Online shopping has steadily grown to become the world’s preferred purchasing method. There are so many reasons for this. There’s the abundance of information, the near-perfect transparency on all transactions, and the wealth of special deals available. And these only scratch the surface.

One thing is for sure. It’s all building up and putting intense pressure on in-store retailers to up their game, lower their prices and increase their stock.

But there’s only so much a store can really do. And so, sadly, this has already meant the end of many retailers like Tower Records, Circuit City and Borders. And it’s just going continue.

Unless, of course, in-store retailers find a way to innovate against this competitive phenomenon.

Retail undergoes disruption every 50 years or so anyway. Just look at the boom of discount chains like Kmart that dominates the 60s and 70s.

Moreover, change doesn’t exactly eliminate what came before it but rather, it reshapes the landscape and redefines customer expectations.

So what does this mean for traditional stores?

Perhaps the best thing is for every retailer to have an online alternative available. Almost all major stores are doing this now anyway, with independent stores quickly catching up. But even then, the practicality of physical stores is still undermined.

Perhaps, then, physical stores should be gone entirely. Perhaps chains should redirect their infrastructure resources to warehouses, where they can stock an every growing supply for their hungry online shoppers.

There’s a lot to consider here. And it’s not just the simple fact of having your stock available online that’s led to such strong competition between markets. It’s things like the vast and remarkably easy to search processes offered by experienced giants like Amazon and eBay, built in with ever-improving recommendation technologies, that entice customers and keep their interest (and wallets) at bay for hours.

Add to that the simple fact that online prices are often cheaper and easily compared, and you’ve got a hard sell for the in-store guys.

If there’s one thing that online shopping is famous for, it’s cheap prices and savings galore!

Half of US online retailers now offer free delivery, and many retailers are offering free returns. Profitability is therefore going to be a much harder ball game for the old school crew. If stores aren’t careful, the potential for increased market share granted by the infinite potential of online reach is likely to be mitigated by the decision to lower prices.

Physical stores will therefore need to come up with effective cost strategies to market their product online without hindering this promising competitive approach.

It’s worth looking into, I say.

And why? Well, simply put, social networking and online advertising has become the most popular form of marketing in recent years. Its comparably cheap, and also offers businesses great insight and transparency throughout. Look at Facebook’s marketing campaigns, for example. You can organise exactly who you want your ads to reach, how often and for how long, with the entire campaign visible in real time. Plus, you have the ability to back out at any time if things don’t go as planned. It’s a lot better than having to deal with television and radio contracts, which many traditional businesses still rely on.

The only challenge for traditional businesses, therefore, might be how innovative they can be with their advertising. Streamlined costs do mean a heck of a lot more competition – the entry barrier is drastically lower! Perhaps then, there is no straight answer on how to traditional stores can set themselves apart other than through the simple element of just being… different.

What do you think?

Is social media and online advertising the way to go? Should physical stores completely rebrand into online stores to survive? Or is there perhaps a hidden charm to physical shopping that the online experience may never match?