There have over the last few years been a number of commentators stating that with the emergence of eCommerce, bricks-and-mortar stores will soon be a thing of the past. While no-one can deny we are in the midst of a significant shift in the retail ecosystem, we believe these commentators to be wide of the mark.
Despite the attention that eCommerce attracts, according to eMarketer, 90% of retail spending worldwide still occurs via bricks-and-mortar stores. So why is this the case? From consumer insights research we have undertaken for our clients, the majority of shoppers prefer to buy items in store especially when new to the brand. While many consumers are learning about brands and new products via online channels, retail for many remains tactile. Online provides far greater choice, but customers cannot touch and try products before buying. Physical stores provide this solution while also allowing shoppers to have their purchase immediately.
Over the last few years, we have seen a shift in the consumer journey with the focus around two key areas – convenience and experience. As a result, the way shoppers use physical stores are changing, meaning retailers need to rethink their offline approach. It is no coincidence that the offline retailers who are struggling are those that have become complacent, spending little time trying to understand how the consumer journey is evolving.
A number of retailers have announced over the last year that they are closing large proportions of their existing store portfolios. While for some this is a due to the brand struggling, for others it is just a result of them being over-stored and readjusting their channel strategy. For most categories, brands are moving away from large numbers of small stores and instead focusing on larger stores in prime areas which are able to house the full product range and allow the customers to become immersed in the brand.
However, the issue that brands face is how they can maintain visibility and brand awareness with less brick-and-mortar stores? The solution may be to increase the marketing spend although, this may have limited success due to the fierce competition for eyeballs. With eCommerce providing the consumer with the flexibility of when and where they want to shop, retailers with brick-and-mortar stores need to give the customer a reason to go in-store by offering something they cannot get online. While the senior management of retailers may not like to hear it, stores can no longer be judged merely for their in-store sales. Stores are becoming an important marketing tool – a way of engaging with the consumer and making them familiar with the brand and product offering. An authentic, engaging experience will draw shoppers into the store. This will allow the brand to connect with the customer at a level that social media struggles. If stores standout and offer something different, they will also increase dwell-time providing a greater chance of additional purchases, whether in-store or online.
Consumers in most markets still appreciate the human touch. A big part of the customer experience going forward is a focus on relationships – the connection between the brand and shopper. This will help ensure the consumer keeps returning. Apple have brought this to the forefront of their physical store model with the Genius Bar, an additional service that keeps their customers returning to the stores. While online stores have live-chat, this is not the same as speaking with someone face-to-face. Some brands however have made the mistake of thinking that if they have a good customer service program, then they can charge a higher price for their products. This is not the case. When Best Buy entered the China market, they focused heavily on having knowledgeable staff but then charged a higher price for most of their goods. This turned off potential shoppers. With the rise of show-rooming, price has become even more of a battleground as the consumer can monitor what the competition are charging in real time.
While the location of a store has always been important, today, it is more critical than ever. Consumers are now the ones dictating where stores need to be located with retailers needing to make it as convenient as possible for their shoppers. This is especially the case when providing services such as click-and-collect.
Brands with an offline presence are at a real advantage due to their accessibility. We are in a time of a ‘demand now’ culture. Time is becoming crucial to the last mile and retailers are now competing on how quickly they can fulfill online purchases. Retailers with a bricks-and-presence can use these stores as local fulfilment centres shipping direct to their customers from the closest store. This approach gives the shopper flexibility allowing them to collect their purchase from a location and time convenient to them. Both options provide the consumer with greater convenience while providing the brand with a further direct connection to their customers.
While no one can argue that the emergence of eCommerce has had an impact on the performance of offline, the bricks-and-mortar store remains a key component of the retail ecosystem. The role of a physical store is evolving. While many retailers have for some time the misconception that you cannot be successful both online and offline; attitudes need to change or they will be the ones who will disappear. All touch-points of the retail experience play a key role to drive sales. The most successful retailers in the future will be those who implement an omni-channel approach where the channels do not compete, but support one another. This approach will not only increase sales, but boost consumer engagement, nurture customer loyalty, and enhance cross-selling.
James Rogers, Managing Director at CR Retail
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