The e-commerce store Jet.com is reported to be in talks to be sold to Walmart for $3 billion.
But the merger would also highlight a new trend that’s increasingly sweeping through the online commerce business: expansion to physical retail space.
“The future of retail is the integration of physical bricks and online clicks. This is true because the customer experience needs to address anywhere a customer wants to shop,” market research firm Cowen & Co.’s analyst Oliver Chen told Business Insider.
It’s unclear how Jet.com plans to leverage Walmart’s massive physical store network to grow its online business. But it’s not hard to imagine seeing some form of partnerships take place, like using Walmart as a pick-up location. And Jet.com certainly won’t be the only e-commerce company seeking opportunities from physical retail stores.
Amazon, for example, just opened its first physical bookstore last year and plans to have several more, possibly in other categories as well. Other companies that originally started online-only, like Blue Nile and Warby Parker, have also expanded to physical retail in recent years. Even smaller players like Birchbox have launched pop-up stores to reach customers in-person.
Amazon CEO Jeff Bezos said in a recent interview with Recode that having a physical store does help and could make a big difference for the customers.
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“There are a bunch of very small things and it makes a very big difference in the customer experience. It’s something that’s easier to experience,” he said.
Cowen’s Chen says the obvious benefit to having a physical presence is the reach and convenience. It gives companies another channel to acquire customers while providing a faster purchasing experience. “Opening stores can make sense as you try to broaden your reach,” he said.
It also doesn’t hurt that almost 90% of US retails sales still come from physical stores, while most people first search online before going to the store to buy the product. According to GameStop, a game retailer with over 6,000 stores worldwide, nearly 80% of its customers first search the product online before making the actual purchase at the store.
It still remains to be seen how the Walmart-Jet.com deal ends up helping either company. But Chen believes it could be a sign of more online stores expanding offline.
“The trend will continue because these brands are looking to offer the customer touch points across all channels. The store experience is critical to the brand,” he said.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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