How can physical stores compete with online stores?

The latest figures show warehouses, particularly ‘super sheds’, are proving a resourceful option for businesses trying to keep up with online demand. As retailers navigate the age of e-commerce, the only way physical stores can compete is with a radical rethink of physical space.

In response to this demand, dark stores and malls pose a significant opportunity for retail expansion. These are traditional retail stores converted into local fulfilment centres and warehouses and would be a major step in supporting the struggling High Street. This is possible for retail businesses which are omnichannel in nature and able to take on orders against local store inventory. This is an effective solution for retailers faced with the decline of in-person shoppers by being able to serve them better online. If it’s widely adopted, the evolution of brick-and-mortar could help retailers win back their share in the sales boom for years to come.

Whilst dark stores have begun to rise in popularity, dark malls – shared warehouses that provide the same variety of retailers as the traditional shopping centre experience – are the next development. Traditional shopping malls should be supplemented by e-commerce channels, involving mall operators, retailers and logistics suppliers in order to retain business going forward.

Retailers around the world fear large players with a significant e-commerce presence entering their market and the impact that could have on their business. There’s a widely held view that online shopping via the likes of Amazon and Alibaba is killing retail stores.

The reality is quite different, according to Miriam Burt, managing vice president at Gartner. “In fact, more retail stores opened than closed in 2017,” she says.

The real reason behind store failures is more likely to be poor leadership, economic conditions, reading market changes incorrectly or bad timing on execution of strategy, she says. Others fail because they try to ‘run before they can walk’ or lack clarity on the customer proposition.

“More importantly, we see many retailers that are simply not optimizing their most significant assets – staff and stores,” Burt says.

Retailers can fight back by providing exceptional experience in nine key areas to make their customers’ lives simpler, easier, better and safer.

Ideally, you want consumers coming into your stores where they are enveloped by your branding and sent on their way with a favorable impression. Your online shop can be used to provide more information, comparison research, fill inventory gaps, and appeal to those who would prefer to shop from the convenience of their home.  

While it is possible to have a successful eCommerce business without a physical location (as we see with Etsy and eBay sellers), the majority of business is still conducted offline. Last year, the top 100 digitally-native retailers unveiled plans to open more than 850 physical stores over the next 5 years. In the age of evolving consumer behavior, we discuss how brick-and-mortar stores can compete with online retailers. 

Are Online Retailers Taking Over?

There is some evidence that online retailers are increasing in prominence and threatening to dominate:

• The convenience of online shopping wins. Amazon is not just the king of online retail anymore. The company topped $10 billion in profits for 2018, finally surpassing Walmart to become the largest U.S. retailer.

• Physical stores are closing in mass droves. A “Retail Apocalypse” began in 2010 that saw the closure of over 12,000 retail stores by long-standing brands like Macy’s, Toys R Us, Sears, Bon-Ton, Abercrombie & Fitch, Sports Authority, and more. It’s been surmised 25% of U.S. malls could close by 2022.

• There is a generational preference. According to research from Statista, 67% of Millennials and 56% of Gen-X shoppers prefer online transactions, while 59% of boomers and 72% of seniors prefer brick-and-mortar stores.

The retail landscape is changing, but physical stores shouldn’t be discounted just yet. The numbers pretty speak for themselves: eCommerce sales rose from $390 billion (2016), 16% to $435 billion (2017), and 14.2% to $513.61 (2018). While slower growing, but massive by comparison, transactions continued in brick-and-mortar retail, rising from $2,985 billion (2016), 2% to $3,043 billion (2017), and 3.7% to $3,103 billion (2018). 

It’s not that brick-and-mortar is coming to an end, but rather, that the way people choose to shop is evolving; 87% of shoppers begin their trips online, but 90% of retail transactions occur in physical stores. Why? Consumers like to physically interact with products in a tangible way. They like the immediacy of being able to have an item at the moment, without delay. They like not paying for shipping and avoiding the hassle of returns by mail. Lastly, people like the social experience of visiting a physical location and interacting with other shoppers and sales associates.

So, before you throw in the towel, consider how to meet consumer expectations, bolster your best competitive assets, and keep your business focused on good old-fashioned people-to-people interactions.  

How Can Brick-and-Mortar Stores Compete With Online Retailers?

To successfully compete with online eCommerce empires, brick-and-mortar stores should:

• Focus on building long-term relationships through excellent customer service. Retailers should have methods—such as email interactions, surveys, and a social media presence—in place to keep track of customer interactions, following up to ensure customers are satisfied. In-store, retailers will want to make sure their staff is trained and knowledgeable of products to be sure customers’ needs are met. 

• 
  Add value to the in-store experience. Excel where most online shops fail by offering free ship-to-home or same-day delivery to shoppers whose desired item is out-of-stock. Provide special deals on purchases that reach a certain threshold, as many eCommerce brands do. Offer VIP customers exclusive holiday shopping or invitations to unique in-store events. Allow click-and-collect for shoppers who want to stop by quickly on their way home from work to pick up items ordered online; once they’re in the store, they’ll likely walk out with more. Allow online price-matching, so consumers know they’re getting the best deal possible. 
• Harness the power of mobile. One of the key trends in brick-and-mortar retail is an increased focus on the needs of mobile shoppers. Since 90% of shoppers are using their smartphones while in physical stores, it makes sense to ensure your site is mobile-optimized or that you have a mobile app. Going a step further, you can partner with Shopkick, a mobile shopping app, to guide shoppers down the aisle to find the products they need and some they may not have realized they needed before.    

Shopkick Offers Brick-and-Mortar Retailers a Competitive Advantage

Shopkick provides a way to engage consumers in brick-and-mortar locations, offering incentives for their presence and in-store engagement. The mobile shopping app rewards shoppers who visit retail locations, interact with products at-shelf, and purchase them in-store. Once they amass a certain number of rewards points, called kicks, users receive a free gift card of their choosing. 

Just as eCommerce sites offer special deals, brick-and-mortar retailers can offer the same in a convenient way—through shoppers’ mobile devices.

Just as eCommerce sites offer special deals, brick-and-mortar retailers can offer the same in a convenient way—through shoppers’ mobile devices. Shoppers can check into the Shopkick app and earn rewards points all along their shopping trip—from the moment they walk into the store, while they’re browsing the aisles, and through checkout. Meanwhile, you make it easier, more incentivized, and more profitable for consumers to shop in your store as opposed to online. It’s a win-win for everyone.

Continue reading how Shopkick has helped our brick-and-mortar retail partners compete with online retailers, or contact us to learn more about engaging your customers in-store.

Image courtesy of Stokkete

ABOUT THE AUTHOR

Shopkick

Shopkick is the fun and easy way to earn free gift cards for the shopping you already do. Download the app now!

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