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How Do We Keep Physical Stores Relevant in the Digital Age?

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How Do We Keep Physical Stores Relevant in the Digital Age? STORES: WHAT NOW? How do we keep Physical Stores Relevant in the Digital Age? A State of the Industry Report By: LEE PETERSON CHRIS Executive Vice President, DOERSCHLAG Brand, Strategy & Design Chief Executive Officer 4 Winning back the storeless generation It’s a new dawn, retailers! Hope you’re ready. 6 Let’s Talk about BOPIS As we look across the fluid landscape of physical buy online, pick up in store retail today, there are four disruptors affecting every aspect of selling goods that simply must be recognized and called out. In our minds, these are the powerful 8 Customer prerequisites to being successful now and going forward into what should be the most interesting— Segmentation albeit scary—period in retail history. the advantages and limitations Let’s commiserate. 10 People Make the Difference but they need to be up to the task, and that’s up to you 12 The Omnichannel Dilemma focus or fail 15 5 Mobile Retailing Tips Live-Shop keeping pace with fast A huge shift in consumer mentality has bludgeoned the thinking of all moving consumers retailers, regardless of vertical. Shoppers, especially younger ones, no longer shop and live separately, they/we all live-shop simultaneously. One consumer told us, “I needed something, remembered it at work, shrank down what 16 Human Interaction I was doing, went online and bought it—5 minutes.” We are shopping all community and connection the time now, not within store hours and not necessarily in stores at all. Consequently, not only have retailers had to compete online, but the days of the “stack it high and let it fly” experience are over. Here’s the shift in simple 17 A Lot of Catching Up, terms: No one has to go to a store anymore, we have to want to go to a store. Understanding that element is the first step in being competitive in today’s In 3 Simple Steps physical retail environment. digital solutions at retail 2A chainstorage.com August/September 2015 CHRIS DOERSCHLAG Chief Executive Officer The Storeless Amazon’s soft underbelly is their lack of Third Wave of real space. But let’s face it, stores will Generations have to stay sharp in order to beat Physical Retail Change is upon us, and it’s brought to the gorilla. The first wave was Ma you by a large group of consumers who and Pa retail. The don’t have an affinity for stores. This second wave was group of young people, who grew up retail on a mass on experience-less stores and highly Smaller/Better level. Now comes experiential digital devices, are going Physical retail will have to do two things the third wave; to make us compete for their spend in order to compete in the new retail the combo of in a much different way. “Why would I future: be smaller and be better. Smaller the first two with go to a store? It’s all here in my hand.” in size of actual shopping space and also a dash of digital. is a comment we often hear from the overall store count. Footfalls in stores in Whole Foods, Apple, young people we talk to in our studies. the US have been dropping by at least Starbucks, Warby Parker, Bonobos Obviously, stores are going to have 5% every month for over 3 years straight and Shake Shack (to name a few) are to get better in order to compete; and were down over 20% last November concepts that appeal to consumers better associates, better service, better to the year before. Sure, we’re over in a fresh way on all levels and to all digital-retail integration, better product stored in the US, but even if we weren’t demographics and their numbers are assortments, better pricing strategies, (as Sweden is not), the idea of having to stunning. This third wave of retail is better store design, better logistics, shop in stores is obviously over. Again, taking a bite out of the second wave and better navigation . we now have to want to go to stores. coming back for more. Excellent service, better everything. We can buy anything, anytime, anywhere quality over everything, simplicity, clarity and from anybody with a couple of clicks of offering and digital masters degrees and as stated, “in five minutes.” Retailers drive their corporate philosophies to a Amazon Rules now have to work a lot harder to entice place where all retail must get to in order Commonly known as consumers to come to their stores, to play. And those retailers that think the “900 pound hence the “better” part of the equation. this is a “specialty” thing only will soon gorilla in the Additionally, a store’s shopping floor does get run over by the first mass merchant room,” Amazon not need to be as large as it was in the truck that applies the same principles. Be is everyone’s past. “Endless aisle” technology coupled ready to think and competitor. The with BOPIS and ship-to-home will turn the operate differently. “Everything “shopping” part of stores into smaller, Store.” As more experiential environments while the rest of the physical store will become a Mickey Drexler —Thank you for your time, said recently, “How fulfillment center. do you compete with a enjoy the pieces we’ve put huge company that doesn’t want to together. Looking forward to make money?” This competitor also This brings us to our grand conclusion. rates very high on every consumer It is indeed a new dawn and that calls speaking with you soon. survey’s trust meter. They love them. for a completely new retail experience. Armed with low (or no) margin, severe Fortunately, there are plenty of examples ease-of-use, next day delivery and out there that are providing us with a innovative leadership, Amazon is the sneak peek into the future. It’s somewhat biggest competitive threat to physical of a mini-tsunami, but a long time ago, retail since the invention of the store. so were department stores. And more But ironically, the best way to compete recently, so were “box” stores. Here’s with Amazon is, in fact, through stores. our take on the new wave. August/September 2015 chainstorage.com 3A Winning Back the Storeless Generation It’s been 25 years since, urban sociologist, Ray Oldenburg coined the term third space. “A generic designation for a great variety of public places that host the regular, voluntary, informal and happily anticipated gatherings of individuals beyond the realms of home and work.” From the desk of technology that helps them avoid Instead, most stores are viewed as The WD Thought going inside a store at all. They don’t time-sucking establishments with Leadership Team love shopping anymore. It’s a chore, unfriendly associates, vast expanses not an experience. of space that rather than help you That might sound stuffy and stilted “get through the day,” require ample compared to the elegant way Howard Yet in The Great Good Place one reserves of patience to merely get Schultz uses the term to describe reads of a lost retail world. A through. A store isn’t the place you go Starbucks, known universally as the consumer culture few Young People for “happily anticipated gatherings.” It is a place to be avoided. “third space between work and experience today. After all, who refers home.” Of course, Schultz’s genius to a big-box store at the nearby was in turning the concept into a So how does the storeless generation power center as the kind of place to viable business model. Yet there is far get “through the day” today? Based go to “get through the day?” more to Oldenburg’s original concept. on frequency, with the heavy use of social media. Yet based on well-being, The moniker Millennial no longer I recently revisited Oldenburg’s social media fails to play the kind applies. This is the storeless book, The Great Good Place: Cafes, of role in the lives of Young People generation. A generation raised in a Coffee Shops, Community Centers, that the third space once played in chainstore world, one without third Beauty Parlors, General Stores, Bars, the lives of previous generations. A spaces, at least in the classic sense. Hangouts and How They Get You growing body of research suggests Through the Day. I wanted to make After all, Oldenburg described third obsessive use of social media has sense of the rather disheartening spaces as welcoming and comfortable, created a latent craving for more finding at the heart of a recent mostly free or inexpensive, and within meaningful social interactions in the survey we did of 1,500 consumers walking distance; places with food and real world. nationwide: People don’t want to go drink where regulars connected with to stores. More specifically, Young new and old friends. Sadly, few stores Facebook and other social media People prefer—by double-digit play such a meaningful and emotional sites are contributing to a new margins compared to Boomers—any role in the lives of consumers today. wave of mental health problems, 4A chainstorage.com August/September 2015 associates, check-out lines—and create new spaces where experiences and social interactions can happen. It’s time to reinvent and revive ...50% of your sales were online, Oldenburg’s original concept of what happens to your stores? “third space.” Stores have always been a vital part of human well-being and may actually be making users the business model for retailers—might and community belonging, but there’s miserable.
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