Sooner or later, bricks and mortar will be replaced by online shopping. Online, price is the only thing that matters. Offline retail is degenerating into a showroom for online retailers. Young people have already been lost to brick-and-mortar retail. … Or so they say!

1. Roland Berger Strategy Consultants and ECE have surveyed approx. 42,000 consumers, and looked deep into 2,000 consumers' shopping bags for a month to establish a clear picture of the retail situation
2. Online retail is rising faster than expected: 7% online transactions generate 16% of total retail sales
3. For almost two thirds of consumers, brick-and-mortar retail remains the most important channel
4. Price is by no means the most important decision-making factor in choosing a shopping channel – the ability to take their shopping home straight away, try it on or get advice and information make offline shoppers willing to dig deeper into their pockets
5. "Showrooming" is not a threat but an opportunity to stay ahead of the pack; even for brands that have no offline activities, brick and mortar is attractive
6. Brick-and-mortar retail is by no means degenerating into a showroom for online retailers. The opposite is true: online information gathering for offline transactions generates eleven times more sales than the other way around
7. "Digital natives" are not lost to brick-and-mortar retail – a large group of young Internet-savvy consumers shop almost exclusively offline
8. Consumption patterns are varied: Multichannel retail, also known as "click and mortar", can be the solution – if you know your customers' requirements. There are seven shopper segments

Hamburg, February 20, 2013

Online shopping is becoming ever more important: In Germany, although only 7% of transactions are done online, Internet shopping accounts for 16% of sales revenues – and rising. But brick-and-mortar retailers should not despair in the face of online competition. Conventional shopping is still most Germans' favorite way of shopping – regardless of online price wars or the new generation of digital natives with their high affinity for the Internet. These are the conclusions of a study entitled "What the customer really wants", produced by Roland Berger Strategy Consultants and ECE Projektmanagement.

In a comprehensive analysis, they determined seven buyer segments, each with distinctive shopping behaviors. To sum up: German brick-and-mortar retail can meet customers' needs in ways that online shopping cannot or will never be able to do. However, companies must better understand their customers' wishes and shopping needs, in order to tailor offers to them and let them discover the opportunities of the digital world. A targeted click-and-mortar multichannel strategy will create better offerings for consumers and open up new horizons for retailers. But only if they know how to give different customers what they want.

"The battle is still raging between online and offline retail," says Prof. Björn Bloching, Partner at Roland Berger Strategy Consultants. "If traditional retailers recognize their strengths and expand their range to include suitable online offerings, they will be able to keep consumers loyal in the long term."

Consumer behavior – A varied picture

The joint study by Roland Berger Strategy Consultants and ECE analyzes consumer behavior both in the digital world and in traditional retailing. Some 42,000 consumers across Germany were surveyed on their shopping behavior. In addition, 2,000 testers kept personal shopping diaries to record their spending, time of purchase, product group and sales channel. This resulted in seven different customer segments, each with their own shopping habits, needs and preferences.

"The biggest surprise for me is the offline affinity of many young digital natives," says Alexander Otto, CEO of ECE. "The second-biggest segment we observed consists of young people who love the Internet but rarely shop online. So this generation is certainly not lost to conventional retailers. You just have to offer them exactly the shopping experience they like."

The customer profiles identified vary greatly: Young, Internet-savvy buyers ("joy-seeking multichannel natives") who do most of their shopping in actual stores; efficient multichannel shoppers; well-off shopping enthusiasts who want high-quality products; and service-oriented retirees ("traditional senior shoppers") who almost only buy in regular stores.

Brick-and-mortar retailing has the edge in many aspects of shopping

The comprehensive study clearly shows that the era of traditional offline retailing is certainly not over: "Two thirds of consumers are regular shoppers in brick-and-mortar stores, i.e. they shop in malls or downtown at least once every two weeks. Online, only 13% of customers are regulars. Also, 55% of online purchases are planned, while only around a third of offline purchases are. These figures show how important brick-and-mortar retail still is to people – regardless of the growth in online sales," says Henrie W. Kötter, Managing Director of Center Management at ECE. A clear phenomenon that is also reflected in the sales figures: in 2012, Internet-based retailing in Germany generated EUR 30 billion in sales, while traditional retailers managed just under EUR 389 billion.

"Online retailing is certainly on the rise, but there is still a huge gap between online and offline. That is where the potential is for traditional retailing," explains Roland Berger Partner Lars Luck. "It is not true that offline is degenerating into a shop window for online. The opposite is true: Online information gathering for offline transactions generates eleven times more sales than the other way around. Many consumers prefer to buy in stores – where they can touch or try on the goods and take them home right away," Luck adds.

There is also the feelgood factor: "Customers like to visit certain stores again and again because they find suitable offerings in a pleasant atmosphere, with friendly and personal advice. That creates strong customer loyalty," says Bloching. "This is where traditional retailers beat their online competitors hands down." This explains why even high-tech companies who rely heavily on the Internet open large, prestigious flagship stores in key cities. "What is worrying is the ever-stronger emotional loyalty to many online shops. Traditional retailers must do more to continue to inspire customers and retain them," Bloching warns. If they succeed, says the study, then price is not the most important factor in brick-and-mortar retailing. "Customers who currently shop offline are fully aware that they are not paying the cheapest price. So increasing transparency is obviously not the main threat. In a multichannel shopping world, successful businesses know what matters more to the customer than price," concludes Kötter.

Showrooming is not a threat but an opportunity

Online information gathering for offline transactions generates eleven times more sales than the other way around. But even so, "brands need an effective and high-quality offline environment. That is important for all brands – even, and especially, if they want to be successful online. So I can see a lot of potential for us because we provide space for people to meet brands in the right environment," Kötter believes. What's more, "showrooming and online sales growth are suddenly pushing demand for physical store space from companies that had not previously thought about having an actual outlet. As traditional TV or print advertising becomes less relevant and people change the way they gather information and buy products, companies are becoming aware once again of the growing importance of high-footfall locations such as shopping malls."

The right way to do multichannel retailing

Retailers must actively target the potential of Internet users, and a multichannel approach may be the solution. However, Kötter warns: "Blindly pursuing a multichannel approach is too risky and complex. Even in the multichannel world, cutting-edge retailers must know their customers in order to define their multichannel strategy and optimally link up the channels." Leveraging the potential of the Internet does not always mean having your own online store. It is about addressing target groups, presenting goods and creating customer loyalty on the web. Simply showing online whether an item is available in an actual store would push many customers to visit that store. "The future lies in click and mortar," says Kötter, "and as mall operators we can be an important driver of integration." Thus ECE will shortly be launching "Future Labs" in two malls. These will test various new service offerings, largely from the online world.