online shopping lead
Picture used for illustrative purposes only Image Credit: Stock image

Dubai: The general consensus is that online shopping can save people a lot of money. However, retailers are working hard towards matching the prices online and offline. So which avenue currently offers shoppers a competitive edge?

At one point online prices were way lower than retail price, but over time the price gap between the two started to shrink, despite the cost of running a brick-and-mortar store being considerably greater than for an online store.

When it comes to a physical store, factors such as rent, electricity, payroll, and fixtures can contribute to the gross margin and overhead of doing business, but there is an evident shift in trend where prices started to become similar to in-store.

However, since new products keep coming into the market regularly at varying price points, even though online retailers have increased the prices far more than physical stores, the increase in prices and margins often go unnoticed.

Online shopping is still better than offline?

Most consumer products (70 per cent) have the same price online and offline, according to a recent global retail consumer study. However, when there is a price difference between the two, 65 per cent of the time online channels were cheaper than offline (in-store) channels, the study found.

The report was based on an analysis of the prices of commonly purchased consumer products across multiple categories, including personal care, books, electronics, entertainment, home improvement or household items, and office supplies.

Moreover, with price comparison websites ensuring you don’t get extorted, research continues to show that online shopping still has an edge over traditional shopping when you factor in all costs involved.

Recent statistics also show that the two key reasons why the digital option is preferred over its counterpart is people can easily access online stores through their devices whenever they want and the ordered products would be delivered to their doorstep as well. So to put it in a word, convenience.

What Is ‘Showrooming’?
One growing trend among shoppers is to go to a brick-and-mortar store to check out and compare the features of a product and they buy it online at a lower price. This is known as ‘Showrooming’. Several apps are available to shoppers to help them check competitors' prices both online and in the store.
Stock Online shopping
For most products, online prices have dropped faster or climbed more modestly and that advantage has widened in recent years.

Prices online have dropped faster than offline

For most products, online prices have dropped faster or climbed more modestly and that advantage has widened in recent years. For other items, shipping can be a hassle that offsets the other benefits internet retailers enjoy, such as low overhead (ongoing or running expense of a business).

An MIT (Massachusetts Institute of Technology) retail cost analysis compared online and offline prices in 56 large multi-channel retailers (which made both online and brick and mortar store sales) in 10 different countries, by using an app which compared the prices of the same products.

In total, about 24,000 prices were analysed. The study had found that in 72 per cent of cases, the prices were the same. Indeed, one area where the channel made little difference was electronics.

In Brazil, for example, online prices are often much higher. The UK and Canada both had a 91 per cent rate of online and offline prices being the same. In Japan, however, online prices were significantly lower in 45 per cent of cases. The US was the closest to the average, at 69 per cent.

Why has online shopping always been cheaper than offline shopping?
• Shopping online involves aggregating multiple e-stores in order to find the best price for the item you wish to buy, which is how you get the product at a more reasonable price than in stores.
• One of the biggest perks of buying online is that you can buy directly from the manufacturer and eliminate the middle man. Thereby, avail the product at a very low cost.
• Online shopping offers various discounts, coupons, deals, etc., every now and then. So, you just need to know when and where to look for the product online and save a lot of money!
• E-commerce websites do not need to have their own shops, so no infrastructure cost is involved for them and hence the prices are comparatively less compared to offline stores.
• Furthermore, online shopping websites directly import goods from manufacturers and save on the transportation and commission charged by middlemen, unlike traditional retailing.
• Lastly, advertising and marketing switched to digital, implying greater returns at a lower investment. So, the products are cheaper.

The true hidden costs of online shopping

When you first see the product on a portal, it generally looks cheaper. But when you proceed for the payment, the extra charges like shipping charges and packing charges are added. These charges will make the product expensive vis-a-vis the local store.

Some portals offer free shipping if you shop more than a certain amount. Sometimes just to avail free shipping, you end up shopping more than your requirement. In case of offline shopping, you can receive the product then and there. But, this does not happen in online shopping.

Even though it hardly takes 10 to 15 minutes to buy the product online, by the time it reaches your hands, it would be more than 4-5 days. During the big sales, e-commerce portals may take too long to deliver the product.

There is an option to return the product, if you do not like it. But again, the return policy differs from one to other. In case of some online shopping portals, customers have to bear the cost of returning the product. If you return the product, you will not be paid shipping charges which you had paid earlier.

RDS_190729_Online shopping-1564554826498
Even though it hardly takes 10 to 15 minutes to buy the product online, by the time it reaches your hands, it would be more than 4-5 days.

Online and offline shopping get highly inter-connected

Digital shopping continues to grow, but it’s no longer a competition between online and offline. Today, many retailers find that half of their online sales are supported by their stores.

Studies show that while many consumers who have downloaded a retailer’s app use it for online purchases, others use it to obtain a coupon or discount offer that can be availed at the physical store.

An example on how online and offline shopping is now connected
A clothing brand sells its products via its website, app, Instagram and Facebook shops, third-party websites, and brick-and-mortar stores.

A customer approaches the brand on their website and completes a purchase online but wants it delivered as soon as possible.

An ideal omni-channel experience (different methods of shopping available to consumers like online, in a physical shop, or by phone) allows the customer to avail flexible delivery options such as buy online pick up in-store or same-day delivery.

So while the trend in online shopping continues to grow, it doesn’t mean that retail store shopping is dead. The truth of the matter is that a huge number of consumers shop both online and offline.

Here’s another example of inter-dependence: ‘Black Friday’ is predominantly a retail sales event, but shares its sales with its online counterpart, Cyber Monday, a 24-hour online shopping event.

It’s interesting to note that more than 80 per cent of retail sales is projected to still happen within physical stores in the coming year worldwide, multiple statistics show.

Online versus offline store: Which one is for you?

As to the question – ‘which is the best option for you?’ The answer is both. There is no better option because you can go online to supplement your offline business. It is also true that online sales is growing and accounting for 18 per cent of retail sales worldwide.

However, the figure also means that four out of every five purchases still take place offline. The truth of the matter is that you do not have to choose at all as there has been a recent trend of traditional retailers opening e-commerce stores and online stores investing in physical locations.

The lines between online and offline retail are starting to blur, with studies showing that about 85 per cent of consumers wanting a unified experience across both and currently there are many companies offering digital interactions with customers in-store.

According to a study by US-based McKinsey Research and Harvard Business Review, omni-channel retail customers spent an average of 4 per cent more on every shopping occasion in-store, and 10 per cent more online than single channel customers.