Module 3 - Case DISTRIBUTION & MARKETING PLAN ASSIGNMENT OVERVIEW Online shopping has increased dramatically over the past few years, and online retailing becomes the top priority of all major grocery retailers. On one hand, retailers see the needs to off

Clicks and bricks; Retailers and the internet The Economist; London Vol. 402, Iss. 8773, (Feb 25, 2012): PG 18.

Abstract After a panic at the turn of the millennium about the impact on the retailing industry of online

shopping, bricks-and-mortar stores settled into making only modest alterations to their business

model or, ostrich-like, trying to ignore it. Few have so far made the radical changes needed to meet

the threats from, and tap the enormous potential of, e-commerce. Such inaction threatens retailers'

survival. Online sales are now approaching $200 billion a year in America. To build a profitable

online business retailers must integrate it seamlessly with their bricks-and-mortar operations. Many

keep them separate, increasing the risk that they fail to communicate or work together properly.

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Many retailers are being too slow in reinventing themselves for the age of online shopping

"WE TEND to overestimate the effect of a technology in the short run and underestimate the effect in

the long run," observed Roy Amara, an American futurologist. This is certainly proving true of

retailers and their attitude to the internet. After a panic at the turn of the millennium about the impact

on their industry of online shopping, bricks-and-mortar stores settled into making only modest

alterations to their business model or, ostrich-like, trying to ignore it. Few have so far made the

radical changes needed to meet the threats from, and tap the enormous potential of, e-commerce.

Such inaction threatens retailers' survival. Online sales are now approaching $200 billion a year in

America. Their share of total retail sales is creeping up relentlessly, from 5% five years ago to 9%

now. People in their 20s and 30s do about a quarter of their shopping online. True, few ladies who

lunch will buy their Christian Dior dresses online; and bargain-hunters will still enjoy rummaging in

discount stores like Dollar General. But to attract everyone in between, retailers will have to build a

strong online offering while making their shops nicer, more conveniently located and, in the case of

many big-box retailers, smaller. Otherwise they are likely to go under, as United Retail Group, an

American clothing chain, did this month.

To build a profitable online business retailers must integrate it seamlessly with their bricks-and-

mortar operations. Many keep them separate, increasing the risk that they fail to communicate or

work together properly. Walmart's online operations are in Silicon Valley, far from its Arkansas

headquarters. Target, another supermarket giant, until recently outsourced its e-commerce to

Amazon, the biggest online retailer, and is only now building its own e-business. Both Walmart and

Target still have a puny online presence relative to their size.

Are you being served?

Retailers also need to be ruthless in chucking out products that do not gain from being sold in a

physical store: not just things like CDs and DVDs, which can be replaced by digital goods, but bulky

stuff like nappies (Amazon has become a big seller of Pampers). Their shops must focus on those

things, such as expensive clothes and gadgets, that customers will want to try before they buy, and

for which they will pay extra, such as advice from competent sales assistants.

Stores have to become more fun to visit, so shoppers feel it is worth the trip to the mall or high

street. Apple's shops thrive not only because they contain cool products; they are beautifully

designed, with helpful staff. Disney stores may be an ordeal for parents but they often succeed in

giving their pint-sized clients "the best 30 minutes of a child's day". But too many retailers think only

of getting a quick sale, neglecting to build relationships with customers. They are the most at risk

from "showrooming": shoppers trying products in physical stores before sneaking off to buy them

more cheaply online.

To survive in the new world of retail shopkeepers will need large amounts of imagination--and

money. Macy's is investing $400m in the renovation of its flagship store in New York. The losers will

include those (like Borders, an extinct chain of bookshops) that keep selling things people are happy

to buy online. The biggest winners will be consumers. They can look forward not only to ever-greater

convenience thanks to the internet. They will also find a growing number of physical stores that

compete to make shopping a pleasure.

(Copyright 2012 The Economist Newspaper Ltd. All rights reserved.)