Hence, brands engage in an arms race of persuasion and hard-sell tactics (prices, promos, presence) at the point-of-sale order to sway the customer when she is ready to transact.

But winning in retailing today is less and less about control of the shopping experience because there is no longer a clearly defined shopping stage. The model is changing as new technologies allow people to bring the purchase of the product that satisfies their need closer to their first perception of it. And this makes the perception of the need — rather than the shop — the stage that marketers need to control.

This paradigm shift — and it really is that — is apparent in three ways....