Commentary

Brick-and-mortar retail isn't dead, it's just evolving

Vladimir Edelman, CEO and co-founder of HEROFi, lists out what physical retailers can learn from Amazon's success story.

Photo by iStock.com

September 14, 2018

By Vladimir Edelman,CEO and co-founder of HEROFi

The physical retail space is in a profound period of flux, with many questioning its future as e-commerce behemoths like Instagram-focused, fast-fashion company Fashion Nova take center stage. The challenges are a roll call of complex issues with no simple answers: consumer behavior has shifted radically and permanently; labor is getting more expensive and harder to staff and train; and "silver bullet" technology solutions pile up the anxiety and operational impact with often little or no results to show for it.

On the one hand, Amazon Prime Day, held this year in July, is, pardon the pun, a prime example of this mindset. The annual discount day for Amazon members has reached the heights of Black Friday and Cyber Monday, additionally driving Prime subscriptions to double in less than four years.

This is putting additional pressure on traditional retailers, with some, including JCPenny, Nordstrom, Bed Bath & Beyond, and Target, even promising to match lower prices found on Amazon. Not surprising given that during 2017's Prime Day retailers saw an estimated drop of nearly 1 percent foot-traffic at electronic stores and some 3 percent at department stores.

But, on the other hand, let's follow the (Amazon) money.

With so much success in the digital space, Amazon raised some eyebrows with its acquisition of brick and mortar Whole Foods, as well as the launch of its very own physical retail space and of course, the launch of Amazon Books.

But Amazon knows full-well that physical retail is far from dead. In fact, according to Scott Clarke, Chief Digital Officer at Cognizant, “America's top retail chains reported a net increase of 4,000 new store openings in 2017 and are projecting a further net increase of more than 5,500 new stores in 2018.” That coupled with recent government policies voting in favor of brick and mortar, or rather in favor of a more robust sales tax in the digital space, Amazon's “money moves” start looking less dubious and rather speak more of a brilliant read on the market. Afterall, 90 percent of sales still take place in brick and mortar stores.

So what can physical retailers learn from Amazon's success story? The takeaways are quite simple.

Software transforms retail

Who else remembers the infamous quote given by Marc Andreessen in 2013 citing the death of brick and mortar? Andreessen was dead wrong about his claim that 100 percent of our transactions will go digital, but he was dead on about software playing a massive role in the future of retail. Consumers are digital creatures — they are well versed in convenience and customization and expect the same in their physical interactions. Let your software transform your retail experience rather than annex it i.e., use your data thoughtfully.

Customer experience is key when winning the hearts and loyalty of consumers. Think convenience, consistency, customization, and contact. Nike by Melrose is a prime example of a brand really taking this lesson to heart, creating a local, digitized, customized, humanized and socialized experience for Nike fans and members of Nike Plus.

The micro trip matters

According to InMarket, a micro trip is a shopping trip that takes less than five minutes and a behavior that is becoming increasingly common as grocery stores add programs that let customers order online and pick up in person. Though traditionally retailers have been partial to longer shopping trips, micro trips allow brick and mortars the advantage of more efficient store formats and improved targeted marketing.

So how do you create a microtrip-friendly environment? It's all about merging your eCommerce platform with the physical interaction. The pick-up model of business is becoming increasingly important to consumers. Brands like Home Depot and Walmart are taking lessons from Amazon and Nike by installing lockers in stores so that shoppers can physically pick up online orders. Whole Food locations with Amazon lockers saw an increase of 11% in terms of micro-visits and chainwide microtrips to Whole Foods are up 8.7 percent.

Why would you want to pick up an online order, you may ask. Paradoxically, it's about convenience. Deliveries come with their own set of complications, including scheduling and traffic delays or the shipment of damaged products. And at the end of the day, there is nothing more immediate than an experience at a physical retailer. "As good as delivery is getting — one-day delivery, sometimes one-hour delivery — that still can't compete with the one-second immediacy of being in store and picking up that avocado ... because I thought about it in that moment," said Todd Dipaola, InMarket CEO and founder.

Digitize that DNA

We've talked software and e-commerce, but digitization of the customer experience is key when it comes to creating a winning strategy for consumer loyalty and engagement or spend. For example, the use of sensors and cameras to track purchases gives customers no time to second guess their purchases over a traditional check out experience. It frees up your human resources to use their soft skills and provide a more personalized experience for your customers. Retailers embracing these kinds of systems can hire relying on a better, more professional and knowledgeable service staff and can further bolster their partnerships with other brands by opening a store-within-a-store shops for leading vendors.

Think complete convenience, consistency, and customization when curating your customer journey. Offline retailers need to tap e-commerce marketing automation technologies like personalization and other machine learning tech in order to better understand their customers and create real-time evolutions in messaging and experience, ultimately serving the consumer. Leverage your assets and cross-promote.

The consumer journey will look very different in five years as retail's transformations embrace tech that continues to evolve, deepening our understanding of consumer preferences and shopping habits. If you offer the right combination of experiences and environment, you can create a unique dynamic between your brand and your consumer. At the end of the day, your audience, your brand family, is your currency. In a post-digital world, you need to approach them with a 360 TLC mentality.