The consumers’ next steps in the retail space…
There is no questioning the rise of the online dominance within the retail space. The far superior customer value proposition is unmatchable. Through greater pricing transparency, product knowledge and convenience, this purchase channel lends itself to an optimal way of shopping. As David Kelnar flagged in his post “Respect your elders and five other powerful trends shaping consumer retail” “there were 34 billion visits to US stores in 2010. By 2013, that number had plummeted 48% to 17.6 billion, according to Elite Wealth Management”, assume the same rate from 2013 and 2016 and you are 75% down since 2010. Certainly worth a pause for thought.
The trend has led to (or stemmed from — depending on your view of the chicken or the egg…), the growth of; all-encompassing marketplaces, direct and unwieldy focused e-commerce start-ups and the multi-channel platform offering from large existing MNCs. Retail has been polarised between online and offline. Not only is this applicable to general, everyday purchases, but also the case for specific or more extravagant consumer purchases and therefore holds true across the vast majority of sub-sectors — from groceries, to books, to clothes and everything else in-between. Taking this at face value, it’s easy to fall into the trap of thinking online shopping is complete, exhaustive and self-inclusive, and why close to 100% of all purchases could be made via our phones, tablets or laptops in the near future.
Having said that, this is not currently the case and likely never will be. Both the rate of adoption of online purchases and overall percentage of £’s spent online vs. in-store appears to differ across such sub-sectors. Take for example, a door stop purchased from Amazon vs. a bespoke designer handbag from Gucci, the latter of which is far more likely to be purchased in-store compared to online*. The experience, the satisfaction and the overall enjoyment of purchasing a physical product, remains superior when purchasing an item so personal and rewarding. However inconvenient it may be, it’s simply not a valid trade-off in the eyes of the consumer. It’s about the brand and the product, regardless of what online discount or greater transparency can be achieved. This is a key differentiator and perhaps always will be. Additionally, brick-and-mortar will still remain profitable for the business — they can still brag about superior conversion rates from shoppers vs. the very weak single figure conversion online retailers typically enjoy (but that’s a different matter for a different blog post…)
It can be concluded that the retail space is somewhat divided. Divided between general vs. big ticket, medial vs. personal, ordinary vs. experiential, and ultimately, digital vs. bricks-and-mortar. Both of which still hold a place for fulfilling consumers’ requirements, the landscape of which is just radically different to what existed a few years back.
The question now is, to what extent will the downward trend in footfall continue and where exactly is the floor of brick-and-mortar shopping. How resilient is the experiential play for in-store shopping and if this creative destruction continues, what will the landscape look like in the future in a raw, percentage split of total £’s spent online vs. in-store? Does the experiential shopping still have longevity or will it continue to fade into history?
With the caveat of not making the above appear like a childish rhetorical question, the answer is actually quite straightforward…no. And neither will the continued polarisation of online vs in-store. Simply put, retail is being hit by rapid and exciting technological development — other tech verticals, which exist beyond the mainstream retail space, which come in the form of the “Realities”, both Virtual and Augmented**, and Beacons (or more likely IOT).
Starting with the latter, Bluetooth powered beacons and trackers remain the next step for in-store interaction. They allow the ability to understand customer movements and suggest personalised offerings. Despite limited rollout to date, the success is likely to be high. There are limits to scale and adoptability such as single app downloads and overall personal security issues will have to be ironed out. But the pairing of smartphones with bricks-and-mortar seems like a harmonised, customer enhancement. However, it actually may be superseded by tech before the rollout goes mainstream. The most important thing is the role beacons can play in connectivity only being picked up by the wider IOT and lead to greater interaction and connectivity across multi-platforms and multi-avenues of life. The big data advancements and growth of AI and Bots, will only help refine the quality of customer interaction and the engagement on a store level basis.
The former has been talked about for some time now with early development to date. Whilst AR might be more prominent or practical beyond retail, perhaps it is VR that could actually take the bricks-and-mortar by storm. Either way, the enhancement of the experiential avenue, will likely be the future of our in-store experience. Whether this is AR through smart phones or VR through headsets, the consumer interaction can be all forms on shop floors, dressing rooms or even shop windows. The start of it will be integration into the store, but perhaps the VR/AR devices might actually soon be the only items in the store, either way enhancing customer integration and experiential behaviour to new heights. It’s worth flagging that the expensive hardware is far more likely to be installed in-store as opposed to customers buying their own and interacting remotely at home, and defeating all hopes for bricks-and-mortar shopping. Unless the reality of Ready Player One comes to fruit sooner than expected…
These are by no means exhaustive options on how tech will continue to shape the retail world but merely two prominent ones, which at least in the near term (relatively speaking!) will transform the way we shop and in turn, slowing or perhaps reversing the current downward trend in footfall. The continued separation between the current either or option? No — instead convergence and integration of channels. The very definitions of online and in-store will become blurred, especially the £s spent between them, they should in theory act in harmony rather than competition. Start-ups are looking to capitalise and traditional retailers are ripe for disruption. Who knows which will be the next Woolworths, Comet or Blockbuster. Retailers will have to be both proactive and reactive to the tech developments and a superior product will have to be matched by a superior retail platform.*** The next retail wave will maximize profit, customer service and demand and provide a seamless integration between the two polarised options of today’s world.
*The caveat to this is of course there are numerous digitally fashion focused online retailers and growing marketplaces that have the strict intention on disrupting the fashion landscape, so perhaps my example might not hold true in the near future… examples include Fartech, Miinto, Lyst, Stylect Girl Meets Dress, ASAP54 and SecretSales to name a handful. A similar story in a bunch of other incumbent, big ticket sub-sectors where bricks-and-mortar typically prevails.
** This assumes that the AR/VR is adopted on an in-store basis; the reverse can of course be true. Online applications of this technology would have the consumer virtually engage with the retailer at home, from another physical location. For example, an ecommerce-only retailer could open a 3D channel by virtually recreating the benefits of being in a store, or they utilize it to enhance engagement and drive the experiential offering that the technology can provide, some start-ups are successfully exploring this, which again leads to convergence between the two different methods.
*** Worth flagging that some retailers (including Tommy Hilfiger North Face) have begun experimenting with VR in their stores.
