Brick-and-mortar stores can be e-commerce assets

The holiday shopping season is here, so it must be time to write about the decline of the local brick-and-mortar retail store.

The story is as well known as the Grinch's: Internet sites with wickedly low prices force the family owned store down the street out of business, leaving a gaping hole in the neighborhood shopping center for a payday lender to fill. The column ends with platitudes about community, technology and the good old days.

This time, though, allow me to offer a different narrative, a story about how a savvy retailer can compete with the Internet and turn the corner store into an asset. Chain stores are pioneering this revolution, but the lessons are just as applicable to the single-store retailer.

The big disadvantage for online retailers is that customers can't sample the merchandise and must pay for shipping, which doesn't suit their desire for immediate gratification. These have led some Internet retailers, such as menswear outlet Bonobos, which has space inside Nordstrom in the Galleria, to open stores that allow customers to sample goods and pick up purchases.

If online retailers see value in opening real stores, that's a signal that traditional retailers can compete if they open additional channels to reach their customers, such as online, mobile or telephone sales.

"As business people, we know to succeed we have to have the right product, at the right price in the right place at the right time," said Steve Koch, an executive professor at the University of Houston. "You have to be in multichannel."

Forrester Consulting this year released an analysis depicting the benefits of multichannel retailing, which some people call omni-channel, titled "Customer Desires vs. Retailer Capabilities." It studied how traditional retailers can even the playing field with online shops.

No one should be surprised to discover that customers want the best of both worlds with the convenience of finding a product online and the ability to buy it nearby. Forrester reported that 73 percent of shoppers would buy from local retailers if they could check the product's availability online first. Only 36 percent of customers who shop online said they would visit a store for that product if they couldn't check inventory.

"It turns out that having physical inventory close to the customer enables retailers to offer a flexible choice of fulfillment and return options to the consumer as well as shorter delivery times that can match those of the leading online pure plays," the study found. But "consumers simply won't waste time goingto a store without thecertainty that the products they want are in stock."

Yet when researchers asked brick-and-mortar retailers that practice at least some e-commerce about making inventories available online, only32 percent said they had the capability, and they ranked it third in their priorities for online expansion.

"The reality is that if I'm looking for something, I'm going to do a search on the Internet, and even if you don't want to sell on the Internet, you need to be able to be found," Koch said. Relying on word of mouth and customer relationships will not sustain the average retailer, particularly with younger generations, who grew up using the Internet for everything, he added.

I asked Koch who in Houston does multichannel retailing well, and he recommended I speak with Rolf Schultz, Academy Sports & Outdoors' senior vice president for omni-channel.

"Customers have a lot more say in the retail experience than they have in the past. What we're trying to do through omni-channel is to celebrate that ... and make sure they have a shopping experience that marries up with what their changing and growing expectations are," Schultz told me. "The value that we create is immediately identifiable, but part of that value is table stakes, things we know we need to do because that's how the modern shopper shops."

The first priority, Schultz said, is to make sure the customer knows what products Houston-based Academy sells and ensuring they are in all 185 stores in 15 states. If a customer can't find what he or she wants, salespeople have wireless devices they can use to order the item and have it delivered to the customer's home or the nearest store.

Schultz called the development of multichannel capabilities a journey that retailers never end because technology and customer needs change, and Academy is considering offering real-time store inventories online. But he said each retailer needs to develop a unique multichannel strategy that suits their particular customers.

The biggest obstacle for small and medium-size retailers is the cost and hassle of buying new software that ties together the store's accounting, inventory, point-of-sale, transaction, e-commerce software and enterprise resource planning systems so that they all work together. Koch said he has visited retailers who use software that was written by companies that went out of business years ago and is not compatible with anything.

He said there are e-commerce sites available for around $5,000 that easily integrate with commonly available accounting software, but making that change can "take years off your life." In the long run, though, Koch said it's worth it.

"It all starts with the customers, and it's about how they want to be served," Koch said.

Traditional retailers who market and sell online, and encourage customers to visit stores to inspect or pick up a product, can undermine the perceived advantages of shopping online.