BUSI 446 Week 1 Discussion Board Forum 1 Example

Discussion Board Forum 1: Does the Physical Store Still Matter?

BUSI 446 Retailing and Category Management, Discussion Board Forum 1 Thread and Replies

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The forum prompt and the classmates are composites; the textbook, the research and the Scripture cited are real.

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Few questions in retailing get asked more often than whether the physical store has a future. Levy et al. (2019) describe a shift from multichannel retailing, in which a retailer simply sells through stores, a website and perhaps a catalog, to omnichannel retailing, in which those channels work as one system so that a customer can research on a phone, buy online, pick up in a store and return by mail. My position is that the store is not fading inside that system. It is the part that makes the other channels work better.

The strongest evidence comes from retailers that added stores after selling remotely. Pauwels and Neslin (2015) studied a retailer that sold through a catalog and a website and then opened physical stores. Total revenue rose after the stores opened. The stores pulled some purchases away from the catalog, but the loss to the website was small and short-lived, and customers bought more often across the business as a whole. If stores merely moved sales from one channel to another, total revenue would have stayed flat.

Bell et al. (2018) reached a similar conclusion for Warby Parker, the eyewear brand that began online. When the company opened a showroom in an area, total sales there rose, online sales included, and fewer customers returned what they had bought. Shoppers who could try frames on in person bought with more confidence, and those who preferred to order at home still did so after seeing the product.

These studies point to why stores matter. A store lets a shopper touch, try and compare products, which lowers the risk of a purchase, and it gives the retailer a place to deliver service that no website matches. Levy et al. (2019) note that each channel offers different benefits, and the store's benefits, such as immediate possession, personal service and the chance to examine merchandise, are the ones online channels find hardest to copy. The store also lowers costs elsewhere: fewer returns, cheaper pickup in place of home delivery and a local presence that draws attention to the brand.

That does not mean every store will survive. Formats built only on selection and convenience, which online retailers now offer better, are under real pressure. The stores that will last are the ones that do what screens cannot.

The textbook's own classification of retailers helps show which ones those are. Levy et al. (2019) distinguish food retailers, general merchandise retailers such as department stores, category specialists, specialty stores and off-price retailers, and service retailers. A category specialist that sells a deep assortment of electronics at low prices competes directly with online sellers on the same terms, and its stores mostly serve as places to see a product before buying it somewhere cheaper. A specialty store that fits running shoes after watching a customer run, or a grocer whose fresh department shoppers want to inspect, offers something a website cannot. For those formats, the store is the product as much as the merchandise is, and closing it would mean giving up the reason customers chose the retailer at all.

Proverbs 27:23 charges a herder to keep close watch over every animal in his care (English Standard Version Bible, 2001/2016). A shepherd cannot care for animals that go unseen. The store is where a retailer sees customers firsthand: what they pick up and put back, what they ask about, what frustrates them at the counter. Data from a website shows clicks; a store shows people. A retailer that closes every store to save costs gives up its closest view of the people it serves, and that view is worth protecting.

Reply to Marcus

Marcus, your point that buy-online-pickup-in-store makes customers visit the store more often fits the research well, and I think it explains part of why stores still pay off. Gallino and Moreno (2014) studied a home goods retailer that introduced buy-online-pickup-in-store. After the option launched, online sales fell and store sales and store traffic rose. The authors traced the shift partly to information: once the website showed which items were in stock nearby, shoppers who planned to buy online came into the store instead, and many bought additional items while there.

That finding supports your argument, with one caution. Pickup only works when the inventory shown online is accurate. Corsten and Gruen (2003) found that out-of-stocks are common across retailers worldwide and that most of them originate in the store itself, in ordering and replenishment, rather than further up the supply chain. A customer who drives to pick up an order that is not there may not return at all. So the operational work behind the store matters as much as the option on the website. A retailer offering pickup should probably hold a small safety margin, showing an item as available only when the system counts two or more on hand, and should have a clerk confirm each order before telling the customer it is ready. Those steps cost a little in sales shown online but protect the trip the customer makes.

Luke 16:10 teaches that the way a steward handles a little shows how he will handle a lot (English Standard Version Bible, 2001/2016). Keeping an accurate count on a shelf is a small task, but customers judge the whole retailer by whether the promise on the screen is kept at the counter. Would your example retailer show live inventory counts, or only a general in-stock message?

Reply to Hannah

Hannah, you made a strong case that malls will disappear within a decade, and I agree that many mall formats are struggling. I would question whether the decline means shoppers no longer want physical places to shop, though.

Research on shopping motives suggests that people go to stores for more than products. Babin et al. (1994) showed that shopping provides both utilitarian value, getting the task done, and hedonic value, the pleasure people take in the outing for its own sake. Arnold and Reynolds (2003) identified six hedonic motives for shopping, including adventure, social connection, gratification and the pleasure of finding a bargain. Online channels handle utilitarian shopping well, but they serve many of these hedonic motives poorly. That suggests weak malls may close while stronger ones change toward dining, entertainment and experiences, rather than all malls vanishing. Shoppers who go out for adventure or social connection will not get that from a delivery box, and a mall that gives them a reason to spend an afternoon can still fill its parking lot. The tenants may look different, with more restaurants, fitness studios, medical offices and stores that began online, but the place itself still serves a need that the screen leaves open.

Levy et al. (2019) describe shopping centers as one of several location types, and the ones under the most pressure tend to be those anchored by department stores that lost their reason for being. Ecclesiastes 3:1 reminds us that there is a season for every matter under heaven (English Standard Version Bible, 2001/2016). Retail formats have seasons too; the department-store mall may be ending its season while other gathering places begin theirs. Which kinds of tenants do you think will replace the department stores?

References

Arnold, M. J., & Reynolds, K. E. (2003). Hedonic shopping motivations. Journal of Retailing, 79(2), 77-95. https://doi.org/10.1016/S0022-4359(03)00007-1

Babin, B. J., Darden, W. R., & Griffin, M. (1994). Work and/or fun: Measuring hedonic and utilitarian shopping value. Journal of Consumer Research, 20(4), 644-656. https://doi.org/10.1086/209376

Bell, D. R., Gallino, S., & Moreno, A. (2018). Offline showrooms in omnichannel retail: Demand and operational benefits. Management Science, 64(4), 1629-1651. https://doi.org/10.1287/mnsc.2016.2684

Corsten, D., & Gruen, T. (2003). Desperately seeking shelf availability: An examination of the extent, the causes, and the efforts to address retail out-of-stocks. International Journal of Retail & Distribution Management, 31(12), 605-617. https://doi.org/10.1108/09590550310507731

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Gallino, S., & Moreno, A. (2014). Integration of online and offline channels in retail: The impact of sharing reliable inventory availability information. Management Science, 60(6), 1434-1451. https://doi.org/10.1287/mnsc.2014.1951

Levy, M., Weitz, B. A., & Grewal, D. (2019). Retailing management (10th ed.). McGraw-Hill Education.

Pauwels, K., & Neslin, S. A. (2015). Building with bricks and mortar: The revenue impact of opening physical stores in a multichannel environment. Journal of Retailing, 91(2), 182-197. https://doi.org/10.1016/j.jretai.2015.02.001