Almost everyone is familiar with the icebreaking exercise “two truths and a lie.” I’d like to take a different slant and propose “two lies and a truth.” In the list of three topics commonly thrown around in the retail industry media, which two are false and which one is true?
- Brick-and-mortar retail is dead
- By the year 2020, 30 percent of all retail spend will be from Millennials
- Customers demand an omnichannel experience and spend up to 2x more through it
First and foremost, brick-and-mortar retail is not dead. Seriously? Have you not paid attention to anything I’ve written or said for the last several years?
Brick-and-mortar retail still accounts for over 90 percent of all retail sales, with 75 percent of
shoppers preferring to physically interact with products and knowledgeable sales associates. When shoppers do engage with the physical channel, they’re likely to spend 3x to 5x more than through other channels.
So, brick-and-mortar is alive, if not completely well, but that’s not to suggest all is business as usual. The physical space continues to face tumultuous and disruptive competitive threats, and analysts predict only a minimal 3-4 percent growth in retail sales in 2015 anyway.
Already this year, physical retail has seen traffic declines of 7-10 percent, and the only real square footage growth is coming from extreme value, fast fashion and outlet formats. In fact, many retailers are downsizing the number of store locations in an effort to maximize profits and minimize loss in underperforming stores.
Every retail channel has its strengths and inherent advantages. So, how does brick-and-mortar fit into tomorrow’s retail?
Start with today’s shopper
Today’s shopper is a different breed of shopper than in past generations. She has less time, less money and less patience. At the same time, she is more researched, more demanding, and more empowered. The end result for retailers is today’s shopper expects high value, personalized experiences and an ability to shape the way retailers run their businesses.
The shopper is clearly in control in today’s retail environment, so it’s futile to try to change her behavior. Rather, it’s more prudent – and effective – to change the way retailers go to market, particularly in the brick-and-mortar channel.
Retailers need to deliver in-store experiences that surprise and delight shoppers, and a great many are experimenting with engaging, interactive technologies that not only educate and serve, but entertain as well. Where appropriate, they’re also delivering the kind of personalized attention and experiences that are so prevalent online. Brought together, stores are now tasked with creating memories for shoppers to share through their networks, and enabling technologies – and the wealth of analytics that power their deployment – are creating a new kind of “Retail Magic.”
Future of retailing
Baby boomers are still a gigantic market for retailers, but we do know that Millennials will be the demographic that drives future retail success, as 30% of all retail spend will come from that age group in just five years time.
Retailers need to adapt to the growing importance of Millennials, as it is rather obvious Millennials won’t be adapting to them.
Related to Millennials, what needs to change about the retail paradigm? Well, just about everything. Consider the following:
- 33 percent of Millennials rely on blogs before they make a purchase
- 42 percent want to co-create products with companies
- 60 percent are brand loyal
- 75 percent think companies should “give back”
- 87 percent use 2-3 tech devices at least once on a daily basis
- Only 1 percent are influenced by advertising
The retail game has forever changed, and the stakes are high. Millennials will grow to be the largest consumer generation in history, and they will decide retail’s winners and losers.
On the way to the store of the future, it’s interesting to note that Millennials and other shoppers aren’t demanding omnichannel – they don’t even know what omnichannel is.
Shoppers shop, and the way they shop is now a circular journey through a variety of channels, all the while looking for value-added experiences to further their journey. In response, retailers have created multi-channel, “omnichannel” experiences, and the retailers who’ve done it correctly find customers spend 5x more through multi-channel experiences.
When going to market through multiple channels, retailers need to remember that shoppers respond to a branded experience throughout – if not branded, you run the risk of losing customers during the journey. Shoppers are looking for differentiated products and services, and, of course, captivating and engaging environments.
At the end of the day though, it’s important to note that today’s – and tomorrow’s – shopper is channel agnostic. They’re not shopping for channel’s sake. Rather, they’re shopping through channels that deliver the value they desire.
Technology, insights, and brand experience
Contrary to some media reports, brick-and-mortar retail is not dead (that’s a lie!) and customers aren’t demanding omnichannel and spending twice as much through it (another lie; plus, it’s 5x!). But, Millennials and their enormous potential purchasing power and distinctively different approaches to shopping and spending are driving retail change (it’s true!).
To survive and thrive, retailers are developing – or need to develop, if they’re late to the game – a singular, consistent brand experience across all channels and shopper touchpoints. That experience is powered by enabling technologies and built on shopper insights and captivating, engaging shopping environments.
It’s straight talk and it challenges retail convention, and that’s a good thing. There’s a new retail reality, and it’s been that way for a while. It’s time to adapt and change, or forever rue the day your competition did.