The Store is Dead! Long Live the Store!

Through a special arrangement, presented here for discussion is a summary of a current article from Tenser’s Tirades.

The distinction between online and off-line retail sales grows blurrier by the minute, as shoppers meld their consideration and purchasing behaviors into an "all-line" shopping continuum that spans brick, web and mobile.

"The war for store traffic will be won or lost on digital," said Margo Georgiades, president of Americas, Google, who spoke April 23 at the 19th Global Retailing Conference sponsored by the Terry J. Lundgren Center for retailing at the University of Arizona.

In 2010, U.S. retail stores recorded 39 billion "footsteps" in November-December, she reported. By the same period in 2014 that number had declined to 18 billion. Despite that huge drop-off in store traffic, store revenues grew for the same periods from $641B in 2010 to $737B in 2014.

"Smart phones are changing everything," Ms. Georgiades said, arguing that they create an imperative for brick and mortar retailers who want to keep their customers engaged and buying. She shared three key propositions:

In-store tech all-line

Photo: Whole Foods

Own your tribe. "Are you winning your fair share of traffic before the store? Do you obsess about all their life moments and present in an authentic way, with messaging focused on content, versus product?"

Commit to all-line. "There is no off-line or online. Making omnichannel real is not easy. Mobile forces you to think about the seamless experience."

Deliver surprise and delight. "Go from demand to suggest. Are you truly using data to understand your customers and their context? Are you delivering curated experiences and magic moments?"

Ms. Geordiades was joined by C-level executives from retailers including Macy’s, REI, PetSmart, Teavana, Whole Foods, Sephora, Gilt and The Container Store. Many made reference to the impact of digital on their businesses.

The digital proposition is so important to Macy’s, now recognized as the seventh largest digital retail business globally in addition to its 800 stores, that it has invested in its own Bay-area Idea Lab, said Terry Lundgren, CEO. It recently introduced an image-search extension to the Macy’s app to help shoppers locate desired items by taking digital snapshots.

"Where does the sale belong?" Lundgren asked, then answered, "I’m agnostic about whether it’s in-store or online. Let the consumer choose where."

Walter Robb, co-CEO of Whole Foods, conceded his company had made its move to digital technology a little late, but stepped forward last year to embrace what he prefers to call "extended experience." He offered as proof: "We are the largest Apple Pay retailer so far."

BrainTrust

"A store is a store, is a web site, is an app ... is wherever a customer buys your product. Not to oversimplify things (however, lately retail loves to over-complicate them), but it comes down, in my mind, to execution. It’s not about the idea, the format or the glitz of technology."

Kevin Graff

President, Graff Retail


"As long as retailers think about foot traffic as a business metric, they will be missing the key — sell the products and don’t care where that sale comes from. With regard to the proportion of online versus offline transactions approaching equilibrium, I would say we may be approaching the tipping point to online."

Gene Detroyer

Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.


"As others have said, the optimal balance between online and in-store sales should be whatever combination makes the customer the most loyal to your particular store or brand."

Mark Heckman

Principal, Mark Heckman Consulting


Discussion Questions

Is the proportion of online versus offline retail transactions approaching equilibrium? In an “all-line” marketplace, how vigorously should retailers compete for digital traffic? Can pure play, all-digital competitors expect to stay competitive without expansion into brick and mortar?

Poll

21 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Chris Petersen, PhD
Chris Petersen, PhD
8 years ago

It is not a question of either/or — the imperative is to do BOTH.

As consumers now shop anytime and everywhere, the “e” in e-commerce now means “everywhere,” especially on smartphones.

It’s not a question of “competing” for traffic, but one of how to engage consumers when, where and how they want to engage 24/7/365.

Max Goldberg
Max Goldberg
8 years ago

Retailers should compete for digital traffic with the same gusto they devote to brick-and-mortar traffic. Consumers see a retailer as being one entity, online and offline. They expect an omnichannel experience and retailers need to meet those expectations or risk falling behind.

Amazon has shown us that all digital retailers can be competitive. This has to worry brick-and-mortar stores.

It’s no longer necessary to have an actual footprint, but it is necessary to be online.

Tom Redd
Tom Redd
8 years ago

First, hope you all enjoyed the Global Retailing Conference at Lundgren Retail Center at the University of Arizona. Oh, you did not go? Bad, bad. Great event that does not allow vendors to go pitch their products or technology or we cut them from the next year. MasterCard’s session, which Tenser references, was very good and told the story that many of us have been preaching for years — the store means MORE! Brick-and-mortar stores are not gone and never will be. They extend the relationship with the consumer. Online, catalogs and more bring the retailer and the shopper’s relationships in line and create stronger and longer-lasting loyalty.

Yes, remember the early web days and the stupid news “The Store is Dead.” That is a dead issue and someday OMNICHANNEL will fade. Retail is retail — all channels, no cute omni-like words. It is simple — just retail.

J. Kent Smith
J. Kent Smith
8 years ago

I think you have to look beyond share of purchase by channel to understand the significance of the interaction on the overall brand. So even if online sales are still a small share, perhaps the right metric is simply browsing traffic — it’s all hits, it’s all interaction, it’s all opportunities to deepen the connection with the customer.

Ron Margulis
Ron Margulis
8 years ago

In some categories the proportion of online transactions is approaching or even surpassing offline retail transactions, like music and consumer electronics. There are many categories, like cars and furniture, which still have fewer than 10 percent of sales going through digital channels.

For the all-line marketplace, Terry Lundgren of Macy’s put it best: he doesn’t care how or where they make the sale as long as it’s their sale.

On whether digital pure-plays need physical stores, the answer is no.

Kevin Graff
Kevin Graff
8 years ago

A store is a store, is a web site, is an app … is wherever a customer buys your product. Not to oversimplify things (however, lately retail loves to over-complicate them), but it comes down, in my mind, to execution. It’s not about the idea, the format or the glitz of technology. It’s about (and has always been about) who can take it and run with it the best.

For stores to survive (they’re not going anywhere, by the way) they need to execute the store experience at a higher level. And for all-digital competitors to stay competitive without expanding into brick-and-mortar (some will) they need to execute a great brand/shopping experience online.

What we know, and everyone sees, is that too few businesses truly execute well. So enough with being “distracted by squirrels” — run your business the right way.

Gene Detroyer
Gene Detroyer
8 years ago

As long as retailers think about foot traffic as a business metric, they will be missing the key — sell the products and don’t care where that sale comes from.

With regard to the proportion of online versus offline transactions approaching equilibrium, I would say we may be approaching the tipping point to online.

Brick-and-mortar will have its place in the future, but not as a place to sell and, more importantly, not as a place to move merchandise. It is and will continue to be at a greater and greater disadvantage to online. Both consumer behavior and the business model is tilting heavily toward online.

Joan Treistman
Joan Treistman
8 years ago

I keep wondering why executives are holding on to thoughts of yesterday’s shopping behavior. Perhaps there is a major investment in a particular channel or media format. Let it go.

We talk about understanding consumer needs and desires when it comes to products and brands. We are not as likely to think of transaction access in the same way. But indeed it is part of how a consumer moves along the path to purchase. It’s up to them to choose how that journey will begin and smart retailers will create the points of intersection online, in the store, and through social media or video content somewhere that influence how the journey will end.

Mark Heckman
Mark Heckman
8 years ago

As others have said, the optimal balance between online and in-store sales should be whatever combination makes the customer the most loyal to your particular store or brand.

As retailers provide more and better online alternatives to a store visit, the balance will intuitively flow towards online, relegating the physical store to a new role as showroom, customer service center and (for certain categories that do not lend themselves to be delivered via drone or Fed Ex truck) a retail sales outlet likely with reduced SKUs.

However, if retailers are selling categories that lend themselves to a visceral shopping experience, a brick-and-mortar outlet will still serve a vital role. There are still those shoppers that want to “squeeze the Charmin” before they buy.

Richard J. George, Ph.D.
Richard J. George, Ph.D.
8 years ago

There is no doubt about the meteoric rise of online and its related impact on offline. Whether it will reach equilibrium or surpass offline ironically depends on actions taken offline. Offline as part of an omnichannel experience can provide a point of significant difference for online retailers. Omnichannel is not about channels, it is about your customers and how they interact and access your products and services.

Offline retailers have three potential advantages: Proximity (advantage fading), service (also fading) and the sensory experience. Offline needs to heighten the sensory experience as a significant point of differentiation. In doing so, this puts pressure on online to develop a brick-and-mortar presence. The capital expenditures and related expertise in operating a physical store gives the current offline retailers an advantage. Whether it is a large enough or sustainable advantage again depends on how well offline contributes to the retailer’s overall omnichannel strategy and customer experience.

Ralph Jacobson
Ralph Jacobson
8 years ago

In a word, yes. Shoppers will continue to enjoy visiting brick-and-mortar stores forever, in my humble opinion. There is already a groundswell of revolt against technology in mature markets around the globe and I feel that will only help the drive to physical stores. In the mean time, e-commerce is exploding overall and 30 percent-plus of all transactions are via e-commerce globally, depending upon which data you believe. So merchants and brands cannot ignore that tsunami of shoppers. Do pure-play online merchants have to go into brick-and-mortar stores? I don’t believe so. However if they have a loyal following of their brand it is not a bad idea, especially to partner with an existing brick-and-mortar store to reduce risk.

Herb Sorensen, Ph.D.
Herb Sorensen, Ph.D.
8 years ago

Glad to see recognition of the Convergence of Online, Mobile and Bricks (COMB) retailing. Since I first began touting that concept a number of years ago, my views of the role of mobile have dropped substantially, and the massive success of mobile in brick-and-mortar really is largely a techie fiction since mobile is still, after years of shouting and pushing it, largely a marginal activity, important to less than 10 percent of the population.

However, online IS moving into stores — at least to the extent that sales of certain classes of goods are steadily moving away from brick-and-mortar stores. BOPIS, click-and-collect, or any of the other approaches to this are far from shopper-focused, but about what you might expect from logistics/supply chain experts. But you can take this one to the bank: “As long as shoppers live in brick-and-mortar houses, they WILL be shopping in brick-and-mortar stores!”

Not to put to fine a point on it, but brick-and-mortar stores CAN have the advantage of immediacy (NOW!) and the positive experiential surprise/delight purchasing. Again, logistics/supply chain experts are babes in the woods on this stuff, even though they OWN the inherent rights to the BIG head of shopping — surprise/delight/NOW! But then, online has the inherent rights to routine/autopilot/complex (or frustrating?) purchasing — the LONG tail.

As difficult as it is for brick-and-mortar retailers — logisticians — to learn the shopper realities of their “owned” business (surprise/delight/NOW!), it is easier for them to cross the line into online with their own long tail capital albatross in their own stores than it is for the online merchant to cross the line into brick-and-mortar retailing. Online retailers don’t do brick-and-mortar except in a highly selective fashion that is in no way relevant to a market as “stored” as most major markets are today.

Finally, even the slow (thinking) brick-and-mortar retailers are beginning to recognize the reality that the brick-and-mortar store of the future is a communal pantry. “Hold my stuff for me at the store/pantry and I will just grab it when I need it.”

Lee Kent
Lee Kent
8 years ago

First off, let’s separate transactions from experience. Whether you are a pure-play or not, it is important that the right experience is created for your customer.

While entertaining and interacting with “your tribe” is key, there are reasons they may need and/or want to make the trip to a store. And it is up to the retailer to give them that experience.

The key is to engage them every step of the way on their path, and that does not mean trying to sell them. The transactions will come if the customer stays on the journey.

For my two cents.

Kenneth Leung
Kenneth Leung
8 years ago

The challenge for retailers is that ultimately, they get paid for transaction, not interaction. Media companies can monetize eye-balls through view and click through ads, retailers are paid on moving goods. Retailers should compete for the right demographics of digital traffic and focus on conversion as much as conversation in order to make their numbers.

Vahe Katros
Vahe Katros
8 years ago

Great article Jamie—thanks for the write-up from this great gathering.

Bringing up the rear in this thread, I’ll try to add something new because so far the takeaways are converging to some undeniable truths, namely: technology is driving changes to where certain shopping activities happen and this shift is a call to action to adapt.

Discussions about the hows and whys of these shifts are category and audience specific and knowing your customer base and your swing voters has always been a retail concern.

The issue now is we have a new form of competition that is not bound to real estate and so the incumbents have structural challenges that they need to turn into an opportunities. Time to talk to customers; fortunately we have customers, so that might be our edge. Let’s see what happens.

But the something new relates to this comment:

Own your tribe. “Are you winning your fair share of traffic before the store? Do you obsess about all their life moments and present in an authentic way, with messaging focused on content, versus product?”

Specifically this line:
“Do you obsess about all their life moments and present in an authentic way, with messaging focused on content, versus product?”

“Content, versus product.” When I think of the changes in behavior from off-line to all-line and read the commentary, it’s usually around transactional stuff. It’s usually around products and payments and making a sale. Yes, you’ll see some words around demand creation, but if execution is what matters, then let’s talk.

Executing on “content, versus product.” On content that is the byproduct of obsessing authentically over the life moments of various members of your tribe highlights a competitive gap for all businesses. It is the opportunity for old school retailers or anyone really, to win over voters.

Retailers have customers—that’s a huge asset—and during this period of shift, it might be an important forward looking indicator of a retailer’s ability to survive. As an industry we need to create new metrics around numbers of questions asked, answers processed, ideas tested, audience groups formed. The byproduct of these conversations represent the raw materials leading to content. “Content, versus product.”

As an industry we need to evolve new enterprise publishing systems and methods to convert nuggets into content, and figure out how to adapt our organizations to not just sell things but become publishers.

Perhaps Managing Editor will become a new title in retail organizations. Perhaps we’ll see the return of “a-buck-a-word!”

Arie Shpanya
Arie Shpanya
8 years ago

Brick and mortar and online shops can and should compliment one another. They have what the other one lacks: access to the products and quick delivery.

Foot traffic might be dropping, but eCommerce sales still only make up a fraction of retail sales. Despite this, retailers should still work hard to get shoppers onto their site. For pure play retailers, it’s a sink or swim issue. For multichannel retailers, it’s a matter of educating shoppers and getting them to check out on at least one of their channels.

I think that pure play retailers should consider expanding to brick and mortar locations (look at the success Warby Parker and Birch Box have had), but only time will tell if it’s a requirement or not.

James Tenser
James Tenser
8 years ago

Some fantastic thoughts in the comments here today. Thanks to all who have elevated the discussion.

I believe the transaction is a moment, but the sale is a sequence. In an all-line retail world, the store extends right into our living rooms and our pockets. The more remote aspects of the shopping experience, however, lack the immediacy, intensity and focus of the physical emporium.

The perfect balance of these experience elements will vary by individual, by purchase objective and with each moment. I feel certain that stores remain essential in this scenario, even if the total experience continues to evolve.

Martin Mehalchin
Martin Mehalchin
8 years ago

We are closer to equilibrium now than we were a few years ago, but we’re all guessing as to where the point of equilibrium will end up being. I do want to give credit to Google who has been pushing forward thinking on these topics ever since they came out with the “Zero Moment of Truth” eBook a few years ago. Now they are introducing tools to help marketers figure out mobile –> in-store ROI.

Gordon Arnold
Gordon Arnold
8 years ago

Let’s take a moment to discuss the elephant, or two, in the room where we celebrate the end of brick and mortar retail. There has been, is, and will be an unreported retail sales market that makes e-commerce dollars and profits look so much like peanut-ville. The focus should never be the death of one kind but rather the inclusion of a new one.

Kai Clarke
Kai Clarke
8 years ago

Online retail transactions still are not equal to offline transaction…however, they are rapidly approaching this and retailers should be planning, competing, and expanding their growth strategies to embrace the leading position of pure digital retailing in the market.

Brian Kelly
Brian Kelly
8 years ago

“The war for store traffic will be won or lost on digital.”

This is a silly skewed hyperbole, especially when “take advantage of those magic moments in the store” follows.

Retail has never been binary, and it is not now because consumer behavior has neither been linear nor binary.

Consumers have always sought choice based upon their needs. Digital increases the options.