E-commerce complements brick and mortar retailers.

The meteoric growth of e-commerce has been heralded by some as a revolution that could end retailing as we know it. As the number of e-tailers continues to grow at breakneck pace, and as some analysts predict online sales to grow to as much as $184.5 billion in 2004, e-commerce poses tremendous challenges for traditional store-based retailers. But does the bell toll for brick and mortar storefronts with each click of a mouse? Clearly not.

Challenge and Opportunity

As fast as e-commerce is growing, it is not growing at the expense of stores - the two are growing together. In fact, store-based retailing has never been hotter, and leasing trends prove it. Every indication is that traditional retailers will continue to thrive in the era of the Internet.

The type of apocalyptic rhetoric we've been hearing about e-commerce is similar to the language experts were using a century ago, shortly after Julius Rosenwald, then the new head of Sears, launched the first Sears Home Catalog in 1895.

Like Internet retailing, catalogue retailing caught fire, with sales quickly skyrocketing by 68 percent in its first five years from $800,000 in 1895 to $11 million in 1900. There must have been many experts at the time who predicted that stores were becoming obsolete and that traditional retailing would never survive. Over time, however, catalog sales leveled off. Retailers adapted. The industry changed, and it not only survived, it thrived.

Another apt comparison lies in the situation we've seen in the past 20 years, as successful regional malls threatened urban shopping districts and experts foretold the death of downtown. Although downtown retail areas have gone through a difficult period, they have refurbished their streets, retailers have upgraded their stores and many downtowns have emerged as economically viable retail centers offering a different ambiance than malls, a more unique variety of merchandise and increased personal, individualized service.

Clicks and Bricks

Although the Web continues to grow as a potent force, as with every other phenomenon, there are limits. One of the reasons why traditional retailers have continued to expand side by side with e-commerce retailers is that the Internet is bringing new shoppers into the mix, attracting consumers who are often not targeted by many store-based retailers. For example, 49 percent of Internet purchases are made by male heads of households and 68 percent are made by customers who are over 40 years of age.

That is part of the reason why, even as Internet sales have increased, so have retail. sales in stores - giving traditional retailers reason to be confident about the future. In fact, superstore growth has averaged 7 percent per year over the past four years and is projected at 6.5 percent per year for 1999 and 2000. Same store sales are up by 5.9 percent. Major retailers are signing leases, committing dollars, and anticipating that their store-based volumes will grow significantly m the years ahead.

The Gap plans to increase it retail square footage by 20 percent this year. Ann Taylor will expand its Ann Taylor Loft concept, opening 30 stores this year, while Liz Claiborne expects to open 41 additional stores. Men's Warehouse has plans for 45 new stores. And RadioShack, operating in a category that is in many ways directly com petitive with e-commerce retailers, is rolling out new stores as well, with 20 stores coming to Manhattan alone.

But just as it would be wrong to proclaim that e-commerce is rendering stores obsolete, it would be wrong to conclude that store-based retailers can rest easy.

The Shopping Experience

According to Women's Wear Daily, which conducted a survey on the subject, "Women want more service in stores and easier ways to get through them. They also combine shopping with another fun activity, making the most of their spare time."

In answer to a question on how department stores can be improved, 30 percent of the survey respondents said they wanted more customer service counters around the stores. Twenty-five percent wanted more salespeople to help coordinate outfits; 16 percent wanted clearer signage; and 13 percent wanted more flyers or information on sale items. And 90 percent told WWD that they often go out to eat after shopping.

The shopping experience is key. Today's forward-looking retailers are listening to their customers to learn how to compete against the Internet. The immediacy of shopping in a store - being able to bring home your purchase right away - can never be duplicated online. If retailers meet the challenge of satisfying their customers with enjoyable shopping experiences, they will thrive. The Internet will not be a competitor, but a complement, helping them to build their brands and reach more potential customers.

That's why chains like Gateway, which sells computers (the biggest selling category online) by mail order and through the Internet, and LL Bean, a well-established mail order catalog retailer, are both planning to open retail stores. And established national chains like Home Depot, CompUSA and Office Max are responding to the interests of their customers by designing and opening smaller stores in certain locations as an adjunct to their superstore base in an effort to provide customers with alternative shopping environments.

Many store-based retailers are starting e-commerce operations of their own, securing their customer base by offering the best of both worlds, and possibly expanding their base by broadening their exposure. Brick and mortar retail will not only remain viable, but may actually enhance the franchise of traditional retailers. Pure Internet retailers may capture a few percentage points worth of the overall market within the next few years, but retailers who adapt and plan creatively, using new technology rather than competing against it, will remain extremely formidable.