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November 3, 2011

Virtual Retailers Entering the Real World: New Store-Based Concepts From Pure-Play Internet Retailers

VirtualRetailersWith more store-based retailers selling online, a handful of pure-play internet retailers are experimenting with store concepts to boost their public profile. So, exactly what are they doing?

In the early days of internet retailing, the channel was typically characterised by high levels of fragmentation, with most retailers being internet-only specialists, also known as pure-play internet retailers. These internet retailers had no store bases and operated solely on the web. At this time few store-based retailers had neither the inclination nor the infrastructure to launch national/global transactional websites.

However, over the years, most store-based retailers have prioritised internet retailing as a growth channel and in 2011 nine of the top 10 store-based retailing brands in the UK have transactional websites. This growth from store-based players in the internet retailing channel has intensified the level of competition not only in terms of pricing but also in terms of additional multi-channel advantages, such as 'click and collect'. With more store-based retailers planning to launch transactional websites, pure-play internet retailers are facing a major competitive challenge.

August and October 2011 saw a whole host of new concepts from non-store retailers in the UK and abroad. Here are just a few of them.

Amazon – delivery lockers

Since overtaking Dell as the largest online retailer in the world, Amazon has dominated the internet retailing channel. Its new store-based concept is a secure locker which stores delivered packages for consumers until they arrive to collect them. To date, the lockers have appeared in Seattle and New York in the US and London in the UK. In the US, Amazon has agreed a deal with 7-Eleven which will see the lockers rolled out to a number of convenience stores in the country. In the UK, Amazon has installed the lockers directly inside a major shopping mall.

The idea behind the delivery lockers is to provide an alternative shipping address for consumers. One of the major challenges for internet retailing is delivery. Many consumers are likely to be away from home during working hours and Amazon may even be able to save on delivery costs by shipping to a central point. Either way, an additional shipping option will help Amazon provide more choice for consumers already being offered the 'click and collect' option by several store-based retailers.

Ocado – barcode shopping wall

In August 2011, internet grocer Ocado created massive media and public interest by introducing its take on 'window shopping' to Central London. The store concept consists of an empty retail unit in the newly opened One New Change shopping mall plastered with images of everyday grocery items. Beneath each image is a barcode which consumers are encouraged to scan with their smartphones. The Ocado smartphone app and an Ocado account are required to interpret the barcode and so many consumers are likely to have registered with the company as a result of the concept. Once users scan the image, the application will recognise it and the consumer is able to add the item to his/her online shopping basket.

This concept is unlikely to generate sales on its own due to the limited range of products offered. A significant boost to app downloads and new account registrations, however, is likely. Ocado's 'window shopping' experiment is the second high-profile example utilising barcodes in public spaces following Tesco's South Korean division, Homeplus, opening a similar virtual grocery store in Seoul.

Ocado's barcode shopping wall in London, UK

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Source: Euromonitor International

QVC – Diamonique pop-up store

In October 2011, homeshopping specialist QVC opened a pop-up store in Hatton Garden, the jewellery capital of London. The Diamonique-branded store is intended to generate publicity for QVC's latest range of Diamonique-branded jewellery.

The opening of the pop-up store in the run-up to the holiday season is intended to boost Christmas sales. However, the additional benefit of the pop-up store is its location in the middle of Hatton Garden. The area has historically been a jewellery hub in the UK and QVC's temporary association with the area could prove vital in building credibility for its line of 'high-end' imitation jewellery.

QVC's Diamonique pop-up store in London, UK

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Source: Euromonitor International

Google – SWAS (store-within-a-store)

The last store-based concept from a non-store retailer is Google's Chrome Zone. The pop-up store has emerged inside a PC World outlet in Central London. The SWAS was launched to generate publicity and boost sales of devices using Google's new operating system, Chrome OS. The 35 sq m store sells Samsung-branded Chromebooks as well as accessories and peripherals for the device.

Despite Google having an internet-only presence in the retail world, the company has now appeared to recognise the importance of store-based retailing following the high-profile commercial failure of the Nexus One smartphone launched in March 2010. Google's SWAS has not only generated media interest in its Chromebook, but with Google employees on hand to answer questions and offer support, consumers are far more likely to actually purchase such a non-mainstream device.

Google's Chrome Zone in London, UK

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Source: Euromonitor International 

Prospects for the future

As the internet retailing channel becomes more competitive, with more store-based retailers harnessing their multi-channel offerings, pure-play internet retailers face a challenge to maintain their market share. Although most experimental store concepts are unlikely to be financially viable on a permanent basis due to the marketing resources required to support them, it is highly likely that more pure-play retailers will utilise real world retail spaces to support their virtual stores.

 



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