by John Liston
If you read the news, you might come to the conclusion that retail is dying. You can find hundreds of articles outlining the problem of competing against Amazon or covering the high costs of working with the social media giants and online marketplaces, but what gets missed in the news is some important context: while we live in the “digital age,” many of the solutions available to more sophisticated brands and retailers have failed to incorporate the many innovations in design, data management, reporting and analytics, and connectivity that have been made over the last decade.
Many brands were and are still locked into long-term contracts for these legacy solutions, with their accompanying long-term maintenance and service contracts. This outdated technology stack is a significant constraint on many retailers and is holding them back from embracing the customer-centric retail paradigm that is determining the winners and losers in the current evolution of retail.
If Retail Isn’t Dying, What Is Happening to It?
Based on recent headlines, it would be reasonable to believe that brick and mortar retail is a dying industry that is being supplanted entirely by ecommerce. While online sales are growing at a faster rate than in-store sales, and thus increasing as a proportion of total retail sales each year, brick and mortar retail is also growing in line with Gross Domestic Product, or GDP.
The truth is that brick and mortar commerce is not all doom and gloom. Rather, it is a tale of retail renaissance, revival or bifurcation. The data supports these assessments, as price-based and premium retailers have been opening new locations faster than they are closing them and the overall net change in the number of retail stores has been positive each year since 2017.
More Than A Store
Behind the doom and gloom stories of brick and mortar lies the fact that consumers now expect an experience that is both convenient and uniquely personalized. This does not mean there is no longer space for brick and mortar, but certainly gives rise to the belief that physical locations must offer much more than a simple storefront.
Before the internet, when shopping experiences were limited, primarily, to mail-order catalogs or physical stores, the foremost metrics for retail success were sales per square foot, sales per location, and same-store sales growth. By starting with or abandoning brittle legacy technologies — and embracing the idea that just about everything can be digitally connected — the smartest brands and retailers have re-imagined the purpose and potential of the brick and mortar location.
This re-imagining of physical retail generally involves a number of converging trends. First is the reconception of the store as a customer acquisition channel.
Curated, well-designed stores are a great way for brands and retailers to introduce themselves and their design aesthetic to new customers. Online menswear brand Bonobos — purchased by Walmart — famously introduced the concept of “Guide Shops,” where customers could try the company’s many sizing options and styles over a cold beer before placing online orders with one of the Shop’s “ninjas.”
Second is the idea of the store as part of the logistics network. With a strong order and inventory management system in place, the brick and mortar location can become not only a place to complete sales, but also a place to fill orders. Zumiez, the global apparel and accessories brand, uses a fully-localized fulfillment strategy to reduce shipping costs by shipping online orders from the closest location. This dramatically reduces the shipping costs and delivery times, not to mention reducing the company’s environmental impact.
Change Today For Tomorrow
This is a time of great change and opportunity in retail. The retailers who shift with the times have the best chance of not only surviving but thriving tomorrow. This requires a complete rethink of what it is to have physical retail space. Instead of trying to copy exactly what the fastest-growing retailers in your market segment are doing, take the time to build a plan that maximizes the strengths of your business in a way that will satisfy your customers.
To execute your new strategy, it is important to remember that you have to innovate both your in-store consumer experience and the technologies and processes that drive your business behind the scenes. If you invest heavily in upgrading your customer experience but neglect to invest in your operational capabilities, you will have trouble meeting the needs of your new traffic and will not be able to fully measure the impact your new initiatives are having on your overall business.
The first step is to upgrade your systems and processes so that you can support and measure your new customer acquisition strategies. Make sure that you have a fully omnichannel enabled environment including a POS system that empowers your in-store employees with the data they need to locate items across all channels, make product recommendations and fulfill orders locally.
You also need to invest time in developing an analytics framework that will allow you to fully understand the impact of any changes you make to your stores. This requires breaking down the barriers between your channels to gain an understanding of metrics like the increase in local ecommerce sales driven by new brick and mortar locations.
Stick Around For The Long Term
Once your operational backbone is ready, use data to relentlessly test new concepts in your stores. Whether it’s hosting events, offering services like consultations, or tying your brand to a charitable mission, you should constantly be monitoring the return on investment you are receiving while also maintaining the flexibility to pivot whenever necessary.
This flexible strategic mindset has been the primary driver behind recent retail success stories, as new brands and retailers have exploited new marketing channels, new in-store experiences, and new customer preferences to get an edge and grow their businesses. By adopting this mindset and setting a solid operational foundation, you can turn your stores into a customer acquisition channel and a key part of your logistics network in order to grow profitably.
Perhaps the concept of physical location is drastically different from decades gone by, but that does not mean dead. Not by a long shot.
This article is by John Liston, Director of Growth of Springboard Retail, POS and Retail Management software that gives retailers the tools to thrive.