Amazon opening a brick and mortar store in Manhattan is being treated today as major news. However, the real news may be why it has taken them so long to follow in a tradition a shopper can experience walking down the hallway of any shopping mall or major airport terminal. While some analysts are attempting to make a trend story out of a dot.com retailer going “brick and mortar,” the fact that “brick and mortar” has been a term for nearly 20 years is evidence the concept is well-worn.

It works like this: (1) Merchant starts small, perhaps with one location in a place you’ve never heard of, say, Freeport, Maine. (2) Merchant becomes popular and starts sending customers a print catalog (direct marketing), or, these days, sets up an online store (ecommerce). (3) Merchant has stores in every mall and airport in the world (brick and mortar).

In retailing, they have a term for this: “multichannel marketing.”

Examples of direct marketing retailers who have gone multichannel

For well over a century, retailers that began as direct marketers with no, or perhaps one, physical locations have used the brand, products and customer data they developed “offline” (even when that line was a phone or telegraph) as the foundation for rolling out national and international networks of physical locations.

Here are just a few of the endless list of familiar retail brands that started out as catalogs:

• Sears. After starting a catalog to sell watches, Richard Warren Sears teamed up with Alvah Curtis Roebuck to bring a merchandise and supplies catalog to those in rural areas (who had previously had to rely on local stores’ high prices and credit). In 1925, they opened their first brick and mortar location in Chicago.
• Victoria’s Secret. When Roy Raymond felt embarrassed buying his wife lingerie at a department store, he began researching the lingerie industry. In 1977, he opened the first store in San Francisco and began shipping the now-infamous catalog. The business boomed, thanks at first to the direct marketing. Now, their stores can be found in malls worldwide.
• Williams-Sonoma. After spending time in France and falling in love with French cookware, Charles E. Williams built (yes, built) his first shop in Sonoma, California in 1956 and began selling the (imported) French cookware he’d fallen in love with. The store was an instant success and he moved it to San Francisco in 1958 and, at the behest of a customer, began a mail-order catalog in 1971. The rest is direct-marketing-to-brick-and-mortar history
• Cabelas. Dick Cabela purchased some fishing flies at a furniture show in Chicago in 1961 and decided he wanted to sell them. When a local newspaper ad only turned up one customer, he created an ad in a national sporting magazine and soon customers were hooked (okay, last pun). He grew the business by including a Cabelas catalogue with each order–a basic, “Here’s what else you can buy from us!” Today, Cabela big boxes are all across the U.S.

Reasons direct-marketing to multi-channel marketing works

This transition uses the value of the brand earned in print or online as a foundation on which to build a physical store. Once you prove success in a new channel, scaling the concept requires time and money–either both or lots of one. Customer data captured through direct- and ecommerce retailing provides a roadmap to where customers are clustered.

Most important reason: Brick and mortar stores are the 800 lb. gorilla in the China Shop. While growing rapidly, online commerce is still small when compared to the revenues generated annually by physical retailers.

Aren’t savings on shipping and returns an incentive for Amazon to open physical stores?

As we noted yesterday, that is one of the reasons some analysts were pointing to. However, any savings in shipping and returns that Amazon may recognize by opening a physical store will likely be negligible when you factor in the cost of running a store in downtown Manhattan. Besides, one of the foundations of Amazon’s disruptive business model is based on the theory that low-prices are the benefit of not having physical stores.

How local merchants respond to challenge of direct-marketers turned local competitors

This is pretty simple: They continue to do what they’ve always done. They know where they are and who they’re selling to. Local merchants should take advantage of their knowledge of and connection to the neighborhood. Small retailers need to focus on serving their network of loyal customers.