Rethinking Retail Stores

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After decades of store openings to obtain incremental sales to satisfy consumers. We have reached over saturation of retail and in 2017 the greatly exaggerated ‘retail apocalypse’ was claimed. The thought was as stores close online sales will pick up the slack. We are now seeing how online and physical retail are closely intertwined as when stores disappear online sales drop for both retailers and its vendors. Physical retail’s role is becoming clearer and is causing us to rethink the format because without stores, sales (both online and offline) are going to decline.

The Changing Role of Retail Stores

Retail data is now coming in to show the impact of store closures on enterprise wide sales online and offline. The symbiotic relationship between a brand’s physical and digital presence must be carefully managed, especially as physical spaces are shrinking. As the physical retailer or point of distribution for a brand is removed, online sales plummet and acquisition costs rise.

According to Nick Kolobutin, CEO of ShipEarly “this just makes sense when you think about it. 90% of all retail sales still occur offline, without physical retail consumer discovery is removed and customers become prohibitively expensive to acquire in that area. The fact that more consumers buy at retail, as 63% prefer to shop in stores, means without stores there will be fewer units in the field for other consumers to see in use driving customer acquisition costs even higher as there is no offline brand recognition.”

“Brands need to start thinking more like software companies and realize the networking effects of having more users and/or products in market to lower customer acquisition costs and become channel agnostic as to how consumers buy. Online isn’t going away and neither is brick and mortar.”

Stores Have Been Greatly Under Invested In

For the past ten years or so much of retail’s efforts have been spent on online advertising driving temporary value/relief to retail rather than focusing on longer term initiatives that drive consumers into physical spaces with in-store technology for long lasting brand impressions. While other companies zigged towards online, the best companies are zagging towards physical retail as the medium has been greatly under-invested in and is now a differentiator. Why? Consumers are increasingly seeking experiences they cannot get online and online advertising is losing its effectiveness.

New Possibilities for Physical Retail

As store closings occur, the retail brands within them are also impacted as they lose the ability for consumers to tangibly touch or feel products, the sales volume, and the ability for consumers to haphazardly discover their brand. Effectively managing both online and physical retail channels in a balanced approach is critical for success.

To achieve this balance, new ways to achieve channel loyalty and growth must be considered. The concept of Retail as a Service comes to mind where manufacturers can partner with their brick and mortar locations who can operate as a showroom, install, pickup, try-on, and return centre, while also performing scheduled local deliveries to consumers homes for online sales. In this case, the retailer becomes a form of advertising for the branded manufacturer and makes service revenue on orders.

Next Generation Tools Required to Manage Growth

To achieve this a software solution that is flexible enough to handle the many ways in which your online and physical retail channel will operate together is critical. There will be no one size fits all solution across the market as we will see a mix of concepts being implemented and they can vary by dealer relationship, geography, or even by product category.

Anywhere a store exists with the right partner and location there is the potential to simultaneously grow online and physical retail sales by working in tandem to achieve growth. If interested in learning how you can become an omni-channel brand and get your sales channels working better together, contact us to see if we can help.

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Rethinking Retail Stores