A new reality requires new stores
Today, we’re seeing brick and mortar take a radically different form than it did before. So what’s the deal?
In Part 3, we uncover what’s changed, and how brands have reimagined the role of store as an entirely customer-centric experience since 2014.
2014 – Brick and mortar faces new forms of competition
2014 was a bewildering time for traditional brick and mortar retailers. Who could blame them? A multitude of new D2C brands and digital strategies for meeting new demands was altering a familiar recipe for success.
D2C retailers and early adopters of digital strategies were considered outright competition because of their role in lowering in-store foot traffic.
Among other reasons, these “competitors” were gaining ground because they could offer a more personalized shopping experience and path to purchase, thanks to their inherent access to precious customer data. This was especially true in China where many new, digitally-native retailers had skipped over a brick and mortar phase altogether – a cause and effect of mass Chinese online shopping.
The link between experience and revenue was undeniable, with customers who had the best experiences spending 140% more than those who had a bad or not great experience.
First attempts at a new in-store experience
It seemed that what brick and mortar needed was attention. Some stores started experimenting with tech to capture and sustain the shopper interest. Tech like iPads started appearing in stores, as did AR mirrors, digital screens, and other flashy initiatives.
Social media “shareability” became a priority in hopes of getting shares and starting to appeal to a younger tribe.
Retailers also tried to take advantage of the increasing number of customers using mobile devices while shopping. Stores began tracking and targeting customer foot traffic through their WiFi connected mobile devices, beacons, and Bluetooth to collect data and send targeted marketing.
But were these the initiatives that customers wanted from their store experience? For example, Deloitte found that retailers were overemphasizing features like store location and in-store wayfinding, which were more frequently utilized by “one and done” customers as opposed to those likely to become loyal.
Long story short, we’ve all seen the numbers since 2014 – brick and mortar, especially in the US and UK, has made headlines, and not usually in a good way. While not all the bad news can be attributed to one factor, it’s true that many who weren’t fast enough to move from product providers to experience curators have suffered the consequences.
2019 – Fewer items, but a better experience
Today, 61% of retailers continue to rank physical retail as their most important sales channel, with three quarters saying that stores are their biggest revenue contributors.
Why? Because stores haven’t died.
Successful retailers have repurposed stores to give shoppers experiences that compliment or enhance their online journey, or just aren’t possible elsewhere, and the importance of this enhanced experience continues to grow. Forrester Consulting found that businesses that invest in in-store customer experience have a 1.6 to 1.9 times higher YoY growth in retention, repeat purchases, average ticket amount, and customer lifetime value than those that don’t.
Plus, people will always want to try things on.
In a fully unified off- and online shopping experience, brick and mortar plays the role of integrating branding, product experience, offline services, consumer management, stocking, and logistics. Summed up – by adding entertaining, convenience, and reducing friction.
Entertainment is great, and convenience is even better
There’s no shortage of brands offering exciting brand immersive, and of course Instagramable (maybe consider TikTok?) experiences for customers in brick and mortar locations. Gartner also finds that by 2020, 100 million consumers in major markets will shop in AR both online and in store.
But by far, the most successful retailers will be those able to merge digital with physical to not only entertain but also empower customers in their purchasing decisions.
In its new 2,500m2 London flagship location, Adidas has incorporated more than 100 digital touchpoints (powered by green energy) that engage customers throughout their shopping journey.
Customers can customize designs, choose products based on personal biometrics, access product information in changing rooms, and more. Store functions are further enhanced for customers who download the Adidas mobile app.
Nothing can replace the human touch (yet)
But even as technology continues to improve, 75% of customers will still want to interact with real people, especially in the luxury sector in which personal clienteling is especially important to these shoppers. According to GlobalData, between 2013 and 2018 people are visiting stores increasingly for inspiration, entertainment, and advice and less for browsing and making basic buys.
But even as technology continues to improve, 75% of customers will still want to interact with real people.
This means that while technology will certainly enhance the customer experience, brands can’t simply replace people with tech. If anything, tech like AI used to automate manual or tedious processes should and will allow for better and more customer-employee interaction.
According to Mercaux, 93% of surveyed retailers said that the most important future role for store staff will be facilitating customer relationships and building retail experiences, though 40% feel their staff doesn’t have enough product information to effectively do so yet.
Reskilling store staff so that they are more specialized, informed, and prepared for today’s customers is becoming a top priority for retailers, especially as emotional intelligence takes a bigger role and retailers are urged to put humanity back into the store strategy.
All-retailer, all-purpose brick and mortar
On the other hand, it hasn’t been just a matter of stores surviving. This is also a story of new players taking notice and placing their bets on physical locations, as well as others who are repurposing spaces for other customer-centric offerings.
As we mentioned in Part 1 and Part 2, some digital-native D2C brands that were able to survive on e-commerce alone five years ago have also recognized the need to invest in offline retailing to offer a full, seamless experience.
In addition to using stores to offer a personal and personalized touch, physical locations are helping large retailers when it comes to last-mile delivery and efficient supply chains. In China, this is huge, especially when many new Chinese retailers never had physical locations to begin with.
Even e-commerce giants like Alibaba, JD.com are expanding their networks of physical stores. The latter, for example, is using a variety of offline retail outlets instead of traditional warehouses, distribution centers, and delivery stations to cut out unnecessary steps, to reach customers across China in as little as 30 minutes. The network it uses includes 20,000 offline stores in 54 cities.
New shopping and payment methods such as “buy online, pick up in store”, Amazon returns at Kohl’s in the US, and “try before you buy” are also creating a need for immediacy and a physical presence for showrooming, returns, warehousing, and last-mile delivery. “Try before you buy”, for example, allows customers to discover a product, try it, scan it, and have it delivered to their home.
With the ability to cut down on inventory, size, and staff, brands can open physical locations with a much lower investment in the past, as well as open in more expensive areas.
It’s no longer a matter of debating the relevance of brick and mortar. While the role of stores has changed in the last five years, there are more reasons than ever to invest in offline offerings, specifically that of providing a fully customer-centric experience.
Those retailers that do it best combine digital and physical to give customers an incredible experience, be it through entertainment or ease, wherever they are on their journey.
Just how important is customer data to retailers? In Part 4, we discuss how valuable and powerful it is, and how far retailers are going to get it.
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