From Bricks-and-Mortar to E-Commerce and Back – Retail’s True Shift to Digital

Ever since the first bushel of grain was traded for meat at the local village square, retail has been in a state of flux. Seemingly indestructible bricks-and-mortar retailers refused to stand still, as corner stores morphed into department stores and suburban strip malls gave way to big box stores. But the biggest retail disrupter of them all? Digitization. Joerg Koesters at SAP makes some great observations below... 

Some say the first online retail transaction – back in the digital dark age of 1994 – was performed by NetMarket, others say it was the Internet Shopping Network. But nobody can argue that in the wake of the ensuing tsunami of online shopping and intense global competition, retail was left shaken and virtually unrecognizable.

Amidst the unsettled waters, retailers began disappearing faster than you could say “bankruptcy”. Since 2000, fully three-quarters of retail sales growth has occurred through online channels. Thousands of department stores, previously community stalwarts, have been shuttered.

Retailers slow to adapt have collapsed – spectacularly. Remember the Borders book chain? It ignored the e-books phenomenon and neglected to build a user-friendly e-commerce site, losing sales to Amazon and ultimately closing the books on itself.

Even powerhouse teen brands like Aeropostale and American Apparel have announced re-orgs under Chapter 11 in recent years.

But despite the destabilizing growth of e-commerce, online sales accounted for less than 7% of global retail sales. Customers continue to demand that retail have a physical presence. They browse in physical stores, and then purchase online for less – a phenomenon known as ‘show rooming’. Or they buy online, and then physically pick up their purchases at neighboring retail locations. The resulting retail identity crisis – am I a physical retailer, an online retailer, or some type of hybrid? – is fueling more uncertainty and confusion.

But is it all just doom and gloom for retail?

The shift to digital may have blown the doors off traditional retailing, but as Alexander Graham Bell stated, “When one door closes another door opens …”. However, it’s the rest of the quote that could prove most instructive to retailers: “… but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.”

Bell knew a thing or two about failure – and eventual success – and he knew how to spot an opportunity. Which doors have been blown open by digital business? Where is the opportunity in retail today?

For retail companies, one of the biggest challenges of digital transformation is fusing physical and digital worlds by designing seamless shopping experiences for customers across all channels. Customers now carry devices everywhere they go and expect a seamless, omnichannel retail experience – whether they’re shopping online from a tablet or mobile device, or in a bricks-and-mortar store.

Developing an omnichannel customer experience is challenging, but it’s where the biggest opportunity lies. Companies with the strongest omnichannel customer engagement strategies retain an average of 89% of their customers.

“Developing an omnichannel customer experience is challenging, but it’s where the biggest opportunity lies.”

Retailers who thrive will be the ones who learn how to merge physical and digital into a new, ‘omincommerce’ experience for their ‘omnicustomers’. They enable customers to choose where and how to buy across all channels, and understand their preferences and purchase paths. They can provide valuable advice, while letting their clients customize their shopping and delivery experience.

Retailers who thrive will be running live. What does running live look like? It goes beyond ‘online’ or even ‘everywhere’ and becomes ‘everything-at-the-same time’. It integrates the value of a retail store into a customer’s digital interactions.

“What does running live look like? It integrates the value of a retail store into a customer’s digital interactions.”

Take the example of eBay and the Rebecca Minkoff store, which partnered to open a digitally ‘connected store’ in New York City. A prime example of how some retailers are merging online and physical shopping, the store has ‘connected walls’ that stream video and content. Shopper can ‘touch’ the wall to reserve fitting rooms, order refreshments, and alter the room’s lighting. While customers are trying items on, RFID technology can instantly identify other sizes and colors.

Neiman Marcus’ created a ‘Magic Mirror’ that can capture a customer’s video image and integrate with the store’s retail apps. Customers can see themselves in a variety of outfits without changing their clothes, and can compare outfits side by side.

Target is testing beacon technology to reach out to customers. Beacon use cases for retail range from connecting to consumers’ devices on the sidewalk to invite them into the store, to triggering rewards when they enter, to instantly advertising nearby goods on their device as they explore the store.

Apart from the fact that they all use SAP technology, the common thread to all these examples is that the physical environment is tailored to a customer’s preferences and needs, and integrated with their devices. The brand experience is personalized and consistent across all platforms – physical and virtual.

Retailers are only limited by their imaginations because the SAP technology exists to make running live a reality. Stores of the future will be able to leverage ‘heat maps’ – which show what customers are doing in a store – in real-time. These stores will be able to instantly track KPIs, such as real-time sales by store area, duration of customer stay, and retention rates. The data can be combined with other data, such as the weather, to create critical customer insights, trigger personalized promotions to enhance customer satisfaction, and increase overall sales. Real-time insights gained from online buyer behavior and store buying patterns can be used to fine-tune shopping experiences.

What about small business? With the right technology, they too can run live and compete in the global marketplace. Designed for small business, SAP Anywhere combines CRM e-commerce and order fulfillment – to enable small companies to quickly build an online store, participate on e-commerce marketplaces, automatically sync their inventory between channels, and deliver a compelling customer experience.

Using SAP Anywhere, West Hollywood’s Gray Gallery can instantly give customers a live view of what’s available for purchase – from one-of-a kind jewelry pieces to vintage furniture. With a single platform that integrates their CRM, live inventory system, POS, and website into one single tool, they can reach more people and focus on customer relationships, rather than managing disparate systems.

As long as retailers know what makes them stand out and leverage the right technology to deliver a differentiated customer experience – from their retail location to their online store, social networks, digital marketplaces, and customer service channel – the future of retail is ‘live’ and well.

Neil How
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Neil How

Neil ran his first SAP transformation programme in his early twenties. He spent the next 21 years working both client side and for various consultancies running numerous SAP programmes. After successfully completing over 15 full lifecycles he took a senior leadership/board position and his work moved onto creating the same success for others.

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