Update: Real World Is Still Important
- by Matthew Brodsky
Roughly 60 percent of the couple hundred alumni polled during a recent Wharton Webinar work at a company that started its existence selling products in the real world. As many as 26 percent said they work at a company that originated selling content in offline form. The remainder consisted of Whartonites who belong to organizations focused first and foremost on online products and content.
The Wharton faculty member presenting during the March 26 webinar—David Bell, the Marketing Department’s Xinmei Zhang and Yongge Dai Professor—was not surprised. After all, the title of his webinar was: “The Surprising Influence of the Real World on How We Search, Shop, and Sell in the Virtual One.”
And if you want just one off-the-cuff takeaway from Bell’s presentation, it’s that emerging innovations in mobile technology will not supplant brick-and-mortar businesses that sell goods and services. The best in new mobile, Bell said, will improve upon real-world businesses by providing more information. (Think Google Glasses.)
Bell had much more to offer than just that, of course. The gist of his webinar came from research Bell had conducted on two Wharton-related startups. The first is Diapers.com, part of the Quidsi online retail empire now owned by Amazon, and founded by Marc Lore, WG’07, and Vinit Bharara, C’93. The second is Warby Parker, the direct-to-consumer eyeglass brand that’s seen a meteoric rise since Neil Blumenthal, WG’10; David Gilboa, WG’10, GEN’10; Andrew Hunt, WG’10; and Jeffrey Raider, WG’10, founded it while on campus.
From Diapers.com, what emerged was just how important real-world isolation is in consumers’ shopping. The data consisted of two markets of equal size but differing in degrees of isolation—market A being relatively unisolated geographically (10th percentile on the “isolation index”) and market B being very isolated (90th percentile).
“What we found was actually quite profound,” Bell told the audience.
And that was: “Isolation offline becomes liberation online.”
Market B saw 50 percent higher category sales and 120 percent higher niche brand sales. Why? Simply because shoppers could not find the diversity of choices in the isolated market. The brand preferences in the brick-and-mortar stores were being dictated by the tastes of the majority.
“The practical implications of this were pretty straightforward,” Bell said. Use census data to identify ZIP codes that are high in geographical isolation and look to sell there.
The relationship between real world and virtual world becomes inverted with Warby Parker’s data—in which case virtual sales were improved through touch, taste, sound and smell realities on the ground.
As a primarily online retailer, Warby Parker from its start has confronted the problem that the Web fails to fulfill the touch-and-feel need of consumers. One strategy it’s employed to overcome this has been its innovative home trial program, whereby you can get up to four pairs of glasses in the mail to try on at your leisure. Another has been to open showrooms in cities like New York and Philadelphia.
Enter Bell’s experiment. He looked at data from two cities: one control city and another “treatment” city where a Warby Parker showroom opened. In the treatment city, sales went up 8.8 percent; Web sales rose too, by 3.5 percent. Sales from the home trial went down 5 percent, although the program’s conversion rate increased by 1 percent.
The takeaway for Bell is simple: “When you’re a virtual-world company, there’s a lot of good things that can happen when you go into the real world.”
Editor’s note: Watch Bell’s “The Surprising Influence of the Real World on How We Search, Shop, and Sell in the Virtual One” by following this link to the Wharton Webinar series sign-in page. The webinar, part of Lifelong Learning, is exclusive to Wharton alumni, students and staff.
For others—and for anyone who wants additional detail—please watch Bell’s Lifelong Learning Tour talk on digital marketing below: