Retail is going through a rapid transformation, driven by changing consumer habits, both captured and influenced by the rise of online commerce. While the American market is the bellwether of this global trend, China is catching up quickly. In these markets and elsewhere, distribution footprints are beginning to polarize around two distribution extremities: eCommerce and experiential flagship stores.
These formats are those most able to offer both a complete product offering and adequate means to lay out a Brand’s reason why. Flagship stores do so through prestigious locations, inspiring architecture, bespoke experiences, better-trained salespeople and services. The digital channel brings rich and fast-evolving content in many formats, connection to authoritative online social spheres, ever-more expected timeliness and convenience. Only those two formats can provide first-in-season access to new creations -increasingly doing so from the same stock pool.
In comparison, small and medium-sized monobrand stores, in second and third-tier locales, have less to offer on every aspect. As the preferences of shoppers continue to evolve, these stores are bound to generate increasingly disappointing experiences -and financial returns- if their value proposition is not significantly upgraded. While maintaining a physical presence in affluent communities may remain important for some retailers, smaller, undifferentiated locations will prove harder to operate profitably. Four-wall contribution may be lifted for some time by deflationary pressure on leases, offering temporary relief in an otherwise downward spiral. Recent closings of the Cartier Boutique in Palm Beach and the Ralph Lauren Store in Greenwich are high-profile illustrations of this trend.
Embrace Omnichannel Transformation. Can You Afford Not To?
To build a sustainable strategy, leaders must change their focus from retail distribution to the more inclusive notion of commercial client engagement in which eCommerce neither stands alongside brick-and-mortar-retail, nor is viewed as an additional store, albeit digital. Becoming omnichannel –a much used and abused term- is a matter of survival, and building a scalable operating platform to do so, is the key to the kingdom.
Channel integration initiatives done well, have already started to blur the lines between flagship and digital store, the two distribution pillars on which most of the engagement with Brands will eventually rest. Client acquisition and retention, width of assortment, availability of stock, sales and services are less and less tied to a single point of contact. This is because stores are progressively upgraded digitally (in-store selling and clienteling apps on tablets, eCommerce generating sales leads, support from contact centers…) and eCommerce increasingly leverages the physical assets large stores have on offer (full stock assortment, shipping points in city centers, reservoirs of unused staff capacity, pick-up, return and after-sales service points…).
At the end of this trend lies the concept of showrooming, in which a store is stripped down to its experiential part, with all things transactional handled digitally and remotely. Without venturing this far (yet), the technology deployed to augment stores already creates opportunities in fringe areas, such as outlets and pop-up stores. For instance, in-store digital sales (ordering from another store via tablet) can dramatically improve offerings in outlet stores, filling gaps in broken size runs and compensating for typically disparate product assortments. Tablet apps provide quick access to goods held anywhere in the network, offering a chance to close a sale where the client would have walked away. In-store digital sales also makes it possible to open pop-up stores almost anywhere, without a need to hold stock, other than samples to try on. For Brands, benefits include faster setup and dismantling, reduced shipping costs, better space utilization, lower risk of theft, loss or damage. For shoppers, this means surprising and more engaging experiences, greater convenience and choice.
Horses And Bayonets: Is Your Fleet Built To Fight Yesterday’s War?
In the inevitably omnichannel future, investment in stores must not be solely evaluated against value created on a four-wall-basis, even adjusting for brand equity building aspects. Investment decisions MUST assess the profitability that a store enables as a catalyst of distant interactions and sales, using digital extensions. Building upon the naval analogy of flag-ships, distribution centers and flagship stores are to client engagement what airbases and aircraft carriers are to deploying military might. The former offer scale and scope but are static and remote. The latter, although costlier, flexibly extend capabilities to critical theaters.
In crafting a lasting distribution strategy, trends must be extrapolated over at least five years, not only to account for the length of store leases, but also to assess the future weight of each channel in a market’s channel mix. Increasingly, decision makers must account for de-coupled channel growth trends in answering two important questions: “Where will sustained online growth and subdued retail growth eventually take my channel mix?” and “Will the investments of today create a distribution matching the expectations of clients tomorrow?”. In the next decade, retailers’ fortunes and woes will depend on finding right answers to these questions.
BALLY Chief Client Officer & VP Global Omnichannel
More from OPPORTUNITIES
The new Omega Watches capsule collection for both men and women is manufactured in Italy in association with Marcolin Eyewear. …
Hilton and American Express to donate 1 million rooms to medical professionals During COVID-19 Crisis
Hilton and American Express today announced that the companies, in partnership with Hilton’s ownership community, will donate up to 1 …
To counter the impact of the virus on sales to its retail partners, Patek Philippe has granted authorized dealers, such …