When Amazon announced its plans to acquire Whole Foods last year, many industry observers seemed caught off guard. Media coverage carried on about the “shockwaves” the move sent through the business world. They shouldn’t have been surprised. Amazon’s decisive move into traditional retail reflects a long-term trend that’s been steadily gaining steam and one that has big implications for the future of the industry.
Granted, Amazon may be the most high-profile example to date, but many other brands that started life as online shopping pioneers are also betting on retail storefronts. Among the first was Warby Parker, which today operates 64 storefronts, with plans to grow to 100 stores in the near future. Mattress maker Casper operates 18 retail stores in the U.S. and recently shared its intention to expand its retail footprint in Canada. Fashion retailer Frank and Oak has been methodically growing its physical retail presence since 2014.
In one sense, it’s easy to see why. Despite the gloomy headlines and dire predictions, traditional shopping actually remains quite strong. According to recent U.S. census data, nearly 90 percent of retail sales take place in brick and mortar stores. E-tailing may have entered the mainstream, but people are also clearly unwilling to give up visiting their favourite store in person.
Others may be tempted to view the move from online-only to omnichannel as evidence of brands simply hedging their bets in a turbulent retail industry, or even as an admission that the online-only model was flawed from the get-go. And they’d be wrong. What we’re witnessing is actually a carefully planned evolution of a business model, albeit in a way that might seem backward to those outside of retail. And it all starts by putting the customer — not the store — at the center of the equation.
So, the question we should be asking ourselves isn’t about the future of brick and mortar, but rather about how physical storefronts will evolve as part an increasingly diverse and sophisticated omnichannel approach. And what it will take for retailers to ensure long-term success.
Power of User Data
To understand how we got here and where we’re going, we must take a step back. Like the social media platforms that have come to dominate our lives, the one thing e-tailers do very well is collect and analyze user data. Everything from purchases to newsletter sign-ups to ad clicks tells retailers a little bit more about their customers’ preferences and habits. They then use that mountain of data to fine-tune the shopping experience, something they can refine with each passing year. Over time, they have acquired enough data — and capital — to tap into their online databases, understand where customers are located and open stores in areas that have a critical mass of shoppers.
Contrast that with traditional retailers, who entered the digital era already heavily invested in real estate and supply chains, and who have struggled to keep up with modern consumer shopping trends. For that, they are paying the price — 2017 saw 7,000 store closings alone, a record number, according to retail think tank Coresight Research.
In many ways Frank and Oak perfectly embodies this evolution. Once it launched, it didn’t take long for the company to become a dominant fashion and lifestyle brand, something they accomplished by offering quality clothing and, just as important, a personalized experience. Every engagement with the online store felt tailored and customized. The company even doubled down on that approach by launching an online lifestyle magazine. A lot has changed in just four years, and today Frank and Oak operates 18 stores across Canada. Clearly, the move to brick and mortar was well executed. But a big factor behind the company’s brick and mortar success is its relentless commitment to taking the level of personalization they pioneered in the online world and making it work just as well as in-store. Each Frank and Oak store has been literally built around the precise tastes and preferences of people who walk in the door, and that all starts with insights driven from data.
Test and Learn
To better understand what customers want to see from retailers as they expand into storefronts, they have to get comfortable — and fast — with making testing and learning a part of who they are. It starts by doing away with the one-size-fits-all approach. Every store must be viewed for what it is, a standalone entity with its own unique market. A physical storefront may carry the same brand name, and clearly, the overall brand experience must maintain some consistency. But expectations from shoppers in New York are going to be way different from those in Crown Point, Indiana. Retailers must be ready to hyper-target their research, using geofencing and passive metering, to understand how to tailor a personalized experience in each of their markets, and that drills all the way down to every last detail, from the ideal location to the CRM strategy.
Retailers must also tap into online research platforms to provide them with the valuable insights they need. If they choose to use a pop-up strategy in market before committing to a storefront, for example, research can gather and analyze feedback — the kind that can be used to determine everything from colour palettes to the style and location of signage.
As retailers know, planning to serve customers is one thing. Keeping them loyal once they’re engaged is quite another. For that reason, research and testing can’t stop once the doors open. It’s just as important to continue collecting data and sharing it with front-line staff so they can make adjustments as tastes and habits change. The objective is clear: Stay fresh, stay nimble and above all, be consistent.
Amazon may have turned heads, but it will be some time before the verdict is in on its storefront ambitions. Meanwhile, other savvy online retailers with far fewer resources have shown that a move to brick and mortar can be well executed, as long as it doesn’t stray from what made them successful in the first place. That includes a commitment to research, testing, and learning, investing in the customer experience and continuously optimizing.
The future may be bright, but consumer standards have never been higher. Don’t let this period of opportunity slip by. Take the right steps now to make omnichannel work and build a brand that will endure for years to come.