How the High Street Needs to Embrace E-commerce.

It is no secret that since e-commerce has become a key channel for retailing that bricks and mortar stores have suffered. This year we have seen a couple of major retailers who have graced our high streets for decades, collapse under the weight of reduced footfall in their stores.

Couple that with the entrant of new online retailers for market share competition, rising rents and personnel costs, it is not easy to make stores profitable in today’s world. Yes, there is an argument to say it is not an even playing field but much like the music industry, it is clear that without innovating in e-commerce and digital channels, retailers will slowly become non-existent.

However, bricks and mortar stores are not dead and buried yet! We have seen a slight shift in share of retail sales, but physical stores have not died the death that some anticipated and still hold the lion’s share of retail sales by some margin. We are also seeing pure players enter the market with brick and mortar stores such as Amazon, Zalando, Allibaba and JD.com, whether that be through acquisitions or opening direct own stores.

Enter COVID-19, the pandemic which drove hundreds of millions to lockdown and drove e-commerce sales through the roof. Even when the world started to come to the surface for fresh air we saw brick and mortar bounce back very quickly, especially in sectors such and food and beverage, and even fashion, with Primark (UK high street fashion retailer) stating that they were surprised at how quickly sales have bounced back following store re-openings. Share prices rebounded 8% in the weeks after lockdown, following a 19% decline. Don’t forget, these are the guys that said no to e-commerce and are a pure play bricks and mortar retailer!

The age of needing to purchase in stores are gone. Now customers purchase in stores because they want to and that they are looking for an experience.

Whilst its clear that e-commerce will continue to gain an increase in retail sales share from bricks and mortar, it is also clear that stores are not done yet and are coming out swinging, this pandemic has been a great example of this, people simply like to shop!

What can retailers do about it.

In the pre e-commerce days, bricks and mortar strategies centred around store volumes and driving scale. This meant retailer strategies were about having as many stores as possible for physical availability and once the customer was in store, driving the biggest baskets through volume of products available, good customer service, and attractive prices.

Ironically, this is now the key strategy for e-commerce; how can online stores be front and centre for customer search queries, or visible on your social media pages and favourite influencers in order to keep you on the store page longer whilst using AI machine learning to give you tailored recommendations and content to encourage you to purchase more.

The age of needing to purchase in stores are gone. Now customers purchase in stores because they want to and that they are looking for an experience. I highlight these two behaviour traits as a key for retailers to review how they see customers and their relationships with physical retail.

Again, retail bricks are not dying and will never die, but a change in dynamic in response to the new competition just requires a new approach to how retailers approach store strategy.

What is the future for bricks stores.

In the future stores will merge even closer to e-commerce, app commerce and social media stores. This will include some of the following:

  • Digital pricing with electronic shelf labels (ESL) based on machine learning. Pricing will become trade-orientated and there will be no fixed pricing in stores but rather digital pricing based on supply and demand and AI. This will also support cost-cutting labour costs and reduce waste (Intersport, Greece).
  • Stores will also become mini distribution hubs and dark stores meaning faster route to market and support for store costs with increasing rents, etc (Ref: Macys).
  • Products will become more exclusive on the differing channels to attract customers to the different channels. In-store or online exclusives or new product launches for a single channel will be vital to differentiate the channels (Ref: M&Ms).
  • In-store experiences are proving to be key to drive footfall for stores by creating innovative and immersive customer experiences that customers come to see first before shopping second (Les Grands Magasins, France).
  • More differing channels to sell via will become more prominent, for example, social shopping and marketplaces. It is imperative for retailers to develop clearly defined multi-channel strategies. This could include promotion driven channels or product specific channels (Nike).

Summary.

The landscape of the traditional bricks and mortar store has changed and there is a new player in town to compete with – e-commerce. Whilst it is clear that stores will not leave our high streets, it is clear that the relationship between offline and online requires a seamless and integrated approach. With the challenges of ballooning store costs, retailers should use e-commerce to compliment their stores to drive profitability. Below are some of these key elements believed to be the key to this seamless approach:

1. Digital pricing consistent both online and off.

2. Stores become part of the e-commerce distribution network.

3. The offering of exclusives or personalised products on different channels.

4. Investing in innovative and immersive experiences in stores.

5. Defining different strategies for the many channels now available to sell.

Has your brand had to pivot this year? What’s worked for you? Let me know in the comments.

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