How can brick-and-mortar stores evolve?

Blog Melle de Ronde | 06-04-2018 Retail

Over the past decades, we have seen incredible changes in the way consumers are shopping. New digital retailers have been moving into traditional retail territory, and traditional shops and department stores have been hit hard as a result. We have seen closures of big department stores and smaller boutique chains, and industry analysts have been sounding alarm bells for quite some time now. Some even speak of a “retail apocalypse”,1 referring to the closing of a large number of retail stores in the 2010’s, with an expected peak in 2018.2 Nearly two dozen major chains including Walgreens, Gap, and Gymboree have already announced plans to close more than 3,600 stores in 2018, and many more announcements on closures and bankruptcies are expected during the year.

While these are grim figures, they do not signal the end of brick-and-mortar retail. Bloomberg stated that the cause of the retail apocalypse “isn’t as simple as Amazon.com Inc. taking market share or twenty-somethings spending more on experiences than things. The root cause is that many of these long-standing chains are overloaded with debt—often from leveraged buyouts led by private equity firms.”3 Forbes has said the media coverage is exaggerated, and the sector is simply evolving.4 The most productive retailers in the US during the retail apocalypse are the low-cost, “fast-fashion” brands, such as Zara and H&M and dollar stores such as Dollar General and Family Dollar.5

Still, the main factor cited in the closing of retail stores is the shift in consumer habits towards online commerce.6 Holiday sales for e-commerce were reported as increasing by 11% for 2016 compared with 2015 by Adobe Digital Insights, with Slice Intelligence reporting an even more generous 20% increase. Comparatively, brick-and-mortar stores saw an overall increase of only 1.6%, with physical department stores experiencing a 4.8% decline.7

Another important factor in poor brick-and-mortar sales performance is a combination of poor retail management coupled with an overcritical eye towards quarterly dividends: a lack of accurate inventory control creates both underperforming and out-of-stock merchandise, causing a poor shopping experience for customers in order to optimize short-term balance sheets8, the latter of which also influences the desire to understaff retail stores in order to keep claimed profits high.9

The sky is not falling

While the widespread closures of brick-and-mortar stores cannot solely be contributed to the rise of online shopping, we certainly can learn some valuable lessons from what makes online stores successful, and even transpose some of the strategies used to the analogue world. As Forbes stated: “The sky isn’t falling – the sector is just evolving.” The main question we should ask ourselves therefore becomes: “How can we evolve?”

Smart brick-and-mortar retailers have to redefine themselves in response to the added value delivered by online-only stores. They should seek new ways to engage customers, create better in-store purchasing experiences and offer new delivery models for online purchases. With the rise of online stores, consumers have come to expect a different kind of service and shopping experience. Seeking new ways to engage customers, forward thinking retailers are creating purchasing channels beyond the physical store, blurring the lines between online and offline. Such companies realize that in order to be successful, they have to offer a compelling customer experience. Price, assortment and convenience will simply no longer be enough.

Best of both worlds

What customers are in fact looking for is the best of both worlds. A shopping experience that includes the convenience of the online and mobile world in conjunction with the tried and true experience of the physical shop. This omnichannel approach, allows consumers to first have the online browsing experience, and then follow up that experience with the option to purchase in person. Retailers looking to combine their online and offline presence face the challenge of creating an experience that feels seamless to customers, no matter how they access it. Consumers are expecting to be recognized and treated as individuals, with their preferences and shopping carts available everywhere in the journey.

This does not mean that we can simply build a digital storefront to accompany our brick-and-mortar stores and hope customers will make the necessary connections themselves. For a true omnichannel experience, the channels we use have to be integrated, and the data we collect on all the customer touch points has to be instantly available throughout the entire customer journey. At the same time, all the complexity this entails, has to remain hidden for our customers.

Embrace the future

The technology for bricks-and-mortar retailers to move smoothly into e-commerce without a huge disruption of their business models is well-established, but it is also now easier than ever to make it work both online and offline, whatever the size of your business. Retailers just need the vision to embrace it and move forward.

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