Pureplay retail model is unsustainable

The online pureplay model may be unsustainable, according to a new report from L2 that finds that online-only retailers are disadvantaged by the high cost of marketing and shipping, making their business model challenging and ultimately untenable.

The report also found that multichannel retailers are better positioned for success, thanks to lower customer acquisition costs paired with organic site traffic and higher brand awareness.

"If you want to increase the traffic to your website, open stores," said Scott Galloway, founder of L2 and professor of marketing at NYU Stern. "High-end malls continue to experience growth in sales per square foot, making them an attractive option for evolved retailers looking for brick-and-mortar spaces."

Several features now being implemented by retailers include in-store pickup and returns for online orders, which drive additional sales as shoppers can spend up to 107 percent more than their original basket size, according to the report.

Digital shoppers report that traditional in-store experiences are the most important touch point for purchase consideration, according to the report. Nearly two-thirds of digital consumers cite the ability to see, touch and try merchandise as a main factor for preferring in-store purchases, while over half appreciate the ability to get products immediately. One-third turn to stores to be certain about the fit and suitability of items as well as in-person advice on fit and style.

The report was sponsored by Simon Property Group; the mall operator has been exploring ways to link the digital and physical to create more compelling shopping environments and experiences.

For more:
-See this L2 report from Simon

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