Why the internet giants are hitting the street

Online giants Amazon, Google and Facebook know that longevity means connecting with the physical world, and not just through a screen.
7 November 2018

Amazon’s multi-billion dollar purchase of Whole Foods laid down the gauntlet. Source: AFP

It used to be that ‘brick-and-mortar’ companies most successful and established in the physical world were, by and large, those that were the first to ‘go digital’ when the world wide web exploded into our everyday lives.

Two decades on, in a digital-first world that’s incubated the growth of online behemoths, it seems the reverse is now true.

Take Facebook. The social platform this week announced that it was opening its “first business pop-up concept” in nine Macy’s outlets across the US. The idea? To introduce 100 of the “most-loved” digital-native brands built on Facebook and Instagram’s network to a new audience throughout the holiday shopping season.

“The Market @ Macy’s helps both emerging and established brands reach new audiences by showcasing them in a physical space inside Macy’s,” explained Facebook in a blog post. “We know the power of connecting businesses with the people who love them most, which is why we’re proud to play a role in expanding the communities of these businesses to in-store shoppers at one of the most beloved retail stores in the world.”

It’s easy to shrug the move off as a publicity stunt— a bit of light shoulder-rubbing with the ‘people on the ground’ following a less than positive year— but underlying it is a serious bid among internet giants to seize market share within the physical shopping environment as consumers remain steadfast and stubborn in their penchant for the real-world retail.

Despite it being on a steady rise, e-commerce’s share of global retail accounted for just 10.2 percent of sales in 2017; it will still contribute less than one in five purchases by 2021. For online giants like Facebook, Google and Amazon, there is a massive opportunity in accessing offline retail for both commerce partners and advertisers, as well as to cut costs on returns, delivery and marketing.

This mindset was behind Amazon’s US$13.7 billion bid for organic grocery store Whole Foods last year, giving online Prime members access to exclusive in-store deals and free Whole Foods deliveries, and providing the springboard for a wider digital-physical crossover.

Now, Amazon has rolled out 4-Star Stores in three US locations, stocking items that have been rated four stars or above by its online users. Its recently-launched cashless Go stores, meanwhile, use sensors and cameras to track what you’ve put in your basket, with the bill charged straight to your Amazon account. That’s not to mention its lockers found in shopping malls and slightly more novel Treasure Truck.

In the world of online advertising, meanwhile, Google— which is forecasted to take over a third (37 percent) of digital ad spend in the US this year— is all too aware of retailers’ desire to grab market share on the street. Its lucrative suite of advanced ad tech tools now includes functions geared at driving foot traffic to brick-and-mortar stores, where the majority of consumers researching products on YouTube and its search engine go on to buy, while, in many cases, advertisers are able to target objectives such as physical store visits.

So, while it’s easy to write off Facebook’s pop-up stores in Macy’s as a customer awareness play, if we take a step back it makes sense in the wider narrative of the internet giant’s move offline. And let’s face it, after the year it’s had, and with active users on the steady decline, the social network certainly needs to break new ground.