Sure, the original assumption about how the internet would affect brands -- that e-commerce would triumph over traditional retailing -- hasn't exactly panned out. But don't let the failure of e-commerce to replace local bricks-and-mortar shops obscure a more important trend: the impact of the internet on in-store sales.
In the mid- to late '90s, there was considerable hype and speculation that e-commerce would drive many traditional stores out of business, as well as provide a platform for smaller retailers to extend their reach nationally or internationally.
Fast-forward a decade, and reality has turned out quite differently.
Less than 4%
Amazon CEO Jeff Bezos optimistically predicted in early 2005 that online buying would "ultimately [be] 10% to 15% of retail." We're still years away from that, if it ever happens at all. The U.S. Commerce Department says e-commerce sales are less than 4% of total U.S. retail sales and have been flat for several quarters. While e-commerce has outpaced growth in traditional retail stores in a bad economy, offline consumer buying is as important as ever.
JupiterResearch and Forrester (now one company) predict that the internet will affect roughly $1 trillion dollars in offline consumer spending in the next five years. Forget about whether it's a trillion or $800 billion; the prediction is directionally accurate in terms of consumer behavior. This online-offline connection is a profound trend that marketers and brands have largely failed to understand, let alone capitalize on.
The internet has evolved into a primary research tool for consumers who go on to buy offline. Nielsen found in May that among "a representative group of people" who had recently bought consumer electronics at bricks-and-mortar stores, 80% had bought from stores whose websites they had visited first. And two years ago BigResearch released data showing that 89% of consumers who made in-store purchases in key categories conducted online research beforehand. There is much more data from ComScore, Yahoo and others that validates the pattern: Consumers research online but buy offline.
|ABOUT THE AUTHOR|
Greg Sterling is the founding principal of Sterling Market Intelligence, a consulting and research firm focused on the internet's influence on offline consumer purchase behavior. He also is a senior analyst for Local Mobile Search, an advisory service from Opus Research tracking the evolution of the mobile internet.
In the consideration phase
Empirical evidence also increasingly shows that the internet is used most heavily during the so-called "consideration phase" of consumer purchase behavior. Traditional media such as TV, print magazines or newspapers often stimulate online research, which in turn leads to offline purchases in local retail outlets.
Most brands and marketers have been slow to integrate traditional media campaigns with the internet, beyond adding their URLs to ads. And their online campaigns have generally failed to leverage location or lead people to a point of sale where they can buy the advertised product (or service).
All of the Ad Age top-25 advertisers, from Procter & Gamble to Berkshire Hathaway, sell products or services in local stores or through local distributors. In this sense, they should thus be considered "local advertisers." Yet most brands bring a national TV mentality to online advertising.
After consumers determine what they want to buy, they typically want to know where they can buy it. Second only to search functionality, store locators are the most popular feature on retailer websites, according to the E-tailing Group. But we're just now starting to see more dealer and product locators in online advertising campaigns.
Where to buy
Online, branding and direct response can be connected in ways that help build awareness and simultaneously provide consumers with desired "where to buy" information. Specific tactics are beyond the scope of this article, but locally targeted search and display advertising are key parts of such a campaign.
In fairness to marketers and agencies, online-to-offline tracking is imperfect, and good geotargeting tools are only now being developed. However, brands and national marketers that aren't using geotargeting or building local messaging into their online campaigns are missing an important strategic opportunity to capitalize on consumer research and lead online shoppers from search to store.