14 Oct Of Dinosaurs and Department Stores
The New Normal Consulting team (NNC) has many years of retail experience, in both brick-and-mortar and e-commerce channels. We love retail. We all grew up in retail. We were at ground zero during the frenzied and heady days of online retail in the late nineties. We continue to consult with retailers of all types.
But in the past few years, we have winced at the faux-punditry that predicted the demise and ultimate extinction of the physical retail store. Our view is this prediction was not only premature, but entirely misinformed. The data and the trending simply do not support this thesis.
Numerous major consultancies strenuously refute the belief in the extinction of physical retail, explaining, rather, how “omnichannel” consumer behaviors are ruling the day, and that to succeed, innovative retailers must embrace all the various ways consumers elect to research, shop for and finally purchase products.
At the same time, we want to be clear our New Normal View forward also firmly rests on the certainty that “business as usual” will not win, and those retailers wishing it were still 1985 will neither thrive nor survive.
We reached out to our friend and colleague, Mark Held, Secretary General of the European Outdoor Group, for a comment from Mark’s side of the pond.
“Brick and mortar has had bad press over recent years and hardly surprising as an often enthusiast-based retail network comes to terms with rapidly changing technologies,” Held told us. ”The debate on the likely survival of the traditional outdoor shop rages on, yet for me the question should be more one of good versus bad retail. There is still room for innovative brick and mortar retail, and if anyone doubts this, then a visit to the outdoor scene in Tokyo should sort that out. Customer services, focus on unique experiences and products are what matter and as everyone knows, these are all factors at the top of customer feedback. My conclusion is that there is room for great retail on both sides.”
Darrell Rigby, a Bain partner, covered this trend in an August 14, 2014 Harvard Business Review piece titled E-Commerce Is Not Eating Retail. “For omnichannel retailers, websites and mobile apps are not just e-commerce ordering vehicles, they are front doors to the stores,” Rigby wrote. “Stores are not just showrooms, they are digitally-enabled inspiration sites, testing labs, purchase points, instantaneous pick-up places, help desks, shipping centers and return locations.”
Rigby refers to the “digital experience” or the fusion of digital and physical innovations being what modern consumers have come to expect.
The data also point the way forward for us:
- Over the past 20 years, online purchases have grown to just over 6% of total non-gasoline and non-food transactions, and continue to trend upwards. New devices and methods of connecting bolster this trend.
- However, the rate of e-commerce growth has slowed to about half what it was since 2000.
- About half of e-commerce sales are done through retailers with both “bricks” and “clicks” presence.
- It has become more difficult to definitively identify whether or not a sale is purely digital or in-store. Where did that decision occur? At home on the Mac? On a smartphone? In the store?
- The AT Kearney Omnichannel Shopping Preferences Study polled 2,500 consumers across every demographic grouping and concluded that 90% of shoppers prefer to purchase in brick and mortar stores, citing that “they love going out, shopping with people and touching stuff.”
On a more qualitative note, we contacted a few of our friends in specialty outdoor retail in the US and their comments were inspiring:
Mike Massey of Locally.com and Massey’s Outfitters in New Orleans is deep into the omni-channel trend and has this to offer, ”Shoppers have spoken. They LOVE shopping online. SHOPPING. But they also love BUYING offline. Technology can really be disruptive and local shops, even huge chains, need to understand how consumer behavior has shifted. Local retailers working with national brands to facilitate ‘on demand’ delivery of their products is the future. And, who is better at curating local inventory based on local trends? Local shops! I think the gist is that local retailers are uniquely poised to dominate the on-demand economy as we shift away from big, centralized players. Infrastructure has come into being that allows small guys to run their own servers so the huge providers become irrelevant.”
Dana Davis, President of The Summit Hut in Tucson said, “The global marketplace is great at getting products to customers, but it’s not always as efficient at making sure the customer is happy and choosing the best products for their needs. At Summit Hut we’re really proud of the culture and talent that we have developed to serve our local customer, but we have also evolved as a company to be able to offer that personalized level of service and expertise to our customers whether they are walking through our doors or surfing our website.”
Jennifer Mull, CEO of Backwoods commented, “While I have certainly heard people say that brick & mortar retail will diminish over time due to the internet, I couldn’t disagree more. That said, brick & mortar has to change. People want what some call a seamless experience which I believe is more a continuum of shopping methods that fit differently at different times into an individual’s schedule, needs and desires. Online is obviously handy, unrestricted in terms of hours “open”, and in some cases has more availability than what might be in a store. That said, a store is where I think it is possible to get the TOTAL experience when delivered with excellence – touch product, try it on, get a genuine feel for the culture and brand, and create relationships with real people that share your passion. This is particularly important when talking about specialty brands and retailers. E-commerce has a place no doubt in this day and age, but it doesn’t replace what an outstanding store experience can provide.”
The Timetrade State of Retail 2015 report finds a paradigm shift at retail, with e-tail channels remaining popular, while, concurrently, retailers are more focused on and committing capital and energy to the physical in-store experience. One take-away was that more than 70% of Amazon.com shoppers would prefer to shop in a physical Amazon store. This surprised even us.
Timetrade also points out that, among active demographic groups, Millenials are more inclined to shop in-store, but will arrive well armed with product information and preferences researched online.
Finally, the Timetrade study overwhelmingly finds that consumers value and are influenced by knowledgeable sales associates, and that past favorable in-store experiences will tip their future shopping preferences.
Innovative retailers, from smaller independents to large national chains, continue to double down on terrestrial retail:
- Of course we can cite Apple, an all-too-easy example. But if brick and mortar were on life support, we would see this market leader backing away.
- None other than Amazon has opened a retail location on the campus of Purdue University, with plans for more and a possible purchase of Radio Shack.
- Arc’teryx will open a new location in Denver this fall, joining its Washington, D.C., Seattle, Portland and Minneapolis locations. They plan to add new stores soon in New York City and Boston.
- Timbuk2 operates sixteen flagship stores at locations around the world.
- More recently, Rock Creek Outfitters has expanded it’s store count
- Summit Hut in Tucson will be opening a new shop this fall.
Our New Normal View is that physical retail stores and online shopping are here to stay. But to be successful, both terrestrial and virtual retailers need to embrace omni-channel consumer behaviors, (supported by and leveraging the new tools of this digital world) and to excel at what retailers have always had to do: be unique, become indispensable to loyal consumers, offer something more than low, low everyday pricing and continue to evolve with their customers’ habits and preferences.