The Future of Retail: Is Brick-and-mortar Heading the Way of the Dinosaurs?
Digital transformation is affecting every aspect of our lives, but one industry in particular is experiencing a significant amount of turbulence at the moment: The retail industry. Fuelled by their needs, expectations, impatience, and desire to get the most value, excitement, authenticity, and more, consumers are driving the changes in the retail arena (together with the advances in technology). With e-commerce and m-commerce on the rise, brick-and-mortars risk extinction if they don’t adapt to this new consumer behaviour but how can they compete with online shops and technology?
This week we’re looking into the challenges physical retailers are facing and how and why consumer behaviour is changing. Next week we’ll follow up with a blog about the trends that look set to shape the retail industry in the years to come.
Brick-and-mortar Isn’t Dead, It’s Just Changing
The quick answer to the question above is, they can’t. There’s no way of competing with technology and as online shops have a head start in this regard, brick-and-mortars have to go out of their way to embrace the new consumer behaviour and technology to stay competitive.
Two thousand and seventeen was record-breaking for the retail industry – and not in a positive way. Store closing announcements more than tripled to about 7,000 and the number of bankruptcy filings was up 30% compared to 2016. This leaves no doubt, online shopping is rising and today, consumers buy more goods online overall than offline.
According to a report by Walker Sands, many stores struggle to create an in-store experience that meet the rising consumer expectations. Twenty-five percent of consumers even think the online experience has already surpassed the in-store experience.
However, despite all the discouraging facts about the sector and brick-and-mortars, Walker Sands actually present some encouraging news. Twenty-four percent of consumers believe the “online experience will never surpass the in-store experience”. Interestingly, their study shows that the in-store experience is especially important to younger consumers – 18-25 years old – who are among the most likely to buy certain products in physical retailers. Walker Sands also reports that some product categories are even experiencing renewed preference for in-store buying.
So, brick-and-mortar isn’t dead, but it’s definitely changing.
When looking at the future of retail, it’s important to zoom in on the Millennials. Why? It’s estimated that Millennials will have the most spending power of any generation by 2018 and by 2019, they’re projected to overtake Baby Boomers as America’s largest generation. So if the theory holds true, they’ll be the dominating consumer segment in the very near future.
Millennials differs from Baby Boomers and Gen X’ers. They’re the first digital natives, they spend more time on online activities, and they’re more social and connected than their predecessors (source: Goldman Sachs).
Unlike Baby Boomers and Gen X’ers, Millennials are unmoved by wait time at checkouts, inventory availability, and returns and exchanges. These are all regarded as bare minimum elements that retailers are expected to do well.
Also traditional marketing leaves Millennials unmoved. While 53% of Baby Boomers and 40% of Gen X’ers say that an ad with the precise item they want is incentive enough to a store visit, the same goes for just under a third of Millennials. So what does move the mysterious Millennials?
As the most connected generation ever, Millennials are savvy, skeptical, and filled with information about almost everything. They want authenticity and engaging experiences. So, if you want to catch their attention, immersive experiences that blend technology, personalization, and price is the way to do it (Source: Euclid).
Assistance Is the New Battleground for Growth
Millennials may be leading new consumer behaviour, but emerging technologies are also responsible for a big part of the turbulence in the industry and of course, Baby Boomers and Gen X’ers are also influenced by new trends and techs.
Earlier this year, the Consumer Electronic Show took place in Las Vegas. Following the event, Google President of the Americas, Allan Thygesen, sat down with the top marketing executives to talk about what the latest technology trends mean.
At the meeting, Thygesen said, “when we want something, we expect our phone to tell us where the product is being sold at a store nearby, and even tell us if it’s in stock this very moment.” “[Brands] have to be ready to assist. And assistance is really the new battleground for growth. As expectations of the empowered consumer continue to rise, the most assistive brands will win.” (source: Google).
Next week, we’ll be looking at how retailers can combine technology, in-store experience, and assistance when we look at the techs and trends we expect to shape the retail sector in the short to medium term.