Home > General Retail, Uncategorized > Bricks & Clicks: Why Store Presence Increases Online Sales in a Market Area

Bricks & Clicks: Why Store Presence Increases Online Sales in a Market Area

My brother (a partner in a law firm with some shopping center landlord clients) and I were discussing retail and the challenges retail landlords face today. Press coverage suggesting a retail apocalypse is concerning when income from property depends on retail stores.

There are important changes happening in retail – but there’s also a lot of error out there. So we discussed why I think the “retail apocalypse” storyline is a myth. We discussed Amazon’s opening of over 300 brick locations. We discussed that the top shopping centers are doing well – the middle ground and low ground are where the suffering is highest.

I also observed that while retail is here for the long term and should remain stronger than online stores for the long term, there are short term trends that might be very serious problems for retailers – like they probably still have too many stores left from their expansions in the 2000s.

Then Stan asked me why I think on-line sales are higher when there is a brick and mortar store in the vicinity.

For background, he’d seen reference to a study on store opens and online sales. Here’s a link to an infographic summarizing the research which showed things like a 27% increase in online web traffic from an area when a store opens there and a decrease in web traffic from an area when a store is closed.

Thought a few others might be interested in my thinking. I’m not trying to cover every possibility here – but the brand impact which I believe is so critical.

When a store exists in a market, the mere physical presence of the store has impact that we’d otherwise have to rely on advertising to produce.

To understand this, we need to recall the fundamentals of how memory, shopping and buying works. Market strength occurs for a brand, a store, or an online store when memory structures are built in shopper minds. The goal of these structures is that when the shopper has a need for something that fits what you offer — your products, store or on-line store — YOUR product or store comes to mind.

As a simple example, Snickers advertising wants to place “Snickers” in your mind so that when you walk into a 7-11 and are hungry, the idea of Snickers comes to your mind. Hundreds of thousands (or millions) of those subtle recalls a day turns into tremendous profit.

As a another example, if someone is a DIY who is working on a fence and their mind says “need a new fence post”, Home Depot would like memory structures to exist so the idea of Home Depot comes to the front of their mind in that situation.

The situational setup of memory recall is critical. Home Depot’s ads will have failed if someone walks into 7-11 when hungry and Home Depot comes to mind. That’s NOT a useful memory structure to pay to create.

So as a retailer (online or physical), you need to come to mind when a shopper thinks about shopping for products that fit your offering, thinks about shopping to solve a problem that your products solve or your associates can advise about, or is ready to buy a product which you carry.

When you have both bricks and clicks, it doesn’t matter hugely which option they take. Some shoppers will opt for bricks today; some will opt for bricks always; some will opt for clicks today; and some will opt for clicks always. (That said, it’s more expensive to sell a product through clicks and you almost always will see lower total shopping basket size when someone buys online. So beware of this caveat.)

Having bricks — a physical store — in a market builds memory structures because shoppers are regularly reminded of your store brand.

Think about when you encounter stores as a result of having one near you.

It’s common for someone at work to say “I went to Best Buy over the weekend and my kids bought every game on the shelf”. That helps strengthen your recall of Best Buy — including a reminder of the reasons to shop at Best Buy.

Or you may regularly drive by Home Depot or Lowes and get subtle memories of what you’d buy there along with memory of the name of the store.

Or your friends might always take their kids to Macy’s for back-to-school shopping so you are reminded of Macy’s each time they do that.

Or a friend might say “you should check for that at JoAnns”. And they’d be saying this because last time they walked JoAnns bricks they saw the product which interests you. Note that they wouldn’t have even needed to be shopping for that product. When in a store, we take in far, far more than we do browsing a website. Eyesight & memory in a 3D physical world retain vast amounts of information – far more than a shopper will ever get online. The net result is that they lead you to click at JoAnns for the product.

You also get regular updates on store experience when people share what happened to them at one store or another. This affects perceptions of quality, of customer service, etc.

And you may be able to return goods at a store – far easier (for me at least) than returning things via USPS, UPS, or FedEx.

Physical presence also builds stronger memory structures.

We need remember digital things aren’t real – they’re ephemeral. And that means your memory works differently with digital.

There is no stronger brand connection built than when a customer buys a products and succeeds with it. Move that idea to stores we need remember that the store IS the product. So, when a customer visits a store, is pleased by being there, finds what they seek, interacts well with the associates, and walks out satisfied you have won an incredible battle.

Physicality creates a far stronger mental imprint than going to a web page with a logo at the top. It’s not that clicks don’t build brand – but it’s my observation that the resulting mental structures aren’t as long lasting or instinctively as powerful.

Why isn’t all this more evident? The influence of store presence is somewhat subtle in our minds. Many people probably wouldn’t be able to look at themselves and see all this. As always, though, the most  important brand impacts aren’t from “brand love” or the latest high impact brand ad. The most important brand impacts come from softer, “less hot” emotions like “I liked that store”.

Carefully watching behavior over a period of time, and attempting to sense what influences behavior, we may begin to see the trends in ourselves if we’re skilled enough at this kind of observation (it’s not easy). In my biz, I believe it is important for me to try to notice when I’ve made some kind of choice and ponder what kinds of things might have influenced the choice. There’s no perfect way to do this, but it’s a flavor of self awareness that retail involved people need to cultivate. (Business busy-ness gets in the way of this kind of self awareness.)

When a store is removed from a market, the mental structures begin to weaken.

And that starts the decay of mental connections (Byron Sharp calls these connections “mental availability”).

Even worse, store closings are usually quite visible in a community. We once did focus group work close to where a Lowe’s store had closed recently and left a bad taste in the community. We heard about it throughout every 2 hour group.

So when someone at work says “They’re closing the Best Buy by my house” you instinctively put Best Buy a notch down in your mind and start the process of forgetting they existed.

Then, over time, lacking regular reminder of Best Buy, eventually they fall way down on your list of places to shop online.

How should a company calculate the exact monetary cost of this damage? You can’t. The impact may start today – but it will last for years with tiny impacts each month which can’t be separated out from the general noisiness of a market. That makes it impossible to measure the total impact. No KPI can explain it all – in fact KPIs can explain only a minor percentage of this loss.

That said, immediate impact can be estimated through measurement. But numbers are tricky. Far too often once a number is estimated everyone forgets the caveats that came with it — like “this represents 10% of the total impact we expect” and only the number remains. So remember that any impact of store closing you CAN measure is the tip of a very large iceberg of financial damage.

Thus, Steve Dennis observes, shrinking your way to higher profits isn’t ever likely to work – he calls it the “store closing delusion”. Shrinking to profitability is very tough to make work in ANY situation for a lot of business reasons. In retail there’s this added “advertising value” of stores that makes it even more impossible (if that’s a thing).

There are no simple answer for success when confronted by the complexity of the changing retail market.

Two things are clear:

  • The downside impact of online shopping on retailers will be far less than the hype we hear today (and have heard since the early 1990s).
  • Yet retail WILL change just as online shopping WILL change — and they will change more than many will want them to.

What that next phase of the bricks and clicks balance looks like will be different for every retailer.

That said, the way for retailers to succeed is to adopt the mentality of trappers starting in St. Louis in the 1830s (imagining this may be easier for those working at Hudson’s Bay Company :-).

The trappers goal was to find watersheds that produce the most money in a winter of trapping. As desperately as they might have wanted them, there were no reliable maps (though map makers had, by this time, sorted out that the gulf of Mexico did NOT reach Montana). There is no LandSat imagery. The path to success starts by talking with people who’ve been out in the wilderness, trappers that failed, trappers that succeeded. We’d need to look at any fragmentary maps available – and compare where maps tell different stories. Then we need to get out and listen to lore, rumor, and anecdotes. We need to talk with rich and poor, white, black, asian, and Native American. We need talk with trappers, explorers, railroads, and soldiers.

Finally, in the end, we have to make choices based on instinct trained by what we’ve heard and on analysis. Then we remain alert as we travel to detect things which all our background work might have missed. Fate tends to favor those who’ve done their homework. So if we do all this right, we end up making some good money and moving strongly into the future — which will always remain unknown.

The good news? This is more fun than a world without risk.

©2018 Doug Garnett – All Rights Reserved

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