Ana Pia Matijaš
What is the future of brick and mortar in digital transformation?
While stores were once the primary focus, brands are shifting attention to how stores can support sales that start and end digitally. Investing in online is now no longer a choice for most businesses. At a time when most stores have been closed to traditional shoppers, omnichannel services are prompting a mindset shift: websites don’t exist merely to supplement stores; stores, instead, support online sales.
And there is a reason why on most brick and mortar shop windows and shopping bags you can read "Buy online". Omnichannel refers to selling through multiple channels, and increasingly a blend of digital and physical, whether by uniting a customer’s purchase history or fulfilling an order through more than one channel. While the term “Brick and Mortar” refers to traditional businesses that have a physical presence in the form of storefronts, warehouses, factories, etc.
Shopping malls are the most visible of “brick and mortar” retail. With the construction of the interstate highway systems in the 1950’s, large malls became retail meccas to millions of middle-class consumers. The challenges of opening a brick-and-mortar store in the internet age are similar to what they've always been: It's just more expensive to have a physical presence. But what is their destiny in the future when younger consumers are more digitally oriented?
Retail consultant Howard Davidowitz predicts that as many as half of America’s 1200 shopping malls will close within 15 to 20 years.
You also can’t answer the brick-and-mortar vs e-commerce question based solely on customer behavior, because both segments are still growing (although at different rates). According to Shopify worldwide e-commerce sales topped $3.5 trillion USD, an increase of approximately 18% from the year before. E-commerce is expected to nearly double by 2023 to more than $6.5 billion. Food and beverage e-commerce sales will grow 23.1%, while its consumer goods counterpart, health, personal care and beauty, will grow 18.6% in US market.
Much of e-commerce growth is attributable to Amazon, which is growing at above-market rates and was expected to account for 37.7% of online U.S. sales in 2019. Also China’s Alibaba Group Holding Ltd., who dominate the domestic e-commerce market with platforms such as Taobao and JD.com Inc. expect to grow 62.9% in 2020 to 264 billion RMB compared to a 29.2% growth last year.
Due to pandemic, many established brands will transform into more efficient operations, possibly leaving large, high-rent spaces for smaller ones. And probably a top priority will be blending digital and physical retail to create an enhanced consumer experience. For example, a retailer may incorporate augmented reality to enable consumers to "try on" clothes or view goods in their homes before completing the purchase at a physical location.
The luxury megabrand Gucci, in a bid to recreate its crucial in-store experience, has launched Gucci Live, a video service that lets staff communicate with shoppers on their mobiles or laptops. Employees working from the 2,300-square-metre client services hub, Gucci 9 in Florence, which has developed a faux luxury store with cameras and TV-style lighting for the new “remote clienteling”. Gucci says it’s the first of its kind in luxury.
The mission of our Gucci 9 global service centre is to provide our customers around the world with a direct connection to the Gucci community that is a seamless, always accessible, personalised experience. “The service is delivered according to the values that define and differentiate our brand today: a human touch powered by technology.” said Marco Bizzarri, Gucci president and CEO
The rise of in-home or remote video consultation services represents significant industry macro-trends: the convergence of physical and digital experiences, data-driven personalisation and the rise of the service economy. “More and more retailers are looking to increase customer value and enhance brand relevance by bringing the personal features of the in-store shopping experience directly into the customer’s home,” says Scott Clarke.
Recently, omnichannel services that let customers discover and purchase online but pick up or return in-store are increasing. Retailers currently offering buy online, pick up in-store options grew digital revenue by 27 per cent in the first three months of the year, compared to 13 per cent for sites not offering the service, according to Salesforce, which analysed the activity of more than 1 billion shoppers in over 34 countries.
Mobile apps — more customisable than mobile websites — can help facilitate hybrid selling. Retailers can enhance the pickup experience by adding location-based functionality to an app. Brands can use GPS or RFID technology to “geotarget” product pickup zones by creating a virtual geographic boundary; push notifications can then be used to send updates to the retailer and customer. In a store or mall, the same technology can limit crowds and time spent inside.
“Think about a store as a pickup centre, and the shopping decisions are made before you arrive,” says Coby Berman, COO of Radar
Self checkout and cashless payment will continue to rise across physical stores, and become mandatory for all retailers who will have to cut the expenses and offer seamless shopping experience. While recent innovation here has been led by Amazon in grocery and convenience stores, these technologies are expected to expand to reduce person-to-person interactions. For example H&M is starting experimenting with Paypal QR code payment method to carry additional information about the customer, allowing the brand to personalise the experience in a store.
There’s no doubt that small business brick and mortar stores face stiff competition from big corporations and online retailers – online shopping statistics speak for themselves. But in this age of digital technology that we live in, it’s no longer enough to say that ‘you run a retail business’, since that now includes running an e-commerce businesses also. Over the past 19 years alone, online retail sales have increased in volume by 300%! And at the same time, department store sales have dropped by nearly 50%.
When you combine that with the statistics cited above that show nearly 70% of millennials preferring to make purchases online, it points towards a future where consumers will conduct the vast majority of their shopping and buying through eCommerce. And that doesn’t mean that physical storefronts will disappear altogether, just shift to include multi-channel selling. Even by offering the most basic of e-commerce functions such as ‘buy-online and pick-up in store’, brick and mortar stores can give customers what they like from the world of online shopping while maintaining the advantages of the physical store.