Nightmare In The Guitar Shop – A Cautionary Tale

Here’s the lesson. Most of the things we buy today are not necessities in the true sense of the word. What we are buying is enjoyment or the promise of a happier future. The true art of retailing is not about the product, it’s about the experience. If a customer can get a better experience online than in a store, why would they bother going to a store? Never before in the history of retailing have those little things that make customers feel better about themselves been so important.

“But” I hear you say, “what about the price?” Let’s go back to marketing 101. People buy value not price. Here’s an important equation worth committing to memory:

Value = Convenience + Enjoyment + Quality
Price 

In other words we can increase value, without dropping the price, by making the shopping experience more convenient or enjoyable, or by enhancing the perceived quality of the purchase. The challenge when comparing a store with a website is the website can usually offer an equivalent quality product with greater convenience at a lower price. The jury is out on who wins in the enjoyment stakes. If the in-store experience is nothing to write home about, the web site is going to win hands down.

But what if we could get a physical store and a website working together to increase convenience and enjoyment. Wouldn’t that be a winning combination of bricks and clicks! For instance, two respected Australian digital media consultants, Matt Forman and James Horne, tell me that retail chains with a well thought out website can expect to attract 20% to 30% of their online visitors into one of their stores. This is why business commentators are urging retail groups to get serious about reengineering their store strategies to accommodate the growth in online activity.

Some Facts About Bricks And Clicks

So how fast is online retailing really growing? Because we are hosting a Bricks and Clicks Forum for franchisor leaders at the end of the month I have been collecting data on this topic from a range of research reports and articles. While the percentage of online to physical store sales is still relatively modest (5% to 10% for those with a credible bricks and clicks strategy), the online component is growing exponentially.

Consider these stats:

• Spending by Australians with online retailers is expected to grow by 15% a year over the next three years. In the USA it has been growing 20% a year since 2000.
• This Christmas, some of the larger online retailers reported sales increases over last year of 45%.
• Online retailing is predicted to be one of the five fastest growing business sectors and employment in this sector grew by 40% last year.
• By the end of this year 85% of mobile devices will be web-enabled and these devices will overtake traditional computers as a means of going online.
• Sales of tablet devices, like iPads, are growing at around 30% a year. These are known to stimulate online purchasing behaviour
• In 2011 there was a 111% increase in the use of mobile apps to access retailer websites.
• Around 25% of customers now look up product prices online when they are in a bricks and mortar store.
• More than 65% of purchases in bricks and mortar stores involve prior online research.
• Food companies who have embraced online ordering are rapidly growing their sales. In the USA Domino’s recently topped 1 million digital orders in a week for the first time in its history.

The message for franchisors is, keep a close eye on what is happening in the online world and consider carefully how this will (not might) impact on your business model. For this reason I hope someone senior from your brand has booked into the

Bricks and Clicks Forum to be held on February 28th. (While you can access the program and registration details please be quick as the event is nearly full).

By the way I did buy my guitar pedal online. After some browsing I decided to pay a little extra and purchase it from within Australia. Well sort of - I ordered it from a store in Tasmania!

Until next time,

Greg Nathan