For almost a decade now, many of the online evangelists have been predicting the demise of the brick-n-mortar stores, saying everyone will be shopping online and no one wants to go to a physical location anymore. The odd thing happened on the way to the internet, many of the new, hot social media and online properties need the physical stores for them to stay in business. They are extremely dependent on brick-n-mortar stores for them to serve a purpose and generate revenue. As one of my colleagues has pointed out, “The value of these online properties is the effectiveness to drive customers to physical stores.” Well said. Here’s a brief rundown of a few examples:
• Groupon – If you don’t know, this site offers deep discounts to customers from local merchants if enough customers sign up for the offer. Groupon doesn’t work if there are no stores to give these offers and no locations where customers can go. Without brick-n-mortar, there is no need for Groupon. Also, without local stores paying the fees, Groupon generates no revenue.
• Foursquare – It’s all about check-ins and special discount alerts. Again, without physical stores to check in at, Foursquare’s appeal is drastically cut as well as their ad revenue. Sure, you can still check in at your friend’s house or a park, but neither of these will pay Foursquare a fee for having people check in there.
• Yelp – Yelp and other local-based search sites are completely dependent on physical stores existing. Without them, there is no need to see where are the cool hot spots in NYC, Dallas, or San Francisco. Again, they make their money through “advertising plans” that are paid for by local business.
• Google & Facebook – Yes, even the titans of the internet are partially dependent on physical stores existing. These are the very ones who pay for all of the text ads. Of course, Google and Facebook are more insulated than most others because search for online businesses is also a big part of their revenue stream. But, without these small local businesses spending their $300 – $500 a month on text ads, all search companies will take a hit on their balance sheet.
What is most interesting is as the online experience is going more mobile with smart phones and tablets, such as the iPhone and iPad, brick-n-mortar becomes more important to the business model of these online only ventures. People now use their phone to find a physical store or see what specials are there, more than they use them to search for e-commerce purposes. People still want to go out and experience shopping. Many things just don’t translate well through e-commerce. Would you spend $12 on a new pastry concept you’ve never tasted or even heard of? Would you buy a brand of shoes online you’ve never had on before and trust that the color you see on the monitor is accurate? Shoes need to be worn to see how the fit and comfort is. These are just a couple of examples of why many people still want the real-life experience of shopping at a physical location.
Next time you hear someone pronounce the end of brick-n-mortar, you can bet they won’t be from one of these social media companies who depend on these stores for their reason to exist.