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Clicks Don't Need Mortar


Business Week e.biz -- Cutting Edge

Clicks Don't Need Mortar

Combo retailers aren't offering a better shopping experience than e-tailers do

O.K., write me off as a dot-com bigot. But I'm beginning to wonder if the newly fashionable notion of "clicks and mortar" is nothing more than a comforting buzz phrase for retail execs trying to quit losing sleep over e-tailers like Amazon.com Inc. Just as we have rightly stripped the gloss off some undeserving dot-coms, it's time to question this latest bit of conventional wisdom.

I'm not saying that physical retailers with online sites don't have some advantages over pure e-tailers. Their brands, their ability to spread marketing and advertising costs across both venues, and their clout with vendors all add up to a considerable edge when it comes to running their business. But proponents of clicks-and-bricks contend the advantage goes way beyond that. They think there's a magic "synergy" to the combination, resulting in a superior customer experience that pure e-tailers can't match.

For the life of me, I can't find any really good examples. Let's take the most often cited clicks-and-bricks edge: the ability to return goods bought online to physical stores. "Total nonstarter," sniffs Amazon CEO Jeffrey P. Bezos. Yeah, he would say that, but I think he's right. It's not that returns don't matter. It's just that they're not a big factor either online or off. Surveys by market watcher Jupiter Communications Inc. indicate return rates online are generally 5% to 10%, slightly less than for catalogs. Even if you assume e-tailers lose all of that business to physical stores--which nobody believes they do--that's pretty weak synergy.

Yes, surveys also show that people want the ability to return online rejects to stores. But I wonder how often they actually do. Returning stuff to stores is an annoying, time-consuming experience.

Granted, for some goods, like apparel, clicks-and-bricks may actually click. You might be more willing to order clothes at Gap.com than at online outlet store Bluefly if you know you can zip to the store to exchange something. For just about everything else, e-tailers are outdoing the retailers. Hate that TV you ordered from Amazon? The e-tailer will not only pay return shipping, but it will send the UPS truck to your door for free to pick the thing up. Does it get any easier than that?

The other assumed synergy is that some people who order stuff online would prefer to pick it up in a store. Circuit City, in fact, says half of its online shoppers pick up their order in the store. Wait a minute--you call that service? Computer e-tailer Outpost.com Inc. just announced free overnight delivery--to your door. And e-tailers are adding a physical dimension at far less cost than building stores by doing deals with physical stores they don't compete with. Instant-delivery service Kozmo.com, for example, has its customers return video rentals to Starbucks cafes.

The fact that retailers such as Barnes & Noble Inc. and Wal-Mart Stores Inc. have set up entirely separate online operations speaks to the difficulty of connecting the two seamlessly. So does the failure of Barnes, Toys `R' Us, and others to use stores to grab leadership in online sales. "They've got all these incredible assets," gripes Robert O. Frasca, chief executive of Internet Venture Works, a Waltham (Mass.) incubator. "[Yet] they haven't leveraged them to create a compelling Internet business."

I have to believe that somebody eventually will come up with a compelling bricks-and-clicks combo that adds up to more than the sum of the parts. It's just that few retailers are even close to demonstrating to customers what the benefits might be. By the time they do, they may find e-tailers are already there.By Robert D. Hof, Rob_hof@ebiz.Businessweek.com


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