As we entered the New Year, one thing has rung loud and clear as we reflect back upon 2016 – retailers are re-thinking their online strategy in the realisation that physical shops are one of their biggest assets, as long as they meet increasing customer expectations.
The revival of physical locations
For a long time, we saw headlines of ‘death to the high street’ and that retailers curbed their property investment. All this while retailers vehemently jostled to provide an online offering to hold the attention of the consumer. Now it seems tables are turning, with previously ‘online-only’ retailers such as Amazon, Made.com and Missguided opening customer-facing branches, proving that physical presence is now just as an important part of e-commerce. What is the reasoning behind this decision?
First of all, customers shop brands, not channels – so becoming omni-channel has become essential, online-only retailers were missing out the most traditional channel of all. The transformation we’re seeing in this space shows how stores are a valued channel, and with continued evolution have a key role to play in the channel mix of the future. They do, however, require evolution to entice customers.
Secondly, retailers are recognising that customers value convenience above anything else. I like being able to buy something online and then return it in a store at my own convenience instead of having to queue up at the post office just to send something back – not only does this suit me because the opening hours at the post office are limited during a working week, but also because it ensures a much speedier refund process.
Being able to return in store also exposes the customer to a wider brand experience and delivers on the somewhat underrated element of ‘human contact’. The physical visit often encourages the temptation to make an additional purchase. From our recent study, "Making the Digital Connection: Why Physical Retail Stores Need a Reboot" we found that 70% of consumers still want to touch and feel products in-store before they buy. Being able to feel the quality of a product is still important, particularly for millennial customers who want good value as well as good quality. The physical store can provide that, and acts as a showroom for the online store.
We’ve certainly seen retailers like Matches Fashion using their stores as a way to showcase their other channels by offering digital services, integration and interaction. Apple recently admonished that over 80% of online purchases had had an in-store interaction. For many retailers it has encouraged a ‘halo’ effect where the stores are a generator of awareness for the brand, driving traffic to the website.
Responding to customer demand
Thirdly, online real estate has become crowded and expensive and smaller retailers have found themselves unsuccessfully bidding on keyword searches against the likes of Amazon. Similarly, the cost to serve has become more of an issue, with the total cost of non-store channels not being fully passed on to customers, often hurting margin.
Off the back of this, many retailers have started to look elsewhere in order to get brand recognition/awareness amongst customers. For many, the offline expedition started with trial pop-up stores before launching flagship stores in high-profile shopping districts. Pop-ups have become a key channel for testing new locations, products and partnerships and when fuelled by encouragement from major celebrities, including the likes of Justin Bieber, Kanye West and The Weekend – it’s no wonder these limited-time only pop-ups are causing such a storm. The growth in pop-ups is reflecting a change in the way that customers want to shop - they want unique experiences, the ability to purchase one-off items and edited selections is great for customers, and for retailer’s it’s something they can quickly scale..
So is the future of retail heading back to bricks-and-mortar? Well, with the announcement of more new store openings from Aldi, the Co-Op, John Lewis and Missguided, the evidence suggests so. Will this traverse all retail sectors – we’ll wait to see. As we move further in to 2017 we certainly expect to see a further partnership between online and offline channels. Maybe true ‘multichannel’ is a possibility. No channel can run in isolation of any other, and going back to one of the first points in this blog - customers connect with brands not channels, so whichever way the trend does move, there is a consideration for the impact on operations and activity elsewhere; all of which is supported by a seamless back end operation, of course!