Small tech companies will be the next victims of brick and mortar’s collapse | Tech Industry
I’ve never used a OnePlus phone, but I’ve seen articles, photos, and plenty of positive testimonials over the years. OnePlus customers are said to be happy and loyal — but by tech industry standards, there apparently aren’t very many of them. Two weeks ago, OnePlus said that its latest phone sold a million units worldwide in 22 days, and that it was the fastest-selling phone in the company’s history. That sounds great, but it takes less than two days for Apple to sell a million iPhones.
A very low-tech reason for OnePlus’s low sales was buried in an otherwise high-tech story earlier this week: without a presence in retail stores, OnePlus has had problems getting new customers to test out its phones in person. To address that issue, OnePlus is now building relationships with European and U.S. carriers, whose brick and mortar stores typically represent a substantial portion of phone manufacturers’ sales.
I need to underscore the point above. A relatively small tech company, OnePlus, has spent years making products people like — while getting plenty of international media coverage — but the overall numbers aren’t huge. And the solution is increasing consumers’ opportunities for hands-on time at brick and mortar retailers.
You probably don’t need to be reminded that major brick and mortar retailers are currently in the midst of a continuing collapse, or told that relatively few people appear to be concerned about it. Thanks to the convenience of Amazon and other online retailers, our national response to failing malls and the collapse of historic chains such as Toys R Us, Sears, and Macy’s has been pretty close to “buh-bye, you won’t be missed.”
But there are increasingly signs that they (or at least some of what they offer) will be missed once they’re gone. There is no adequate substitute for being able to physically handle and try out a new phone for yourself before making a purchase — though Samsung is working to change that with augmented reality. In some cases, the presence of an informed salesperson can actually make the difference between you getting the perfect outfit, computer, or food for your preferences, or winding up stuck with the wrong item.
In an interview at Cannes last week, Apple’s retail chief Angela Ahrendts said that she believes McKinsey consulting forecasts that 75 percent of business will actually be conducted in physical stores five years from now, even though 75 percent of people will shop online. Some people view this as a given, but I’d suggest otherwise: at the rate things are currently going, rising minimum wages, interest rates, and prices may mean some small retailers — and big ones — won’t necessarily be able to afford to operate physical stores five years from now.
That will disproportionately hurt small tech companies. It’s one thing to be Apple, which could still outsell OnePlus even if Best Buy, Costco, Target, and Walmart all went out of business, thanks to its own 500+ retail locations and carrier stories. Apple’s selling premium products, has flexibility in pricing, and can roll with pretty much any change in the broader retail environment. If more sales shift online, it’s covered. Ditto if local sales increase; it can just hire people away from failing competitors.
Without some sort of local brick-and-mortar safety net, however, smaller tech companies are going to be in trouble. They’ll be dependent entirely on online sales, a market that’s only becoming more crowded and hard to stand out in every day. For software companies and service providers, YouTube videos or in-home trials may compel purchases. But for hardware companies, like makers of clothes, foods, and other things that are really best experienced in person, making a smart purchase choice online is not that easy.
Although I’m a technology journalist, I live near Buffalo, New York, where three separate malls are all in the process of failing. When I was younger, I might have viewed their troubles as a victory for the internet, a platform I’ve championed for my entire adult life. Age and experience instead make me wonder what will fill the enormous holes these retail spaces are about to leave in our towns and local job markets.
I don’t claim to have the answer, but unless something changes, I’m pretty sure that virtual stores are not going to be enough to fill those gaps. And without real stores, fewer people will have the retail jobs or money to purchase the next round of innovations. It’s a dangerous cycle — and one that needs to be repaired before it’s too late.
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