The role of the physical store is changing. For millennials and younger consumers, the store is no longer the only place to discover or buy products; they turn to their mobile phones and shop online. With the abundance of information and reviews available online, consumers often know more about the product than the sales people. The result? Many traditional retailers are closing down.
But the retail store is not dead. Instead of debating whether to invest in the digital or the physical channels, retailers need to see both as complementary platforms that should ultimately enrich the customer experience.
The challenge is, how to integrate them into a coherent shopping experience that drives revenue and creates customer loyalty. How can retailers take the best of both worlds that maximizes a return on investment?
Brands need to be able to blend the offline and online experiences effectively. In effect, new store experiences will emerge. Retailers who think ahead know that the role of the store is evolving: it’s no longer just a place to sell products - it can be so much more.
Exploring New Store Experiences: Showrooming and Data Collection
With so many businesses competing for the customer’s attention, retailers these days need to get creative and think outside the box. How are they eliminating cross-platform sales barriers?
One solution is showrooming: giving shoppers the sensory experience to examine or test out products before buying them online. Online-only retailers are starting to understand the value of the physical store.
Amazon, for instance, opened a physical bookshop known as Amazon Books in Seattle’s University Village. The bookstore offers a hybrid experience that’s different from simply purchasing books online. In the store, people are able to see, feel and open them. Using the Amazon app, shoppers will be able to read additional reviews or purchase the product online. Shoppers can also buy the eBook version for their Kindle or add the product to their wishlist.
Amazon Books sells only a limited selection of bestsellers, highly reviewed titles and popular books on Goodreads. None of the books have prices on them. Shoppers will need to use the Amazon app to check prices. This is part of Amazon’s initiative to track in-store browsing habits and consumer behavior. By having shoppers use the app, Amazon is able to track which book caught your eye and link this data to your online customer records, preferences and browsing history. Armed with this data, Amazon can feed you recommendations, retargeting ads, coupons and incentives to eventually close the deal.
Publisher Penguin Random House also opened a direct-to-consumer concept store in Puerto Rico, introducing new ways to help readers discover new books and authors. The store is filled with iPads and displays, and it also features an aggressive author event calendar.
Another example is men’s fashion brand, Bonobos. Their physical locations, known as “guide shops” focus solely on showrooming instead of the traditional approach of stocking products to sell in a retail store. The guide shops offer in-store fitting and measurement to customers, and their orders will be delivered to their homes.
Target is also overhauling their stores with new concepts to revamp the shopping experience. In a pilot program called “LA25,” the retailer transformed its 25 stores in Los Angeles, upgrading in-store dining options, expanding floor space for sleeker Starbucks cafes, and redesigning key departments by adding dedicated service stations for consumers to quickly pick up online orders. Target is also adding product specialists in key departments and service advisers to assist shoppers in using their website and mobile app, Cartwheel.
These stores feature a customer-centric environment, augmenting the sensory experience with digital innovations. The retail store is no longer just about selling products. For Amazon, it’s about collecting and using data to personalize recommendations and drive sales. For other retailers, it’s about delivering a holistic customer experience.
Mobile Phones: Integrating the Digital with the Physical
About 71% of consumers use smartphones to browse products online. From mobile coupons to indoor searchable store maps, brands and retailers are trying all sorts of strategies to get shoppers into stores.
According to Forrester, consumer brands that leveraged coupons and loyalty programs via mobile wallets saw clear incremental revenues. But if these promotions are used improperly or out of context, consumers will consider them spam.
Location data is particularly effective when it comes to sending relevant promotions in real time. Whenever a prospective customer is in close proximity to a store, they would get a promotion on their smartphones to entice them to stop by and shop.
To go one step further, retailers could use mobile location with customer data to develop real-time ads that encourage in-store traffic. Think of retail stores with large screen displays. When a shopper walks by, the image on the screen changes based on that customer’s shopping history or abandoned shopping cart. This retargeting technology is often featured in retail trade show demos.
“Mobile marketing technology can drive consumers into stores more often and push them to buy more because the mobile layer provides digital tools in the physical space,” says Alexis Rask, chief revenue and operating officer at Shopkick, a shopping-companion app that drives customers to stores through personalized offers and rewards.
Whenever a Shopkick user walks into a participating store, the user is awarded points known as “kicks.” This gamification of the shopping experience encourages in-store traffic, and it also allows the store to personalize their products and services. Whenever a customer walks in, the app tells the store the customer’s location, shopping history and browsing behavior.
“Six years ago, everyone thought showrooming was going to put everybody out of business, but now there’s more digital- and mobile-influenced commerce than there is showrooming,” Rask says. “Of the $3.2 trillion spent in physical stores last year, $1.5 trillion of that was influenced by technology.”
The retail store continues to evolve with innovations that improve the shopping experience. Retailers will have to identify what adds value for their customers, and what level of personalization they need to provide without being too unpleasant or intrusive.
A data-driven strategy always starts with authenticity and trust: earning the confidence of your consumers and meeting their basic expectations. It's becoming clear that ecommerce is no longer a competing channel, but rather, a platform that augments the retail experience.
Finding Balance in Digital and Physical Channels
Whether you are a traditional brick-and-mortar retailer or an online-only e-tailer, doing one or the other is simply limiting your potential. Depending on their products and services, brands will need to figure out what kind of experience works best for their customers.
For some retailers, this means adapting the store and customer service based on their visitor’s shopping preferences and interests. For others, it could mean giving easy access their wishlists or shopping carts to finalize a sale on any channel.
To find the perfect balance, retailers will need to have a customer-first mindset. Will your customers benefit from a sensory experience of a physical shop? What level of customer service do your customers prefer? Does your online and mobile branding complement your offline store? Are you gathering data to personalize your promotions?
Offline and online channel each offer different experiences, but brands need to mold these together into one coherent experience. Casey Carl, Target’s Chief Strategy and Innovation Officer, said that the convergence of the digital world with the physical world will be personalized and data-driven.
It all boils down to enriching people’s lives, which involves knowing your customers. It’s about building a relationship, earning that trust, and personalizing their experience to turn them into loyal brand evangelists. You need to be able to create a brand experience that spans all channels, integrating the sensory experience of the store with powerful digital technology.