Retail is evolving quickly and there are many predictions about the store of the future. Some suggest the death of the brick-and-mortar model; others talk about a world where there is no checkout, no queuing – a world so smart that predictive technologies restock our necessities as they run out. But what’s the reality?
Despite the rise of e-commerce, online channels accounted for only 8.7% of global retail sales in 2016, and in 2019, 87% of retail sales will still occur in-store. So, while the discussion continues, most agree that the physical store is likely to remain, except that its focus will change – distinctly.
The store of the future will no longer focus on making a sale. Instead, physical stores that survive well into the future will change how they operate and service their customers. Stores will increasingly move from showrooms to playrooms where shoppers can experience products in a meaningful way. They will become experience hubs for consumers, allowing product immersion that eventually drives a purchase, online or offline. Ultimately, the retailers that win will be those that can leverage powerful yet subtle technology to offer inspiring physical experiences to shoppers, as well as moments that touch them, to result in conversions.
While the physical store will likely continue to play a key role, it’s also clear is that consumers will continue to increase their shopping online. This is especially so in Asia-Pacific, which will remain the world’s largest retail e-commerce market through 2020, with sales topping $1 trillion in 2016 and more than doubling to $2.725 trillion by 2020.
This gives traditional retailers an opportunity to capitalize on the biggest advantage they have over their online pure-play counterparts – the physical stores themselves. By transforming the store into one that blends physical and digital, a retailer can provide an evocative, experiential shopping journey as well as create a flexible fulfillment center. This enables retailers to profit from their investment in stores near where people live, work, and play.
The pressure is compounded by dwindling foot traffic in shopping malls, especially in the more developed retail markets. Many mall operators are proactively helping their retail tenants bridge the digital divide, transforming beyond mere “lifestyle centers” by exploring click-and-collect shopping, enhancing customer engagement experiences, and even experimenting with deliveries using drones. We’ll see more of these types of initiatives in the months and years to come and – in some cases – a reversal of the dwindling footfalls. Whether or not shoppers return to malls, one thing is clear: Retailers must innovate or fall to Digital Darwinism.
We are already seeing today’s technologies influencing the store of tomorrow.
In essence, online and offline presences are complementary extensions of each other; online provides the hyper-convenience and offline provides the experiential engagement.
New, disruptive technologies and innovative methods have and will continue to emerge to help retailers enhance customer engagement. However, the winning retailers will be those that can amalgamate both online and offline presence into a seamless customer engagement channel. Otherwise, there is simply no way a retailer can effectively engage its more demanding and savvy customers.
Brian began delivering Business Transformation Programmes enabled by SAP around twenty years ago. Well-grounded with the structure and rigour the Big 5 gives, from the outset Brian’s passion has been to ensure real business performance is delivered by the Programme (i.e. enabled by technology, not distracted by it).