How Can Physical Retail Thrive in the Era of E-Commerce?
As many industry observers have noted, consumers no longer say they’re planning to do some “online shopping”; it’s just “shopping” these days.
However, if you want to understand people you should pay attention to their actions, not their words.
Sure, people no longer have a firm linguistic demarcation between online and offline shopping, but they do maintain an important behavioral distinction between them. Otherwise, we’d all be doing our grocery shopping online. As Amazon has found out, we want more than just convenience and a few product pictures when it comes to choosing our vegetables.
Moreover, while e-commerce continues to eat into the sales of physical retail stores, it still only accounted for 14% of total global retail sales in 2019.
Technology, often blamed for the downfall of physical retail, can in fact rejuvenate the industry – if it is used to accentuate retail’s enduring strengths. More importantly, technology can help address retail’s eternal weaknesses and help solve genuine consumer problems.
For example, the three problems I’ve outlined below.
Epsilon research found that 31% of customers are satisfied with the personalized service they receive when shopping in physical stores. That’s not great, but it’s a good deal higher than the 14% who said the same about online shopping.
Technology will help improve e-commerce’s satisfaction scores. Why shouldn’t the same be the case for the in-store experience?
We shouldn’t replace store assistants with robots (not yet, anyway); instead, we can arm them with the data they need to provide a better service. Some companies are acting on this insight today.
Canadian menswear retailer Frank And Oak started out online, but has since opened a range of ‘brick-and-mortar’ stores. When a frequent customer approaches the store, a beacon alerts store members and they can prepare a cup of coffee for him. Once in the store, they can use the customer’s historical data to make product recommendations.
Frank And Oak is following a well-trodden path; many digital-first retailers have moved into the ‘real world’ of stores in the past few years. But where others have done so with a lack of imagination that belies their self-appointed ‘disruptor’ status, Frank And Oak excels is in its understanding of the interplay between its online and offline presence. There is little point in using both for the same purpose. If it is all about cold, hard transactions, e-commerce will take the sales and the stores will become redundant.
The store is a place to try on new outfits and generally pass some time browsing. The customer may end up making their purchase online in the end, but the company is focused on overall sales. Physical locations can make a significant contribution without closing every sale they begin to nurture.
A number of other retailers have tapped into this shifting relationship between the physical and the digital, by providing the option to buy online and collect in-store. This addresses a weakness of e-commerce; all of its convenience comes at an environmental cost.
The consumer journey is always changing, but it contains the same desires and requirements along the way. Stores and websites can adapt to cater to these needs and reap the rewards.
Helping Customers Buy Stuff
Most articles about the future of in-store retail focus on the high-tech gizmos that make Amazon Go look like a medieval haberdashery.
Robots will roll through the aisles, inventory will manage itself, and we will only need to show our faces to the cameras to make a purchase.
It all looks exciting and it certainly makes the retailers feel good, but is this what shoppers want? Fortunately, some stores have taken a more judicious approach.
I’m spending a bit of time in Seville (somebody has to, eh?) and Dia & Go shops have popped up through the city. Dia & Go began as a small trial in Madrid in 2018 from the supermarket chain Dia, but its instant popularity proved the consumer appetite for the concept.
In essence, they are small stores with self-serve stations and a frequently-updated selection of fresh food options.
These stores are instructive; not so much for the technology they have implemented, but rather for the technology they have removed.
Dia & Go introduced China-style facial recognition technology in two stores in 2019, to deliver personalized recommendations and seamless checkout for customers. However, they found that the technology didn’t provide value for money and, in some cases, simply didn’t work that well.
As such, they pursued other options, including membership cards that collect data on shopper habits and send out vouchers via a mobile app.
The stores attract a younger audience than other supermarket chains and they see cafes as their core competition in inner-city locations. The ‘experience’ in each city is adapted, based on how shoppers use the stores.
For example, customers in some places want to squeeze their own orange juice, others want sandwiches and coffee. This insight can then inform the layout of the stores’ wares. Dia & Go’s technology resides in the background, for instance in inventory management and customer feedback collection. This helps to keep a lean quantity of stock on the shelves, too.
There are over 60 Dia & Go branches today and the company continues to convert its older stores to this Millennial-pleasing format. It has bucked the trend of high-street decline by using technology to deliver what the customer is really looking for. In this case, they want to buy some food and get on their way.
How innovative. It might just catch on.
Finding the Right Product
We have all experienced decision paralysis when shopping. There is an abundance of options and little guidance on what to choose. Sometimes, we simply don’t make a choice at all.
Shopping online can be bewildering and perplexing, but it is still easier to click around the aisles than it is to walk them.
Online retailers like menswear company Thread use artificial intelligence to curate a feed of recommendations for each shopper, which certainly seems like the future of online clothes shopping. If this is indeed the age of assistance, brands should use our data to be genuinely helpful.
Back in the offline world, we can of course ask a store assistant for this guidance.
There are two mindsets in which we approach this scenario: open and closed. In an open mindset, we are receptive to ideas and we don’t entirely know what we’re looking for. This would encompass the Frank And Oak example above. In a closed mindset, we just want to buy something and move on. For this, see Dia & Go above.
The new Adidas LDN flagship store in London manages to cater for both very effectively. I paid a visit when it opened, to see what all the fuss was about.
For the casual browsers, there are selfie opportunities, giant screens, and tablet-wielding shop assistants everywhere. I spoke to one of the latter and he told me that there are 11 recycled plastic bottles in a pair of Adidas sneakers. I asked if that number fluctuates much and he said, “Depends how big the shoes are, mate. Bigger shoes, more bottles.” Fair enough.
For the no-nonsense shopper, the Adidas app offers the option to have items delivered in the requested size, wherever the shopper is in the store. There is also a running station to try out new sneakers before purchasing, which provides feedback on how well the product fits.
Technology puts the shopper in control of their interactions with both products and in-store staff, while also helping them make better decisions.
The main question facing retailers when considering their stores is, ‘Why would my customer visit the store rather than buy online?’
There are nuances to this blunt question, however. A slide or a virtual reality headset may make the customer visit the store, without having any impact on their proclivity for making a purchase.
Technology offers the opportunity to build on the reasons people visit stores, while also creating new roles for these physical spaces. It’s not that people don’t want to shop in stores; they just don’t want to shop in boring stores when the online world offers the same products with added convenience.
A new crop of retailers is finding that technology needn’t take center stage to play a pivotal role. Often, it has the biggest impact in the background, allowing customers to have the sensory experiences shopping has always been about.