E-commerce and the Retail Outlet: The Beginning of a Revolution
The use of mobile phones in stores has led to the phenomenon of ‘showrooming’, which turns brick-and-mortar stores into showrooms for products that are then purchased online or via mobile.
A few months ago when I was preparing for my Google mobile advertising certification exam, the following statement from Google took me by surprise:
“The use of mobile phones in stores has led to the phenomenon of ‘showrooming’, which turns brick-and-mortar stores into showrooms for products that are then purchased online or via mobile. No retailer is entirely immune to its effects. While many businesses fear that showrooming is a major threat, retailers should approach it as an opportunity.”
It provoked so many questions in my mind, such as, is this the end of the retail outlet? Will Saturday shopping in town soon be a thing of the past? Can consumer habits really change so drastically?
The answers came quickly and decisively. This won’t happen tomorrow or in a few years; this is happening today.
Many retail groups are struggling with these developments. One of Ireland’s best-known electronics retailers, Peats World of Electronics, was forced to close in 2013 largely due to the impact of online retailers. US stalwarts Wal-Mart, JC Penney and Kmart are the latest retailers to announce they’re closing stores because of business migrating online.
Setting aside rocketing online sales, it’s not just a matter of where customers are buying. Customer behaviour is also a huge factor in the changing retail landscape. Consumer habits have mutated beyond recognition. Customers have access to more information than ever and they aren’t afraid to use it. Before making a significant purchase, savvy consumers are now checking online reviews, and comparing products and prices. It’s also normal for people to check out a product in a shop while searching for the item at a better price online. Some 44 per cent of all age groups say the availability of in-store Wi-Fi influences where they shop.
So what the customer wants, the brands want. Proactive retail groups are busy responding to this shopping revolution.
In France, Decathlon - one of the world's largest sporting goods retailers - has opened a new type of shop. Their new shop is an ‘experiential zone’ where you get to try out their fitness-related products. That means you can bounce on trampolines and ride bicycles around the shop but no cash changes hands. Instead, you find the product you want and complete the transaction online on one of the many computers in the shop – or download their app and order at your leisure. You can then either collect the item or choose to have it delivered to your home.
Why does this work for the customer? Firstly, it satisfies the need to see and touch the actual product. Not being able to do this often stops people buying online. Furthermore, it allows Decathlon to showcase all of the products they carry as opposed to 40 per cent in a classic shop.
Secondly, according to Decathlon, this new concept allows it to make better use of employees. Instead of sorting stock and tidying the shop, employees spend their time advising customers and generally offering an optimum in-store experience. This is also a clever use of resources since Decathlon sells specialist sports equipment such as ski gear - items that buyers tend to seek advice on before buying.
Finally, the price is the clincher. The products are 10 per cent cheaper than identical items in their traditional shops. Delivery, however, is not free.
Other groups, such as Sephora the beauty retailer, are also testing this new concept.
Sephora is a good example of a brand bridging the online and offline worlds as it focuses on the multichannel experience. The company has enhanced customer experience by mixing online and in-store shopping. Whether facilitating product research pre-purchase, or providing information during and afterwards, Sephora stays close to the customer each step of the way. The Sephora app grants customers easy access to their purchasing history - listing all items previously purchased online and in-store – and informs them of promotions and product reviews. And it works! According to the consumer research group, the Benchmarking Company, Sephora.com is the online destination of choice for 85% of women looking for beauty products, and 62% of those surveyed spend between $26 and $75 each time they visit a Sephora shop.
Amazon too has followed this trend, opening its first physical book shop in November 2015 in Seattle.
It doesn’t look much different than a standard book shop, but includes reviews posted by customers on the Amazon website. Books are sorted by the number of stars they’ve received online and by genre, and prices are the same as those on the website. In short, all the information available online is offered in the shop to facilitate the customer journey and guarantee a good shopping experience.
The Amazon experience is actually the reverse of Sephora’s, in that it involves an online outlet opening a physical shop. You might well think, why bother, and the answer is - branding. Internet users tend to surf a wide variety of websites, without loyalty to any particular brand. On the other hand, having a highly visible shop on the street promotes customer loyalty. By opening an actual shop, Amazon is providing something unique. It multiplies the point of contact - becoming ubiquitous - and succeeds in placing itself at the forefront of the customer’s mind.
Still not convinced? Why, for example, does Irish bookmaker Paddy Power, run more than 200 betting shops – and continue to open more - while its online operations show strong growth, delivering more than three quarters of the group’s profits? The bookmaker is a good example of an omni-channel retailer.
The good news is we won’t be losing our city centre shops any time soon. We will still be able to while away an hour in our favourite book shop, get to feel the fabric before we buy a new shirt, and try out a pair of runners before the race.
Although we will all be more connected, our journey as a customer will change. Big brands will multiply conversion channels, giving us the information we need at the right time. It’s a win-win situation that will give the shopper wider choice, more competitive prices, and better information – and bigger profit for the retailer. The smartest brands are preparing for the revolution!
* This article first appeared on the TinderPoint Blog.