Pure online players drawn to high street retail

Many traditional retailers are working on strategies to secure greater online success. A growing number of online retailers are turning the tables, however, and are gaining ground in high street retail.

While the Swiss retail sector has more or less stalled, online business continues to boom by around 10% annually. Companies appear to be focusing on one particular area of investment, namely online retail, with many high street retailers looking to make their mark on digital commerce. There is a countertrend appearing, however. “Pure players” are opening stores. Where has this unexpected trend come from?

Turning the spotlight on brands and products

An entirely new approach can be taken to brand experience in a retail outlet. It becomes part of the physical everyday world of customers and passers-by. The online shop may be a true paradise for collecting customer data and mapping trends, yet high street stores can provide far more information about customer requirements.

In several sectors, there are also advantages to facilitating a direct product experience. This is one of the reasons why home24 (online furniture retailer), for example, is currently operating across seven showrooms (which have been explicitly named as such). One way of reducing the obstacles to shopping for furniture online.

New target group and optimized processes

When a company opens its own stores, the spotlight turns to the target audience who embrace the omnichannel approach. As these customers are generally more loyal and happier to spend, solely online or just in stores, this move is understandable.

With its nine outlet stores, Zalando is addressing another target group, namely the bargain-hunter. This is a way for the company to continue selling products that are being phased out online or have minor flaws.

Another advantage of a showroom is that it can help to reduce the high rate of returns experienced by some sectors.

Standing out among giants

Online retail giants are currently going from strength to strength, with Amazon, AliExpress, Wish, etc. all experiencing major growth. In terms of price, these suppliers are hard to beat, making other surplus values even more important when it comes to gaining the competitive edge. Opening stores can make a big difference here.

More of a sounding balloon for many

These days, many of the big online players also have physical stores. However, the network of stores is generally very small for most of the pure online players. A few examples:

• Digitec: 11 stores (Switzerland)
• Zalando: no stores in Switzerland (9 outlet stores in Germany)
• Home24: one showroom in Switzerland (8 others in Germany/Austria)

To compare, Interdiscount has around 180 stores and IKEA has 11 stores in Switzerland.

Entirely new challenges

There are a number of hurdles involved in the move to opening high street stores. On the one hand, with their rent and personnel requirements, stores represent large, fixed cost pools. Furthermore, a lot needs to be done right in order for high street retail to be a success. Online shops first need to build up or buy in the necessary expertise. And even if a store is successful, scaling the model takes time and major investment.

Nevertheless, the providers of on- and offline touchpoints appear to enjoy the advantages over “pure players”. Which is why the trend of online shops entering the high street retail market won’t be disappearing all that quickly.