Customers are the real "assets" … not the stores or the websites
With all the talk about omnichannel retailing, it is easy to assume that the physical retail stores are dead. They are not. In fact, a report released by A.T. Kearney indicates that brick and mortar stores are by far the preferred place where consumers shop. So, what's changed? There are at least 7 major trends which indicate that the concept of the traditional "store" is being redefined in terms of new consumer shopping behaviors. As the store of the future evolves, retail success will require a fundamentally different approach to evaluating and measuring business investments in terms of acquiring and serving consumer relationships.
Why this is important: In today's omnichannel world, it's not about the store, online or even mobile. Future success will be about the retailer managing it's assets to grow profitable consumer relationships at the lowest cost of acquisition and service.
Blurred Lines – Why it's time to redefine the quaint notion of a "store"
It's not that long ago where "the store" was the physical place that shoppers actually drove to, so that they could see what was available, evaluate their choices, and then make an actual purchase to take home with them. The store was designed as the physical showcase for products … typically the only place that consumers could find about products other than the store's catalog or print ads. The store as the primary source of product information and point of purchase seems rather quaint and outdated in light of today's omnichannel consumers.
That is not to say that bricks and mortar stores are dead. Not by any means. In the A.T. Kearney Omnichannel Shopping Preferences Study of 2,500 shoppers of all ages, bricks and mortar stores are the preferred channel. As much as 90% of final purchase decisions for some product categories are made in physical stores.
In an omnichannel market what has changed are the consumers shopping behaviors. The "store" is no longer the single source of information or experience. The store may also not be the place where consumers take the product home. The omnichannel consumer shops anytime and everywhere. As a result, there are major shifts, which are causing retailers to rethink the traditional concept of "the store" as the place where consumers shop and buy.
Omnichannel trends redefining "the store":
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When is a store just a physical store these days?
Retailers are not stupid. They fully realize that consumers are shopping any time and everywhere on their computers and smartphones. Even the smallest of small retail shops have a website. The best shops are definitely on social media promoting their value and services, and using shopper location services like Shopkick for check-ins.
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Online is moving toward physical stores … pick up points
Not only have retailers of all sizes opened online shops within the ecommerce giants like Amazon, eBay and Alibaba … the ecommerce giants are piloting stores. eBay has piloted both stores and store shopping windows. Amazon is realizing the power of consumer pickup with Amazon lockers within retail stores and mall locations.
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Manufacturers are launching their own stores
Manufacturers used to rely solely on store chains to merchandise and sell their products to end consumers. That model went by the wayside with the success of Apple stores, which in turn helped to raise sales within traditional retailers. Today, major brands like Microsoft and Samsung are launching their own stores, as well as dedicated shops within retailers like Best Buy and Dixons.
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BOPIS and BISH are standard customer expectations
If there is one major trend that is challenging the physical 4 walls of the store, it is the consumer's expectation that where they shop, where they purchase and where they receive the goods do NOT have to be the same place. Consumers today value and expect to be able to Buy Online and Pickup In Store (BOPIS). Increasingly, the reverse is true: BISS – Buy In store and Ship [anywhere].
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Race to be smaller … stores as online distribution points
Walmart has over 4,800 US retail store locations with over 135 million consumer visits a week. They should be the bastion of maintaining the concept of traditional stores. Yes and no. Physical goods inventory is expensive and a costly liability for monster hypermarket stores. A Walmart key differentiator is free shipping to their 4,800 stores as pickup points. In the process, Walmart can use their "virtual shelf" to stock over 4 million items online, reduce store inventory, and build much more cost efficient smaller stores in local neighborhoods. And, oh by the way, Walmart has a separate Facebook page for every store location.
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Nordstrom's "Trunk Club" and personal shoppers like Instacart
Perhaps, the newest trend is consumers are even abdicating their hands on "shopping" to personal assistants. Nordstrom's has a rich legacy of traditional department stores. But, their latest innovation is Nordstrom's "Trunk Club" for men. A personal assistant from the Trunk Club sends the man personally selected items based on attributes and preferences they have shared online. Even more interesting is a startup called Instacart, which employs personal shoppers to select and deliver your groceries from retailers like Whole Foods, Costco and Safeway.
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The US Postal service will be delivering groceries
Speaking of groceries, it's no secret that Amazon is in the grocery and home delivery business. They just announced a pilot to have the US Postal service to deliver groceries and other consumables to consumers doors on the weekends when there is down time from delivering mail. Expect many more iterations of online and store integration from other retailers like Target, Walmart and drug store chains.
Bottom-line it's about serving evolving consumers … not physical stores
The bottom line is that retail is rapidly evolving beyond the traditional concept of "the store". There are many flavors of "stores" both physical and virtual today. Consumers certainly don't just shop in store, or just online. They have a much more robust and complicated journey that takes them online, through social media and then typically to stores. Although the final purchase decision might be made in a store, the physical goods might be delivered at home.
New retail store concepts = Need for new metrics
An interesting paradox regarding the evolving nature of the store of the future is the fact that many core retail metrics are rooted in the past and the concept of the traditional store. Even the core metrics reported on Wall Street and retailer annual reports still reflect the historical view of "the store". Some examples include:
Same store or Comp Store Sales – this is a traditional measure of year over year store growth. But, what happens if sales from store visits are now fulfilled online?
In-stock rates – A traditional metric of inventory management is the percent of items in-stock/out of stock. But, what happens today if the item is not available on shelf, but can be purchased from a "virtual shelf" online?
SG&A – A traditional metric for store operations is "Sales, General & Administrative Costs". Does the cost of acquiring and serving today's omnichannel consumer now include the cost of the Facebook page, landing pages and mobile phone app?
It's not about the "store" any more … it's about consumer relationships
The retail store of the future is here today. It is no longer about a physical place. The "store" is all about the many ways of engaging consumers in shopping decisions. Retailers now must evaluate how they deploy all assets to acquire and retain customer relationships, not just make a sale at the cash register today.
Consumers are still voting overwhelming for stores as a preferred location for their experience. The key word here is experience, and that is perhaps the most important metric for the store of the future that is not being adequately addressed or measured today.
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Sources:
- Forbes: Maybe It's Time To Redefine 'The Store', Erika Morphy; July 27, 2014
- The Record.com: With 'subscription box' retailers, Christmas now comes once a month, Rick Romell; September 5, 2014
- Female Shopper Image: Sippakorn; Freedigitalphotos.net
- Male Shopper Image: Stock Images; Freedigitalphotos.net
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