The importance of continuous reinvention in brick and mortar retail

Mila Budeva
Mila Budeva
Mar 20, 2018

Toys R Us has announced that it will close all its stores in the US and the UK, putting 30,000 jobs at risk [1]. Earlier this week, Claire’s Accessories was reported to be preparing for bankruptcy [2]. In the end of February, Maplin, one of the UK’s biggest electronics retailers with more than 200 stores and 2,300 staff, also collapsed into administration.

This news has added fresh fuel to the ‘Retail Apocalypse’ discourse. Are these instances of brick and mortar retailers failing to stay in business indicative of the overall demise of brick and mortar retail? Do they evidence the end of physical retail and the triumph of online commerce over it?

 

Die another day

Such an apocalyptic view risks to oversimplify the complex transformation that the retail industry is undergoing – an interplay of economic conditions, changing customer behaviours and expectations and the growing role of technology in shaping these.

 

Rather than discussing physical retail in terms of “apocalypse” and “Armageddon”  and blaming it on the rise of e-commerce and technology, a more productive debate on the future of brick and mortar retail can centre around the need for reinvention. Put simply,

The changing retail landscape could equate the end of physical stores but only if they do not respond to it. To those retailers who are prepared to embrace the change, it can bring a competitive edge.

 

As a recent in-depth study of the retail environment conducted by Deloitte points out, 91 percent of retail sales still take place in brick-and-mortar stores. This means that online shopping represents just 9 percent of total retail sales. The online channel is projected to grow 11.7 percent, but so are in-store sales [3] –

'hardly the stuff of apocalypse’

 

The growth of ecommerce popularity does not necessarily reflect disengagement with physical stores but does indicate higher expectations of the in-store experience. Online has provided customers with greater convenience, choice and speed in shopping. If physical locations can combine this with a customised  experience and informative, personalised human interaction, they have a great chance of success.

 

As Deborah Weinswig notes in the Deep Dive: The US Retail Revolution Solution report [4],

"Retail stores have an opportunity that online stores do not have in terms of providing a memorable experience for customers that will translate into long-lasting customer loyalty"

 

Retailers might be making the mistake of designing and running their store operations based on sales. Customers, however, are seeing brick and mortar outlets as a physical location where they can interact with  brands in a way that online shopping cannot provide first and as a purchasing location second. As Gary Vaynerchuk suggests, one possible explanation of Toys R Us's demise is the fact that the retailer only used its physical locations as purchasing points rather than creatively using them as centres for customer engagement.

 

Digital transformation for retail reinvention

Adopting technological capabilities – from ‘scan as you shop’ devices to IoT inventory management – can help retailers to meet grwoing customer expectations of a seamless and engaging in-store experience but is not the silver bullet that will ensure the longevity of physical retail. In-store tech should be implemented as part of a broader process of digital transformation which, to be truly efficient, needs to address customer experience and retail operations.

 

For example, presenting customers with the latest in-store technologies while the execution of store operations is still in the pen and paper age can create more friction in the shopping experience and a rift between customers and the physical store, devaluing the investment in digital. The checkout process in a supermarket, for instance, can be fast and mobile-enabled but on its own would not be enough to ensure great in-store experience. Poor on-shelf availability and store layout, store associates who lack product information, can negate the effect of the speedy checkout.

 

Next-gen brick and mortar retail -  where to begin?

We should start with the right questions. Instead of stating that physical retail is dead we should be asking:

  • How can we use the very technologies that we blame for its demise to ensure it lives on?

Rather than viewing the collapse of a large retailer as indicative of the future of all retail stores, it could be more productive to look at and learn from retailers who are successfully leveraging digital capabilities and physical locations and are building a future for their brick and mortar operations.

 

 

[1] http://www.bbc.co.uk/news/business-43411051

[2] https://www.retailgazette.co.uk/blog/2018/03/claires-bankruptcy-will-not-affect-uk-stores/

[3] https://www2.deloitte.com/insights/us/en/industry/retail-distribution/future-of-retail-renaissance-apocalypse.html?id=us:2el:3pr:4di4365:5awa:6di:031418:&pkid=1003795

[4] https://www.fungglobalretailtech.com/research/deep-dive-us-retail-revolution-solution/