Companies in the retail sector are under a massive amount of pressure. For example, Foot Locker and Macy lost a lot of their market value this year. Anyone walking through the shopping streets can not ignore the increasing number of vacant stores and it seems to be a structural trend (RTL, 2017). Most people would point to the rapid growth of e-commerce as the biggest disruptor, but even though it has, and will continue to have, a great impact on every aspect of retail, there is another more profound dynamic at play: ‘digital-first retail’ (Forbes, 2017).
Digital-first retail is the growing tendency of consumers’ shopping journeys to be influenced by digital channels, regardless of where the final transactions take place (Forbes, 2017). So, instead of shifting from physical stores to digital commerce, traditional retailers should reinvent themselves with this dynamic in mind.
Deloitte (2016) published a report in which they stated that, in 2016, 0.56$ of every dollar spent in a store was influenced by a digital interaction. Therefore, a lot of the sales that happen in physical stores start online. Of all the digital devices that we use, mobile devices like smartphones seem to become the front door to the retail store (Dennis, 2015). From a recent survey under American millenials showing which apps are most beloved and used, Amazon came out on top, even before the obvious choices like Facebook, Instagram and Youtube (Businessinsider, 2017). Mobile devices are also increasingly used for, what Google calls, ‘micro-moments’. These can consist of looking up an address, confirming opening hours of a store, looking for an item, etc (Forbes, 2017).
E-commerce now approximately accounts for 10% of all retail sales, but web-influenced physical store sales are 5 times as many as online sales. To fight off the growing competition from electronic markets and retailers, becoming great at enabling a digital-first brick & mortar shopping experience is the next step. Companies that spent most of their time solely focusing on building a compelling online business as a stand-alone silo are the ones in trouble now (Forbes, 2017).
Not all of the blame for the struggling traditional retail sector can be accounted to Amazon and e-commerce in general. Nowadays, closing down stores and starting an online business is not enough anymore. The traditional retail sector needs to understand the digital-first dynamic, because eventually, that will determine the lasting success of their brick & mortar activities. If they get this right, retail might reinvent itself once again in the age of digital disruption.
References:
https://stevenpdennis.com/2015/12/14/retails-new-front-door/
https://www.rtlnieuws.nl/sponsored-special/zal-de-detailhandel-e-commerce-overleven
Hi Joshua, this was a very nice article. I like to shop so I can relate to what you wrote in the article. Instead of going to physical stores, I shop online. Sometimes I would see a fashion blogger wearing something or recommending an online store I would be more eager to check it out. Now I don’t even look around in physical stores anymore. I just “look around” online and would then purchase it in a store!
Interesting topic Joshua! It is indeed compelling to see how traditional retailers have an online business as a stand-alone silo when it’s much more useful to combine the digital and the physical world. When you have separate departments the digital and physical environment merely act as substitutes instead of complements and there don’t contribute to the existing business.
Although e-commerce is very convenient, I truly believe that physical stores are still very relevant today and will remain relevant in the future if proper adjustments are made. I think that a physical presence is good for brand awareness and that customers will perceive your brand as more reliable. It is also interesting to see how digital retailers are expanding by adding new stores like CoolBlue and Amazon are currently doing. But it is required to re-evaluate the current functionalities of the existing stores. Like you mentioned, mobile technology can play a very important role in using digital technology for in-store use.
I really enjoyed reading your blog post Joshua! What an interesting topic.
Personally, I am doing most of my shopping via Amazon for a few years now –mostly for the convenience, fast shipping and awesome customer service – but usually would not buy clothing online. Hence I completely agree with your post as I think that physical retail stores will continue to be crucial – at least for certain products.
I would like to point you to a study done by AT Kearny in 2014, which serves as further proof for your statements as it emphasizes the importance of multichannel retailing and suggests that pure-play online retailers will most likely have to build an offline presence for continued success. (https://www.atkearney.com/documents/10192/4683364/On+Solid+Ground.pdf/f96d82ce-e40c-450d-97bb-884b017f4cd7)
After reading your blog post I started looking into the topics of digital retail a bit more and would like to recommend you (and of course anyone else interested in this topic) taking a look at this Facebook video from the World Economic Forum that highlights a few impacts that new technology might have on retail within the next 10 years: https://www.facebook.com/worldeconomicforum/videos/10154815690156479/
I am curious to see the development of the retail market over the next few years and look forward to innovative concepts such as Amazon Go become reality and change the industry.
This is quite an interesting post, Joshua. E-commerce is definitely turning out te be a must-have for any retailer. The added layer of convenience can easily convince a consumer to buy your products via your website. While it’s certainly an evolution that disrupted the retail industry, e-commerce will never completely take over brick-and-mortar stores, since online ordering simply lacks the service and feelings that traditional retail can provide.
I feel like the earlier comments by Keno and Bram are in complete alignment with my (and your) view on this topic.