By David Reed, director of digital retail, RAPP
In-store shopping has fallen on hard times. Many retail categories — such as electronics and music — have largely disappeared, victims to the convenience and easy price comparisons that online shopping provide. Brick and mortar simply can't keep up.
In the U.K., e-commerce growth has been deemed the cause of a 4 percent reduction in footfall on most high streets and malls — and the closure of many stores, which were replaced by nongovernmental organization and charity stores. Numbers in the U.S. are even more dire, with up to 800 stores (one-fifth of all anchor stores) estimated to close in the next few years.
So what exactly is pulling all these once-dedicated shoppers away, and what can brick-and-mortar retailers do to bring them back?
The house always loses
E-commerce has such a high competitive advantage that it's actually causing physical retailers to fight for every leftover scrap.
Take a look at comparison shopping. E-commerce has made this much easier — so much so that consumer price sensitivity has given rise to low-cost grocers in the U.K. and Europe. Aldi and Lidl offer significant savings on a range of key products — more than sufficient to offset the benefits of sales promotions and loyalty schemes in established grocers. This has resulted in new shopping behaviors, with customers buying their "basics" from one store and their treats or branded products from another.
This disruption in the way we shop threatens the profitability of any store designed with footprints that provide a full range of products.
The companies that hope to weather this storm are completely rethinking how they conduct business. Amazon, one of the biggest juggernauts on the e-commerce side, has recently announced the launch of a new retail concept, Amazon Go. While that might seem like a commitment to the brick-and-mortar business model, Amazon found a way to completely change the way physical stores operate — namely, without checkout lines.
Argos, a U.K.-based electronics and homewares retailer, offers same-day delivery for products bought online and faster in-store collection. They have bought into the idea of convenience insofar that, in many places, their delivery time is within 60 minutes. During the delivery service, the retailer also collects and recycles unwanted appliances — all in the name of drawing more people to its physical locations.
Taking down the big bad web-wolf
For brick-and-mortar stores to survive, they need to find ways to embrace consumers' new desire for greater convenience and low prices. They need to reinvent their value propositions and give shoppers new reasons to shop in person. Here are a few ways to bring those wary consumers back:
1. Perform a retail audit
The best way to innovate is to build on consumers' expectations of how to shop, repurposing or reinventing those expectations for brick-and-mortar stores. Are consumers in a particular category looking for the best prices, or is it the quality of service they crave? There's no sense in optimizing for the wrong customer experience.
Fashion retailer ASOS has tapped into the minds of its audience in a masterful way. The company creates excitement for new sales or seasons through social media events where shoppers can showcase, endorse, and share social content. In one instance, shoppers were permitted to move to the front of the online queue for a sale by competing in online games and quizzes.
2. Prototype plans — and make it fast
Just as digital apps are designed using rapid prototyping and heuristics to refine them, retailers need to embrace the need for fast prototyping in stores. Look at the major trailblazers: Amazon Go is designed around cashier less retailing, while Tesco has tested digital walls that let consumers select and purchase products at busy railway stations.
Of course, these are still embryonic ideas, suggesting a new convenience-based future. More retailers need to try out new, alternative strategies — and give themselves permission to fail and learn. Only then can they gain a lasting advantage.
Consumer expectations are not defined by a retailer's category but by the consumer's total shopping experience. Whether through automation, engagement, or some combination, retailers have their work cut out for them if they're looking to stay in the game.