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E-commerce is Non-Existent Without the Physical World – How and Why?

Randy RayessRandy Rayess

What you do in the virtual world – how you search for information, what you shop for, what you read – is largely, if not completely, influenced by where you live. Believe it or not,

but the online decisions of your customers have little to do with their taste and a lot to do with their geographical location. This is one of the key takeaways from Wharton Professor David Bell’s forthcoming book, Why Location Is (Still) Everything.

“Location is still everything. However, it’s not about the location of your physical store, but the location of your customers relative to the options they have” Bell said in a recent talk held at a NY Speaker Series. In his book he touches upon various concepts of location based marketing and explains why still only three things matter in retail: location, location, and location.

While e-commerce may be taking over the offline retail world in several aspects, it is wrong to assume that physical attributes have absolutely no impact on virtual sales. You can’t treat online and real worlds separately. Physical circumstances largely influence online decisions. Here’s one example Bell quotes in his book: Amazon’s Jeff Bezos’ first customer lived 50 miles away from a physical bookstore. But he turned to online shopping because of his offline conditions. This tells the tale of online-offline connection and emphasizes on the need for location marketing.

Revealing his valuable insights about the influence of location on online purchasing decisions, Bell has created an acronym called ‘GRAVITY’. “You need to have an acronym for a popular book”, he says. Each letter here denotes a factor which relates the online and offline worlds, and influences your customers’ online behaviour.

Let’s understand this acronym in detail.

Geography: Where your customers live is crucial in understanding their online behaviour. Geography isn’t something random. It has a specific structure. How cities develop and how people with similar demographic information and interests share the same geography is a matter of importance. And understanding this helps in establishing a good foundation towards predicting your customers’ online decisions.

Resistance: This notion talks about how internet has helped consumers overcome a certain friction. It can either be search friction (inability to find information about a particular product) or geographical friction (when there exists a physical distance between the consumer and the product). Online stores can easily address search friction. Geographical friction however can be challenging. For e-commerce companies geographical friction is more than just prolonged shipping time or delayed delivery. It is possible that your customers want to buy online products originating only from neighboring countries, as adjusting to their language and demography is easier and their tastes are also somewhat similar.

Adjacency: Word of mouth is the best marketing medium. Consumer base grows in pockets and what people are saying about your product impacts this growth. When a friend talks about a product, it is more likely to influence your customer than any online search. And if an influential customer is talking about your offerings, adjacency effect gets doubled.

Vicinity: Internet brings together people from diverse locations but similar interests into the same online vicinity. Bell explains this through the ‘Spatial Long Tail’ concept. He explains, initially 80% of product acceptance comes from geographically proximate places, while the remaining 20% comes from the vicinity. Moving on, this ratio changes to 50:50. So, e-commerce may start in any location but gradually it will gain traction from people with shared preferences, even if they are spatially diverse.

Isolation: Isolation occurs in geographies with limited offline stores or with stores that are under-serving. This encourages people to shop online. A beer store in Canada is more likely to stock ales or pale lagers than Cigar City. Thus, a Canadian customer who wants Cigar City is more likely to buy it online than going to Miami to get it.

Topography: Here Bell highlights the co-existence of the online and offline worlds. Thanks to this ever-evolving landscape, the two worlds are merging together. The tremendous success of social media is an apt example which explains how we are sharing our real world experiences with the virtual world. And so are smartphones. Today, if we own a smartphone, we can carry the virtual anywhere with us. It is this connection between the online and offline worlds that e-commerce brands must leverage.

You: This is a no-brainer. Here Bell drops the ball in your court and lets you decide how you will leverage the above principles to grow your e-commerce brand.

Moral: Geography isn’t something insignificant. It is a key factor that’ll decide the fate of your online business. You must understand the offline preferences of your customers if you want them to make you their online preference. As Bell has rightly said, “When you go into the online space you have to remember that people still live and make choices in the real world and until we understand this real world environment we will not get much success in our online operations“.

CoFounder at VenturePact Passionate about software, marketplace startups & remote work. Previously at SilverLake Partners, Ampush and Wharton.