Retail Apocalypse or Omnichannel Evolution?

by Steve Wilson

If you’re wondering what in the world is going on with brick and mortar retail, you’re not alone. Right now, we are hearing two dramatically different click-bait stories. On the one hand, we have the doom and gloom tale of how traditional retail is dead or dying. On the other, we are being told that retailers are investing in improving the experience and seeing growth. So which narrative is right and how do we know whether we’re seeing a retail apocalypse or an omnichannel evolution?

Fortunately, there is a good amount of data to help us see what’s really going on. We know that 93 percent of all retail purchases are still happening in retail stores. E-tail is projected to hit 10 percent of all retail sales in 2017—its best year ever. But if e-tail is still only 10 percent, why are people saying traditional retail is dying? Well, it’s because people are looking at the pace that e-tail is growing—roughly seven to eight times the rate of brick and mortar. At that pace of growth, it is projected to eventually kill off brick and mortar. The big question is which one will win out?

How the Game and the Players Are Changing

If we ignore opinions and stick to actual data, we’re seeing that brick and mortar isn’t going anywhere. And big e-tailers are actually pushing into brick and mortar stores. Amazon made major headlines when it bought Whole Foods, but they also just entered a strategic partnership with Khol’s for returns to be processed in eight Kohl’s locations. Additionally, they’re opening Amazon shop-in-shop stores in those same Khol’s. Amazon is just the biggest, but when we look around, we see lots of e-tail players that are finding their way into brick and mortar.

So if the biggest threat to traditional retail is actively investing in it, why should we think these are the end times? The sky isn’t falling; it’s just evolving. Big players like Walmart, Best Buy, Target, Costco, Home Depot, Lowe’s, Bed Bath and Beyond, and of course the big mall chains are working hard to figure out how to bring their old models into this new world. Consumers are buying more via e-tail every day, but that’s in addition to people shopping in-store. There are just some things that shoppers still want to see, touch, or try on before they make a purchase. No matter how easy e-tailers make buying and returning products, it is still just as easy to go to the store and try something on, then walk out the door with your purchase.

Ultimately, the desired experience isn’t exclusively brick and mortar or e-tail but both seamlessly combined. We call it omnichannel, but we often miss the point and think that omni just means multiple channels. What the consumer actually wants is everything blended seamlessly together as one experience and one channel. This is what Amazon has figured out, and it’s what Walmart is working on catching up to with new options like mobile returns and free grocery pickup.

Consumer purchasing habits show us that if anything, it’s commodity purchases that are going to shift to online. When we know we don’t need to see or try it before we buy it, we opt for having it just shipped to our house. So, it becomes all about the experience. When people shop at actual stores, they want a real experience. They want to experience all the things they enjoy. They want knowledgeable salespeople and personalized experiences where the information provided is useful for helping them find what they want.

Embracing Pop-Ups and Shop-in-Shops to Reach Consumers

It’s also time for brands to no longer depend solely on traditional brick and mortar national retail. They need to go direct-to-consumer. If the retailer has not figured out how to create an amazing omnichannel experience for consumers, do you think they will provide a great experience for your brand? Not likely. As a result, many brands are shifting and taking their story and engagement directly to the consumer. Some brands are looking for ways to partner with traditional brick and mortar retailers to do this. One strategy has been putting brand stores right inside the retailer’s store (think Apple inside Best Buy), and they often demand to have their own independent staff operating in those locations.

Others brands are looking at the ability to do pop-up shops–both short and long-term. Think of it as a brand’s own mini-store. Sometimes it’s just a kiosk, and sometimes it’s a small 2,500-square-foot storefront. Locations range from traditional malls to storefronts in downtown Manhattan. As part of the omnichannel experience, the brands will promote the pop-up stores online via their website, app, social media channels, and email lists. It brings the brand experience full circle for the consumer—from their phone to the pop-up physical retail location.

Successful Implementation

If finding a way to go direct-to-consumer is a key to success, how can brands build out those capabilities quickly? Partnering is the answer. Many companies have been building out plans to help support brands going direct-to-consumer, including how you pick real estate, ring up consumers, process credit cards, account for the revenue, handle inventory and logistics, procure displays, hire, train, and staff the stores—and the list goes on and on. It is complicated; that’s why the current model exists. But, brands that want to win will figure out how to quickly shift and the best way to do that is to partner with companies that have done it successfully for brands before. This is something we have been involved with firsthand, helping brands move into their own retail space (which is quite a complex process), without having to take years to do it. Finding ways to work with existing, slow-moving legacy systems inside your brand is not easy, but it is possible. It has been done and done successfully.

Direct-to-Consumer Channel Partnering

Partnering to create your own direct-to-consumer channel will speed up and streamline the process, but planning ahead is key. Finding the right partner actually mean partners, as in plural. Most of the players in this pop-up space have started to realize that unlike retailers, they shouldn’t try to do it all. Having been down this road ourselves, we learned that by bringing the right partners together—and keeping everyone in their own lane—we were able to get a major consumer brand off the ground (without disrupting their legacy systems) and into their own pop-up kiosks in malls and some major city transit centers with just a two-month launch cycle. That is fast, but they were motivated to keep pace with their partners. Buy-in from executives and alignment with the right experienced consortium of key partners will allow a brand to quickly jump ahead of its competition and create relevancy and increased mindshare with consumers.

Want to know if a pop-up is right for your brand? Contact MarketSource, and we can show you how our pop-up management services have helped brands directly engage with customers and increase sales.

Topic: Retail

ABOUT THE AUTHOR

Steve Wilson is Executive Director, Retail Practice Leader for MarketSource, Inc. He has 23 years of experience in designing, implementing, directing and operating retail programs focused on driving customer experience and sales. His wealth of experience in partnering with major brands and retailers has helped them achieve their goals. He currently oversees the retail strategy for MarketSource, new services and capabilities, as well as continuous improvement.

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