19455899 – worker create a brick wall with trowel and cement mortar
A recent article in the San Francisco Chronicle got me to thinking again about why most traditional retailers are having so much trouble these days. Still. I have written before on brick and mortar suicide (just search the blog on brick and mortar), but the trend continues some of which is self-inflicted and some as shoppers and the world changes.
But what can traditional retailers do to survive?
Most advice has two components: First and most obviously, blend online and physical as Walmart has done reasonably well. The key advantage, at least today, is that if the customer wants it “now” they can order it and pay for it online and then go to the store and pick it up. Walmart, Target and others do that well. Others could too and that certainly provides two values for the retailer:
- They get sales the online only stores like Amazon can’t get.
- They can entice the customer to shop their website more often.
All they have to do to make this business model work is create a website with a great customer experience (should not be that tough today) and make sure they can execute in-store for online orders. Again, should not be that tough.
However, there is one other area that most stores are not only failing in, but going backwards: That is in-store customer experience. Shopping for many used to be fun. Most retailers have killed that. Macy’s is in a death spiral in my opinion because, among other things, they destroyed their in-store experience.
Williams Sonoma still makes shopping in their stores an experience. Surprise (not) their in-store and online sales are both strong. Meanwhile retailers such as Sears, Penny’s and soon to be Macy’s are cutting “costs” that make shopping in-store an experience worth having. Destroy that and why should anyone wonder why ‘nobody’ does it anymore?
What does the brick and mortar business model offer that online can’t? Instant delivery and shopping experience. If you don’t provide either of those they why are you surprised when sales drop?
Mitch
Great – and very relevant – topic. While the typical advice that you identified is good, it’s not a good strategic direction. Too use a fishing metaphor, these approaches are kind of like telling someone to get a longer pole and start casting farther into someone else’s fishing spot. Eventually one would realize it’s better to just lift anchor and row over.
A better strategy – one which is woefully absent in retail – is to figure out what can (or if you can) get the fish back to your spot. The one thing that retail is horrible at is innovation. When you think about it, the retail experience in 2017 is not profoundly different than 1987. Nobody seems to have the vision or courage to reinvent the model of a retail store. Bricks and mortar has some dramatic advantages over the virtual world, and vice versa – but nobody is exploring how to combine the best of the two in any truly innovative sense.
I believe that a visionary retailer could be incredibly successful. Unfortunately, most are following in the footsteps of Sears, who have been trying to shrink their way to success for over 25 years.
Well stated and thank you
As a business model, online retailing is less risky than ‘bricks and mortar.’ Online retailing doesn’t suffer from external issues that affect shopping centers. Traffic, crowds, fuel prices, parking availability, inclement weather – none of these things impede online sales. These issues significantly impact bricks and mortar retailers, not to mention the fact that online retailers stay open 24 hours a day, seven days a week.
But it seems to me that if online retailing posed an imminent threat to bricks and mortar, the symptoms would have manifest themselves much more prominently than they have. Sure, retailers shutter stores, but they also open new ones. A list was compiled on 2015 of the fastest growing retailers (see https://www.thebalance.com/us-retail-and-restaurant-chain-expansion-2892736) in terms of store openings. Family Dollar, Dollar General, and Dollar Tree have planned to open around 3,500 combined stores. T-Mobile plans 400, and Walmart 240. ALDI, a German retailer has aggressive plans to expand into the US, and plans 520 new stores through 2019. ALDI just opened a grocery store near me, in Alexandria, in one of the most competitive retail grocery markets in the US. These anecdotes don’t comport with forecasts of a doomed business model.
For many people, shopping at bricks and mortar stores is fun, and provides an experience that online can’t match. Some of the experience advantages are within the retailer’s control, but some are not. Tyson’s Corner (see https://en.wikipedia.org/wiki/Tysons_Corner_Center) in Northern Virginia, is a shopping mall, but it’s also a cinema and restaurant complex. You can visit there any day of the week, and by 1 pm, you will find throngs of people milling about. Some shopping, some eating, some hanging out with friends, and many doing all of these. Tyson’s is a destination, and for that reason, it’s the most valuable commercial property in the DC metro area. And every time I read this, I remind myself that it’s a shopping mall. But these ancillary things I mentioned make the experience not only enjoyable for people, but complete. Online retailers cannot match it. No matter how slick the online experience is, online cannot duplicate the ability to see, feel, touch, try on, handle, and test merchandise. They cannot replicate the experience (as I have had) of bumping into contractors in Home Depot, and asking him which power tool he recommends for a particular need, and getting help and product insight that no online review could every provide. For me, this has happened many times. And yes, I prefer to hand-select my lumber. I’d never buy it online . . . but I digress.
The point is, bricks and mortar is far from a ‘doomed’ model. There are structural impediments that make competing against online difficult, but the best retailers will figure out how to exploit their unassailable advantages, and innovate ways to combine the online experience to improve their CX results.
Andrew – I’m with you right up to the end. There’s no evidence that even the most successful retailers have the stomach or ability for real innovation. Sure, they are adopting some new technologies here and there, but that’s not innovation. They need Henry Ford, not faster horses.
Thanks and we agree. My point was that if brick and mortar leverage the shopping experience (the fun as you noted) they can win and they can also have an online presence for when that is the best solution. They should be dominating not shrinking, which they are overall
Andy, the brick and mortar model is not “doomed” but is under serious stress.
According to this Bloomberg article, “Amazon is gobbling up most of the industry’s online growth.” And that’s where the growth is.
Quoting from the article:
“Year-to-date store closings are already outpacing those of 2008, when the last U.S. recession was raging, according to Credit Suisse Group AG analyst Christian Buss. About 2,880 have been announced so far this year, compared with 1,153 for this period of 2016, he said in a report.
Extrapolating out to the full year, there could be 8,640 store closings in 2017, Buss said. That would be higher than the 2008 peak of about 6,200.
Retail defaults are contributing to the trend. Payless is closing 400 stores as part of a bankruptcy plan announced on Tuesday. The mammoth chain had roughly 4,000 locations and 22,000 employees — more than it needs to handle sluggish demand.”
Agree with your points that online retailers can’t duplicate all of the experiences of the real world. I shop at Ace Hardware, Best Buy, and many other retailers for same reasons you do.
I think the retailers that survive will either
a) Deliver an experience that only be done in person. Although I can’t think of any examples right now, because the point of retail is to sell products, no?
b) Deliver a multi-channel experience that combines the best of both worlds. Order online and pick up in the store is one. Digital assistants in the store is another.
A recent post by Ernan Roman (Webrooming vs. Showrooming: Are You Engaging Both Types of Shoppers? ) discusses how Sephora is using digital to improve the in-store experience:
“Sephora’s mobile app offers an “in-store” mode which consumers can use while they browse to scan in a product to read online ratings and reviews and access the loyalty program to check reward points. The store can also send personalized messages and alerts to consumers with the app via Bluetooth beacon technology.”
The retail industry has gone through “bust” cycles before — remember big box stores like Home Depot and Best Buy were once the innovators. I think in the long-term that consumers will be better served by retailers that blend offline and online experiences.
First and most obviously, blend online and physical as Walmart has done reasonably well. The key advantage, at least today, is that if the customer wants it “now” they can order it and pay for it online and then go to the store and pick it up!
Agreed