In-store shopping does not guarantee the success of a brand

As a result of globalization and increased competition, it is apparent that in big cities, local shops have disappeared and have been replaced with global companies’ stores. For example, when you walk in high streets in other countries, they can feel very familiar. Of course, we see all brand logos in every corner of our cities. However, I do not think that this means the end of local business; instead, it signals a change in business operations and distribution channels.

Statista (2017) shows information about worldwide sales in retail e-commerce from 2014 to 2021; the data is presented in billions of US dollars. In general, it is immediately apparent that the trend is upward. In 2016, the retail e-commerce sales were 1.86 trillion US dollars, and e-retail revenues are estimated to rise to 4.48 trillion US dollars by 2021.

Online shopping is one of the most popular online activities worldwide. Thus, in-store shopping could be replaced with the new online shopping platform. Firstly, this is because online shopping offers great convenience to consumers. Undoubtedly, consumers do not need to go out looking for product information, as websites already provide such information with a mixture of images, sound, and much detailed text description. Furthermore, online shopping encourages consumers to learn, to evaluate prices, and to make a decision on the most suitable product (Moon, 2004). Thus, it is an effective way for individuals or small businesses to expand awareness of their products to customers around the world.

On the other hand, global brands have to quickly adjust or change their operations in order to take advantage of the trends before their competitors do. A case study of the H&M brand will illustrate why one such global retail brand is experiencing a difficult situation, in terms of its brand and distribution channels. Specifically, the stock price of H&M has dropped over the past two years, since it recorded its highest level in 2015. By contrast, the inventory cost has increased every quarter from 2015 to 2017, which indicates to investors that profits are not as good as before (Bloomberg, 2017).

H&M intend to deal with the situation by changing their strategy from an ‘store-on-every-corner strategy’ to an ‘omnichannel strategy’, in order to boost sales from both in-store and online stores. This strategy may be the best temporary solution, provided the correct channel is emphasized among the online and offline stores. Also, they must carefully calculate how much on each one. In the long run, I do not think this strategy will work well: H&M’s operation aims to ‘have one’s cake and eat it’, meaning that they cannot get the best results by doing two things at the same time. H&M have not planned to increase their stores, but neither do they want to close any current branches. Moreover, they also face pressures from competitors such as Zara, which provides better fashion trends and faster online shopping, and also from Primark, which has lower prices.

In contrast, many new businesses are able to grow continuously through online channels, despite having only small warehouses. This prompts the question: Is it possible to generate a large income within any physical store?

Nowadays, the e-commerce company platform offers the best options for both sellers and buyers. For example, Amazon e-commerce introduced a new perk for its Prime members, called ‘Prime Wardrobe’, which aims to expand within the fashion retail market. For buyers, this feature allows Amazon’s Prime members to order clothes to try, and buy if they like them. Furthermore, it offers free shipping both ways, and a seven-day trial period with no any additional subscription cost (TechCrunch, 2017). This approach can remove the complexities of purchasing clothes online, given that many customers still prefer to try them on before making a decision. For the sellers, Amazon’s e-commerce has no requirement to pay corporation tax, and this can help local brands or small businesses to save costs and grow in the global market.

For example, Karina Garcia started a small online business based on the idea of selling homemade slime: this is made out of a combination of glue, borax and water, and provides hours of entertainment for children. Her tutorials on YouTube became very famous, gaining 879,580,814 views and 6,569,261 subscribers. She started to sell products and a recipe book named ‘Karina Garcia’s DIY Slime’ on Amazon, as well as earning money from sponsorships and corporate advertisers such as Coca-Cola, Disney and Audible. Typically, she can earn $200,000 per month (Tubefilter, 2017), and of course, she does not have any physical stores. Therefore, she can save the costs of corporate rent, warehousing or labour expenses.

In conclusion, in the digital age, adapting to the changing global trends is essential for businesses to survive in the worldwide competition. It is clear that many companies that once flourished no longer exist, due to technological advances and a change in consumer behaviour. However, there is no single formula for when and why an individual customer will make a purchase. Thus, companies should have the ability to analyse and create marketing strategies to match the current market trend, while providing different channels that customers can use to interact with the business. As a result, in-store channels might be reduced or transformed into ‘showrooms’ in the near future.

References:

Bloomberg (2017). HMB:Stockholm Stock Quote - Hennes & Mauritz AB. [online] Available at: https://www.bloomberg.com/quote/HMB:SS [Accessed 27 Oct 2017].

Moon, B. (2004). Consumer adoption of the internet as an information search and product purchase channel: some research hypotheses. International Journal of Internet Marketing and Advertising, 1(1), p.104.

Statista (2017). Global retail e-commerce market size 2014-2021 | Statista. [online] Available at: https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/ [Accessed 27 Oct 2017].

TechCrunch (2017). Amazon Prime Wardrobe lets you try on and return clothes free. [online] Available at: https://techcrunch.com/2017/06/20/amazon-prime-wardrobe/ [Accessed 28 Oct 2017].

Tubefilter (2017). Karina Garcia, YouTube’s “Slime Queen,” Is Heading On Tour With Fullscreen - Tubefilter. [online] Available at: http://www.tubefilter.com/2017/07/07/karina-garcia-youtubes-slime-queen-is-heading-on-tour-with-fullscreen/ [Accessed 28 Oct 2017].