An overview of five local commerce models

E-commerce makes things hard for brick-and-mortar retailers. To improve the customer churn rate, various local commerce approaches have been developed to connect brick-and-mortar businesses to the internet and vice versa. The concepts range from “digital store windows“ via apps all the way to online marketplaces. All of these solutions pursue one common goal: they want to encourage customers to increasingly shop locally without the need to pass up the usual convenience of the internet as an information resource.

Despite the obvious advantages of online ordering, customers are now returning to local retail shopping again. Personal consulting and service, trying on items and examining products in more detail are once again becoming popular. Something Google has been promoting for years in SEO is finally taking hold: the so-called ROPO effect (research online, purchase offline). A majority of purchase decisions are made online and implemented offline. Now smaller local retailers are also taking advantage of this effect. According to a study by the ECC Köln (E-Commerce Service in Cologne) and eBay (1st Quarter of 2016), approximately 80 percent of surveyed retailers believe local online marketplaces offer great opportunities to be present online without operating their own online store.

That’s why we chose five local commerce projects and took a closer look:.

The “eBay Mönchengladbach“ project is based on a research collaboration between eBay, the Business Development Corporation Mönchengladbach (WFMG Wirtschaftsförderung Mönchengladbach) and the eWeb Research Center of the Niederrhein University of Applied Sciences. Local store owners specifically offered their range of products alongside their current distribution channels on the eBay online marketplace. Ordered items could be either picked up locally at the vendor or were conveniently delivered to the customer’s home. The project ended in mid-2016.

The visibility of the campaign was increased by the collaboration effort. What’s more, the local retailers received support from the Business Development Corporation (WFMG), for instance by creating professional photos. If required, they also received a starter kit consisting of an eBay consultation, 12 months of free use of the basic store as well as special conditions for the Inventorium iPad POS system with inventory management and Click & Collect integration.

In reference to Professor Gerrit Heinemann, Director of the eWeb Research Center, in February, the neuhandeln.de portal already reported that this project revealed that customers do not specifically search for local businesses online. The majority of sales was made via the general eBay search function and not via the separate home page. In addition, those retailers who also offered shipping options were successful. It should also be pointed out that almost half of the 70 participating retailers had already been active on eBay beforehand. So it remains unclear whether eBay is a suitable local commerce platform since retailers are already able to utilize this marketplace.

LocaFox is the operator of perhaps the largest German platform (approximately 4,000 businesses) for products by brick-and-mortar retailers and supports consumers in their search for products in their surrounding area. On the LocaFox marketplace, customers are able to search and compare a variety of products, view at a glance which store nearby carries their desired articles and reserve them there for pickup. In Berlin, LocaFox also provides same-day delivery service and - in collaboration with the courier services Packator, messenger and Liefery- delivers ordered products within 90 minutes or during a preferred time slot to the customer.

Thanks to its own POS system, LocaFox connects brick-and-mortar retailers with the digital world. The LocaFox POS is inventory control, electronic cash register and eCommerce solution all-in-one and offers a direct connection to the LocaFox marketplace. In addition, retailers can also connect to other digital touchpoints via the LocaFox Cloud where customers can get information in shopping malls, for instance before making their purchases.

Locafox is a pure product search engine that ostensibly combines large retail chains which in turn operate their own online store. In doing so, this platform does not present a direct additional benefit for local independent stores (with no chain affiliation) and they are actually the focus of this local commerce debate.

Buy Local – Erlebe Deine Stadt eG (Experience Your City) is a nationwide and cross-sector collaboration of retailers, service providers and craftsmen of a region and city and an umbrella branding image campaign. The goal is to support and shape life in the region. Those who want to participate pledge to abide by carefully examined quality criteria. The motto is not “to participate“ but rather “to do more“.

Buy Local also offers templates, guidelines and advertising material that give members the chance to advertise regionally or locally. Aside from that, members primarily also benefit from the following: on-site networking of members nationwide and cross-industry, their own profile page on the Buy Local homepage, various communication campaigns in collaboration with brand manufacturers and partners as well as political and media interest representation.

Buy Local is also intended as a pure network. The retailer’s dedication is important. That’s why the association also awards a nationwide seal of approval to identify recommended local marketing and distinguishes regionally rooted and active retailers. For consumers, Buy Local only provides a minor added benefit. What’s more, the search function needs some work. If you look for a specialty store in Bonn for instance, you will search in vain.

The online marketplace “Online City Wuppertal“, supported by portal provider atalanda, has been around since November 2014. Customers shop online at a local retailer or reserve products. They can subsequently either directly pick the items up locally or have them shipped by a local courier the same day.

Retailers present themselves in a so-called store window profile with attached shop function. For their online presence, some retailers only utilize the profile function. In addition, they benefit from a search engine optimized online platform as well as joint marketing, training courses and perks from partners like Inventorum as a supplier of point of sales and inventory management or the German Federal Association of Online Trade (Bundesverband Onlinehandel) which provides legal expertise.

Unlike the previously mentioned local commerce approaches, the local retailer is truly the focus in this case. The profile delivers all pertinent location-based information. Apart from store hours and addresses, customers also find information on parking or packaging services. Each profile features an individual design and comes across as authentic. Whether the online marketplace does its share in making customers increasingly shop at local brick-and-mortar stores is another story, but at least one is inspired to get to know the many personalities behind the profiles.

On April 23 and 24, 2016, the city of Durlach, the Gelbe Seiten Marketing Gesellschaft and the University of Media Studies (Hochschule der Medien) launched a project with an entirely different approach. Under the name “Digitales Durlach (Digital Durlach)“, the city became a playground for local retailers in a hitherto unique pilot project in Germany. Via the Gelbe Seiten (yellow pages) app, visitors who strolled the immediate vicinity on this particular weekend were sent special perks, campaigns or one-of-a-kind experiences by local stores on their smartphones.

To do this, retailers were equipped with geofences and beacons. They were able to determine individually how and when customers were being addressed. The way the offers were sent was flexible in its design and ranged from text and picture messages via coupons and tickets all the way to QR codes and links to the retailers’ websites. More than 5,000 messages were sent during this particular weekend, of which an average of 33 percent was being read. The project showed that location-based advertising for local stores offers great benefits, regardless of a company‘s size.

Location-based marketing provides a crucial benefit: retailers don’t necessarily need to operate their own store and are still able to attract customer into their stores with little effort. Compared to an online marketplace, maintenance is significantly lower and it’s also possible to make customers curious with targeted and always changing offers. The smartphone becomes the discount card, recipient of customized information and navigator through a small town’s shopping mile all at the same time. Always provided that the customer is open to the use of location-based services.

The aforementioned study by the ECC Köln and eBay once again illustrates the real problem with local commerce approaches in actual numbers: “67.2 percent view local online marketplaces as a tool to boost local retailers. Having said that, they don’t appear to be suitable throughout as a footfall generator for brick-and-mortar retail“. Retailers therefore ostensibly benefit from increased sales through online business. However, the actual problem remains.

Maybe the smartphone offers the bigger potential after all, as can be seen by the example of “Digital Durlach“. After all, retail is on the brink of mobile commerce since many areas can no longer do without the smartphone. That’s something company founders Timo König and Max Zähringer, who developed the social shopping app “Shoppen“ also know all too well. "Shoppen" creates a mobile shopping experience that is mainly used on the go. Thanks to the geolocation function of smartphones, “Shoppen“ identifies the user’s location and suggests stores and products available nearby. In turn, the offers can be filtered by preferences and favorite products. The app is scheduled to be available on the Google and Apple app marketplaces in October.