Research Highlights In-Person Retailers’ Advantage Over E-Commerce

A salesperson helps a customer purchase a bike

What is the future for traditional, in-person stores?

Department of Marketing Associate Professor Jonathan Zhang
Jonathan Zhang, Associate Professor of Marketing, CSU College of Business

That’s a question the marketing department’s Jonathan Zhang has been asking himself for years as he’s watched two conflicting trends unfold: traditional, physical stores have struggled while once purely online companies – like Amazon, Warby Parker and Wayfair – are investing in brick-and-mortar locations.

“Clearly, physical stores are facing problems, but at the same time they can deliver value that cannot be fulfilled online,” Zhang said.

To better quantify that value, Zhang and two fellow researchers from Amazon and Dartmouth College explored how consumers’ buying behaviors were shaped by their ability to examine and inspect certain types of products in person before making a purchase.

To do this, they created a scale spanning “shallow” inspection products, where a simple photo and written description can provide enough information to make a purchase, all the way to “deep” inspection products that require more thorough examination and trial, like a pair of shoes, clothing, perfume, furniture, or novel electronics.

The researchers partnered with a nationwide outdoor retailer that has over 100 stores in the United States to classify the online and in-person purchases from over 50,000 customers according to the deep-shallow scale. Then, using statistical models and lab experiments, the researchers analyzed how individuals’ purchasing habits changed over time.

“Through all these rigorous methods, we discovered the very convincing evidence that if a new customer buys their first product as a deep inspection product in the physical store, that experience leads to more frequent purchases, higher value purchases, higher learning about the retailer’s product assortment and the retailer’s overall quality, and a more engaged, more profitable customer,” Zhang said.

The team’s findings confirmed their hypothesis: Customers who have a tangible, multi-sensory physical interaction with deep products not only gain more knowledge about what they’re buying, but also learn more about the retailer’s quality, value and broader product offerings.

“That learning generates favorable attitudes toward the retailer,” said Zhang, which ultimately leads to deeper engagement with the company.

“Marketers need to fundamentally appreciate that customers are human, they need vivid experiences, they value that.” 

— Jonathan Zhang

Key Research Findings

Retail manager and employee look at a tablet inside clothing shop
U.S. e-commerce grew by 40% in 2020 to over $860 billion, rising to make up 21% of total retail purchases.

Incentivizing new customers to seek out a deep product in-store as their first purchase from a retailer resulted in:

  • A 12% increase in re-patronage intention compared to all other product/channel combinations
  • A greater likelihood of that customer buying deep products in the future online, indicating that they generalize trust across channels
  • A greater likelihood of buying other deep products online, indicating that customers generalize their trust of the company across product categories

Encouraging existing customers to purchase deep products in-store led to:

  • Average spending per trip increasing by 40%
  • Long-term sales increasing by 20%
  • Profitability increasing by 22%

Recommendations for Retailers

Before focusing on how to enhance a company’s performance through deep product strategies, a baseline must be met, according to Zhang.

“Good general store management is critical,” he said. “That’s the basic prerequisite to fulfill the potential of the store.”

“Second of all, the store environment, the customer service, it has to be good enough for people to engage, otherwise you’re better off not having a store,” said Zhang. “Customers’ behaviors are dynamic, and their engagement and purchases with the retailer naturally wax and wane if not managed well.”

Research Suggestions:

  • Use an onboarding strategy for new customers that encourages their first purchases to be deep products in-store
  • If an online customer’s purchases are lapsing in value, promote deep products in-store
  • Encourage customers to physically engage with deep products through merchandising and training sales personnel
  • Managers should avoid blanket assumptions about inspection depth based on product categories because of the large variances between individual products
An older couple drinks wine in front of a laptop
Catering to customers’ desire to learn more about deep products through in-person experiences can help companies increase sales.

Zhang also encourages online-only stores to consider their options for engaging customers with deep product experiences.

“For instance, wine.com is an online-only retailer. It’s not as fun as going to the store. You get a bottle shipped to you,” said Zhang. “But what they’ve done in recent months is they’ve started hosting live virtual tasting events.

“You buy the bottle of wine in advance and the winemaker or a renowned critic will guide you through the tasting. As a company, you’re engaging your customers’ sense of taste, smell, what they hear and see. You’re making the experience more vivid and concrete and multi-sensory.”

A ‘Timeless’ Finding

The data the researchers gathered stretched as far back as 10 years, but their findings are corroborated by current shopping trends and offer insights into how retail habits may evolve.

“Using ‘old’ data, we’re able to predict current trends,” said Zhang. “And then using lab experiments, which were conducted in 2020, we were able to say, ‘Okay, here’s this trend that’s more or less timeless.’”

Drawing on experiential learning theory, which informed much of the researchers’ work, Zhang offered a final piece of advice: “Marketers need to fundamentally appreciate that customers are human, they need vivid experiences, they value that.”

In an age of rising e-commerce, this simple reminder could be key in reshaping the way customers connect with retailers and how companies work to create value through in-person experiences.