Bustling Warby Parker location, Jan. 2020 – Photo: RetailWire
Is physical retail entering a new age?
There has been no shortage of speculation since March 2020 about what the retail world might look like if and when the novel coronavirus pandemic end. While waves of the pandemic continue to impact the U.S., the relaxation of restrictions and the perception of overall improvement has led to an increase in store openings, which one firm sees as a sign that physical retail is entering a “new age.”
An analysis from Moody’s Analytics describes a slew of new store openings and states that the retail world has “a reasonably strong appetite for in-store shopping on both the demand and the supply sides,” according to Globe St.
Retail verticals with products that depend on in-person browsing, such as home furnishings, have been dominating store openings with new locations in places where demographic shifts have demanded more retailers.
Previously online-only brands like Warby Parker have also continued to build their physical retail footprints.
Major chains such as Aldi, Lidl and Starbucks have expanded their physical footprints throughout the pandemic, and 7-Eleven, Sonic and Dollar General have all announced big expansions in the offing.
The reopening of stores seems to be diverting customers away from e-commerce, as well. The prediction of a rush back to stores corresponding with waning COVID-19 cases held up during the summer and heading into fall, although concerns related to the delta variant kept many shopping at home. More recent indications of a rise in cases in parts of the U.S. is becoming a point of concern heading into the Christmas holiday season.
Discussion Questions
DISCUSSION QUESTIONS: Do you see a new era of physical retailing on the horizon? What will it look like?
Poll
Loading …BrainTrust
Lisa Goller
B2B Content Strategist
Steve Dennis
President, Sageberry Consulting/Senior Forbes Contributor
Brick-and-mortar stores will always comprise a majority of retail sales. But e-commerce has come into its own and its share will continue to grow from this point forward. The challenge for retailers is blending the two in a manner that is seamless to the shopper.
The COVID-19 pandemic temporarily changed some shopping behaviors, but for some consumers it has turned temporary behaviors into long-term habits. Some consumers are thrilled to be shopping in physical stores and malls and appreciate the social interaction. However some shoppers have appreciated the convenience of online shopping and now rarely shop at physical stores. Many decisions about online versus physical shopping experiences are driven by the type of product they are purchasing (experiential or commodity). It is a mixed bag.
I don’t see a new era, per se, but rather an ever evolving landscape which has been permanently altered by the pandemic — changes in consumer expectations, advances in robotics, data informed decision making, technology and AI. I expect to see much broader use of automation in every aspect of retailing from logistics and supply chain to the delivery of customer-facing services. Despite all the current challenges, the future of retailing is exciting and bright.
Mark, I believe we’re on the same page on this one.
Stores as showrooms and distribution centers will be the norm. The theater of shopping has never been in doubt. People like to leverage their five senses when shopping, so I anticipate a more immersive shopping journey with surprise and delight taking center stage. Even grocery will look different with robotic pick, pack, and ship or pickup taking up the center of the store much like kitchens moving to the center of a restaurant. In-store is not dead; it has just been hibernating.
Perhaps it’s a little too soon to be focusing entirely on store openings. With rampant theft rings operating in some urban areas, many retailers have shuttered up dozens of locations. On the other hand, MFCs are making it possible for grocery stores to open up in what are generally considered food deserts.
The big question is not retail, it’s department stores. If moves like the Saks/Saks.com split become a trend (look at Macy’s …), the major department stores’ retail footprints could get starved.
The new investors are putting money into the digital spinoff business, and the “legacy” retail business gets … ?
I definitely agree that the department store is going to have to enter the next stage of evolution in order to survive. Some say splitting physical and digital is the only way to stay profitable but there is so much more work to be done. The physical footprint needs to be purposeful and product experts and brand ambassadors need to be next-level.
Physical retail will be comprised of more showroom models, more magic mirror, more self-help kiosks and self-checkout POS, a discrete customer service area, discrete BOPIS and Will-call space, more communication among and to the hourly employee, to list a few characteristics. All of this innovation that we have seen creeping into certain stores will become ubiquitous in five years or so.
When make-to-order bespoke clothing production really kicks in, these elements will all play key roles. Almost like going back to the beginning – personal relationships with your tailor and seamstress…
I wouldn’t call the post-pandemic return to the store a “new era” as much as the next step in the evolution of retail. Retailers that positioned their stores as integral pieces of the ominchannel journey were those that were thriving before the pandemic and I believe they will be those who thrive after the pandemic. There will just be more of them, as the pandemic simply accelerated the need for many to deliver unified and integrated journeys.
Other than a few of the most current facts, this is a question that could have been posed each year. There’s always something. We’ve been discussing how online has disrupted in-store for years. The pandemic accelerated the way consumers shop. (In other words, the big changes in the past 18 plus months would have happened anyway.) The point is that retail has been evolving since the beginning of retail. It’s just happening faster today.
If the new era of physical retail is omnichannel (meaning the same offerings from e-commerce like payment and delivery options – think Klarna, Venmo, etc.) then yes, this will be a new era. If physical retail embraces tech solutions for staffing, staff performance, loyalty, queue avoidance and inventory then yes, it’s a new era of physical retail.
I think it’ll be more experiential, with more helpful employees and the ability to always have endless aisle.
It is my hope to see more independents and local stores that are integrated into the community, but that could be a blind hope.
Yes. Physical stores will support e-commerce and host unique, multi-sensory experiences e-commerce can’t replicate.
Consumer desire for convenience will boost demand for fast curbside pickup and returns, and contactless checkouts. Expect more popups and shop-in-shop partnerships as fleeting, low-risk ways to test what drives sales.
To pamper shoppers and entice them into stores, more retailers could offer services like nail salons and Champagne bars. Also, social events like in-store fashion shows and live cooking shows would entertain consumers and compete with livestreaming.
No, this is not a new era – it is the same era that has always existed. The difference is that the gloomy prognostications that physical retail was doomed – which were amplified by temporary shifts in behavior during the pandemic – have been proved to be completely false. Of course, this doesn’t mean physical shopping is static and that retailers can approach it in the same way – they can’t – but that’s not new either: good retailers have always adapted and changed their stores as consumer habits have evolved.
It’s not surprising that physical retail is experiencing a resurgence as shoppers venture back to power centers, big box stores and (to a lesser degree) malls. At this point, it becomes a market share game: Who has the most/right locations and who has the ability to expand their footprint? It’s not all that different from past retail history where overcrowded segments went through a winnowing-out period.
It still seems inevitable, regardless of the physical bounceback, that online sales will grow at a faster pace. This was happening pre-pandemic anyway, but consumer behavior has undergone some tectonic shifts since early 2020.
Physical retail is here to stay and will remain a significant part of the customer journey. Despite the fact that the pandemic fueled the surge of digital commerce, physical retail still represents over 85% of all the national retail sales. The new age requires retailers to power a connected experience across all channels, leveraging the stores to connect with customers, providing an outstanding experience, and connecting with the communities they serve.
While we are clearly a digital-first society, our economic model is built on physical stores, representing many things. For some consumers, the store is a micro fulfillment center for BOPIS and curbside pickup. To most customers, it’s a showroom to experience, discover and engage with brands, products, and services. Subscription-based services for commodity items are here to stay. However the store is where all the action is at and, if executed properly, this will help drive the industry forward.
To paraphrase Mark Twain, “Rumors of physical retail’s death have been greatly exaggerated.” All the digital natives notwithstanding, people are out looking for connection and merchandise. Hire great people, train them to be great associates, delight customers and bid them to return. Rinse and repeat.
Bob, you bring up a good point – hiring great people is a necessity for creating a great retail experience, however right now, that pool of people is smaller as many retail workers did not come back or moved on to other occupations. I hope the pendulum swings back the other way and we begin to re-build a pool of great people that want a career in retail.
There is this ridiculous notion that there is no one working in retail. There are a bunch of C-level executives looking the other way, managers who didn’t get trained defaulting to managing tasks, and associates bored out of their skulls picking and packing online orders while customers who made the journey to the store are left on their own. You can have smaller crews – if they know what they are doing.
We’re already there. Digital and physical are now inextricably linked. This is a welcome opportunity for the industry and will result in a host of new services for consumers. To keep this going, we need to nurture store associates and investing in stores.
Some surveys of retailers report that over 70 percent of retailers planning to open new stores next year – so the talk about the end of the store is much over-hyped. This is echoed by the fact that Amazon is buying what appear to be store-type locations.
The store is far from dead – it needs to evolve. From being a place where people simply transact it will become a location where product can be experienced, a central hub for harmonized retail – acting as distribution center, pick location, customer pickup point and more.
There is no standard format. Every store needs to have multiple purposes – each with a different combination.
This requires a whole new way of thinking – different metrics by which to measure the store, broader multi-skilling of store associates, technology application to drive productivity and improve the overall customer experience — and much more.
Retailers need to be careful to not over-build right now. There is a pent up craving to get out of the house. Doing outside activities has taken some of that pent up demand but in-store shopping is now also an alternative for that demand. While consumers may not feel comfortable in a large indoor setting, they are more comfortable in a store that is not crowded – especially if they wear a mask. Consumers frustrated over having received orders that were not correct or wanting to see and touch products in person will also want to go to a physical retailer. However these two situations do not include all consumers shopping for all products. While in-store shopping is increasing over where it was 12 months ago, it may or may not return to or settle at pre-pandemic levels.
The key sentence is, “Retail verticals with products that depend on in-person browsing, such as home furnishings…”. Browsing = discovery. How about apparel, electronics, pots and pans? The internet has taken discovery to a whole new level, and physical retail is needed more than ever to confirm and validate those findings. Explore + experiment will drive physical retail for some time to come. But now the promotional malaise of the last two decades is being shaken off as retail evolves into a whole different animal. We are leaving the buggy whip era.
Brick-and-mortar stores will always be a cornerstone for retailers that want to provide a complete and engaging experience. The key is to be able to take the lessons from the last year and understand what customer expectations are and aim to exceed this with a blend of improved customer relations, enticing merchandising, and more digital tools for sales associates and customers in the physical space. The new era will be won by retailers that are constantly testing, learning and innovating, and catering to their customers regardless of channel.
Absolutely! The store as we know it will never be the same. Digital technology combined with faster bandwidth and increasing access is making possible the once unthinkable. The store as a concept needs a complete reinvention. Think of the physical store as a space that attracts consumers with experiential settings created through unique combinations of products, services, visuals, and technologies that inform, surprise, and delight. The home, the mall, the online stores, social media, videos, concert halls, hotels, and much more are blurring shopping boundaries and redefining commerce as a whole. These spaces, as they help define consumer expectations and the desired engagements, should inform the reimagined physical store.
Paradoxically in this collection of commerce, the physical store becomes even more valuable and relevant as the “real” branding reference that defines and connects with the digital experiences at home, work, or play.
I don’t think of it as a new era, but more of a nuanced version of what was brick-and-mortar retailing’s emerging response to a variety of issues from the decline of malls to the rise of e-commerce and – most importantly – a change in consumer markets, all which predate COVID-19.
You can say a lot of things about the future, but the only honest one is that it isn’t all that predictable. Remember all those “Retailing 2020” reports released in 2015? None of them except mine and perhaps a few others even mentioned the possibility of a pandemic, and then only as a “wild card” potential disruption. So rather than speak about “omnichannel” (gag me) operations, I’d like to suggest that as physical retailing returns it will have to be consumer-based and facilitate commerce related activities from BOPIS to returns, rather than fight them.
This question reminds me of a conversation I had with a noted restaurateur (from the Chicago area) sometime back, that involved much the same question. He wisely surmised that a whole swath of lower demographic food service businesses that had heretofore used waitpersons and also a number of staff behind counters, would fall by the wayside. Mainly because it was not cost-effective for the operation — or the waitperson — to continue much longer. This was especially acute in an environment that could so easily be automated. Turns out, his predictions are coming true(r). With each given day, more and more food establishments are headed to a self-service mode, if they’re not already there. (The same, it should be noted, is happening for grocers too.)
Meanwhile, it was also mentioned that the only restaurants that could afford to keep frontline staff were those operations that could (or had to) afford them. In that customer service was absolutely necessary to enhance the experience.
Transpose that to retail stores and you have, rather unarguably, the same eventuality. Which is already happening in places (and hastened by the pandemic), of commerce-driven entities realizing that fewer staff can be managed as long as the behind the scenes operations are functioning (or on their way). As a point, does a Target really REALLY need actual workers in the store — when kiosks and automatic registers can do (and are doing) the job as well?
However, it remains that retail still has those few entities that do need person-to-person contact. It’s just a matter of them knowing this is how they are — or are not. And the rest of us, the consumers, will wait to see how it all plays out. Which is going to happen, perhaps, sooner than some of us thought. Including for the few salespersons who used to think these jobs will always be here. Most won’t.
There is a major aspect that isn’t new at all, but folks are simply waking up to, and another that is mostly new. I’ve been saying (in my keynotes, articles and in my recent bestselling book “Remarkable Retail”) that the retail apocalypse narrative is wrong and that it’s not that physical retail is dead or dying, it’s that boring, unremarkable retail is. The growth of brick-and-mortar retail among remarkable retailers is totally predictable and understandable when you see how they leverage the value added that physical retail brings AND create a harmonized experience where the customer is the channel. What’s new (or at least greatly accelerated) is how stores (and retail overall) are becoming more hybridized. Stores used to be built almost entirely for one role: places for consumer to go see stuff, pick it out, pay for it and take it home with them. Finally, more retailers are understanding the marketing and service role of stores, along with seeing the part they play in digital fulfillment. Physical retail isn’t dead, but it’s definitely different.
I most definitely see physical retail entering a new age. Since the dawn of e-commerce in the mid-1990s, so many have viewed physical and digital retail as separate businesses, and separate operating silos. That’s not however how a customer wants to be served, and not how retail enterprises should be organized.
I would argue that physical retail now becomes an interconnected element of a brand experience, and a way to serve a customer when and how they choose. Physical stores provide a quick and efficient way to deliver online orders, see and sample products in-person that were discovered online, and a nexus for local delivery that is essential to the future of retailing.
The problem here is that there is no horizon. Retail is not an end point – even visually. What defines an era is usually a particular feature or characteristic. In the case of retail there are no eras because it is a dynamic play that intermingles with societal norms – as automation and banking became available, retail adopted tools like cash registers and point of sale technology. As shipping and warehousing grew, retail introduced big box stores. As the internet came into being, retail formed e-commerce. With smartphones, retail enabled in-store engagement, marketing and mobile tech. Even during COVID-19 times, physical retailers adopted contactless transactions and expanded BOPIS. What will the next iteration of retail look like? It’s a deep question – but expect that new technology, new processes, and new consumer habits will be part of it.
We are definitely on the leading edge of a new era of retailing. And while the catalyst for change is unquestionably innovation in technology, the real creativity will come in the form of new business models that were previously impossible. What are the dimensions of retail competition that benefit brick-and-mortar? Customer service, proximity, shopping experience, product demo, entertainment, personalization, etc. Now add AI, big data, micro-fulfillment centers, mass customization, augmented reality, and it starts to look like a very hands-on, 24/7, customer-centric immersive experience in which each customer can have a curated experience.
Physical retail MUST evolve and rethink its purpose, its assortment, and its integration with all other touchpoints. There remain a handful of retailers who believe that we will someday return to shopping as it was in the ’80s … unfortunately, we are not going backward.
Finally, we must remember Sam Walton’s advice, “There is only one boss. The customer.”
Physical retail will continue to evolve to help service online customer engagement initiatives like live streaming and digital clienteling. These types of services help brands maximize revenue per sq/ft, allowing associates to sell beyond the walls of the store. If a store can provide a stage for human-to-human clienteling to online shoppers AND create a unique in-person shopping experience, then they’ve hit a home run.
The store of the future is all about experience. Shoppers have been deprived of full sensory-based shopping for too long. As they go back to stores, shoppers are reveling in the experience, big or small. This is prime time for all the merchandising aficionados, retail creatives and stores employees with flare to really shine.
While yes, extraordinary experiences will be celebrated, let’s not under-sell the value of human interaction and human touch. Experience is the future of retail. Price and convenience are now table stakes.
Feels like it is worth diving down a few layers — certain categories of retail will change differently based on consumer expectations and needs based on the product. Some categories lend themselves to e-commerce, others to brick and mortar. And certain stages of a products life cycle may also dictate what channel works best. I would think a CMO needs to consider these points in order to take advantage of the unique opportunities each channel offers.
The only constant in the world, especially in the retail industry, is change. Either you evolve or you become obsolete for your customers, partners, and everyone else.
Legacy retailers’ failure to innovate has resulted in their inability to fully utilise brick and mortar. Unfortunately, many stores are closing and being replaced by newer, more advanced stores. These stores are more suited to the needs of today’s customers.
Physical retail was, is, and will continue to be relevant. But it will also keep evolving to meet the needs of newer customers as we have seen in the case of Allbirds and Warby Parker, and the most important one — Amazon. We also have legacy retailers such as Walmart and Target who adapted to the new models of brick and mortar and not only retained their customers but also gained new ones.
The modern customers are wired-in and expect a digital-first experience regardless of what, where, when, or how they shop! So for instance, if retailers enable store-mode and show in-store product availability when customers are browsing products on the brand’s website on their phone, customers can decide to visit a store to try those products or directly choose to order online and pick up from the store on the same day.
In the new era of physical retail, retailers should bring stores to customers to bring customers to the store.
From what I see, a lot of stats consider BOPIS e-commerce. It’s getting increasingly harder to clearly attribute sales by channel when you have digital pre-shopping and guideshops.
“The pace of change has never been this fast, yet it will never be this slow again.” ~Justin Trudeau