Transformation: An interesting time to be in Physical Retail!
While the debate about Online Retail Vs Brick and Mortar retail is an old one, recent trends and actions by dominant players in both indicate a convergence of strategy towards a hybrid model. The early predictions at the turn of the century of online retail gobbling brick and motor haven’t materialized, in fact e-marketer and Forester research estimates that 90% of global retail sale is still brick and motor. Even in China, the largest retail market ($5 trillion) and the most evolved e-commerce market, e-commerce sales account for about 18%. In the US, Amazon accounts for 44% of ecommerce sales but only 4% of total retail. So Brick and Mortar are here to stay, recently confirmed with strategic calls by the likes of Amazons acquisition of Whole Foods and introduction of Amazon Go stores, Alibaba’s investment of over $8 billion in stores including supermarkets (Hema). Conversely Brick & Mortar is also going hybrid with the likes of Walmart’s $3.3 billion acquisition of Jet.com, Bonobos and $16 billion for Flipkart as well as Pepsi’s $3.2 billion acquisition of e-commerce Sodastream to name a few.
So while competition remains severe, ecommerce companies will bring technology and innovations and bring about change in physical retail but also provide opportunity to those prepared to adapt and innovate. Some of the Augmented Reality and Artificial Intelligence led innovations already out in stores range from smart mirrors, smart trolleys, no checkout stores all aimed at creating an experience for the shopper. Other opportunities will redefine operations such as fusing physical stores to also act as fulfillment centers to increase speed of delivery and reduce costs. In our data driven world it may be decisions based on analytical data that may have the largest impact and provide the largest opportunity. Information acquired in knowing your customer, engaging them and creating what may feel like a personalized experience will be critical to strengthen loyalty.
With customers becoming channel agnostic bouncing between clicks and bricks, information around the shopping journey and pre-purchase research and behavior is now more critical than ever before. Exciting times indeed!!
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