Clicks and bricks: the future of retail

Profile picture for user pwainewright By Phil Wainewright May 8, 2013
Summary:
Instead of wiping out bricks-and-mortar retail, the internet is bringing a new type of shopping experience to town centers and malls. While retailers who don't adapt are failing, a new breed is finding success.

NikeTown storefront
Increasingly I find that my retail habits are becoming a blend of online and physical behaviors. I'm a big fan of click-and-collect, which lets you find the item you need online, then pick it up right away from a local outlet. I'm also a proponent of 'showrooming', in which you visit a retail outlet to physically inspect the item you want to buy, then order it cheaper online from a competitor. While this type of behavior seems inimical to the business model of bricks-and-mortar stores, some companies are making a virtue of it, developing outlets that act as physical showrooms for their online products.

Take Nike for example. Wanting to catch up with the latest choice in Nike trainers, I visited NikeTown London in the run-up to Christmas. At 42,000 square foot, the 4-storey prestige building is one of Nike's largest retail outlets worldwide and the largest in Europe. Since I'm not someone who has time to visit a store every time I need some new trainers, my concept was to use this visit to find out which formats suited me best, and then order future replacements online. Also in my mind was the notion of ordering customized versions from NIKEiD, but I wasn't going to do that until I was sure that the style I was going to order would be comfortable to wear. So if it works well, NikeTown becomes a showroom that hooks buyers into becoming repeat online customers of its premium NIKEiD service.

The reality is not there yet, as the assistants still think they work in an Oxford Street shoe shop and the shopping experience is dire. Perhaps shoppers need education too, with more pointers and guidance on how to take advantage of this new type of retail experience — Apple has been most successful at this model so far. At NikeTown, maybe my age and general fashion taste marked me out as not being one of their target customers, but I didn't feel welcomed. My sense is that the concept is on the right track but Nike needs to invest in executing better.

Experience or convenience

The general rule for retail success in the digital age seems to be that you either make visiting the store an experience, or a convenience. Ikea is a great example of a store that does both. If you want the traditional experience of getting lost wandering round Ikea for an entire afternoon, that's still on offer. Today, you can also find the item you need online, check that it actually is in stock, and know precisely which aisle of the warehouse to find it in when you get there. (The one thing Ikea could do to sharpen that experience is mark out a shortcut route to the warehouse area and shorten its lines, but maybe that's asking too much).

An item on BBC News yesterday investigated the phenomenon of online retailers that are opening up bricks-and-mortar outlets. UK-based tradesman's merchant Screwfix started out as a catalog retailer in 1979 and moved online in the 1990s. After its acquisition by retail giant Kingfisher in 2005, it started opening physical stores and now has almost 300. What drove this was the need for on-demand collection — jobbing builders, plumbers and the like often need parts or tools to complete a job and often don't realize until the need arises. An efficient, reliable click-and-collect infrastructure is what's driving success for Screwfix. Chief executive Andrew Livingstone told the BBC that people even pull up to the parking lot outside a store, order the item on their mobile phone and then walk in to collect it right away.

The BBC item also cites the example of furniture retailer Oak Furniture Land, which started out on eBay in 2003 but now does 65% of its trade out of stores that it has opened across the UK. In a revealing insight, managing director Jason Bannister says that having an online-first model keeps its physical store costs lower: "We don't have to have a lot of staff, as most people know what they want." In addition, since customers find out about the stores online, physical location is less important so "we get some great deals on rent at retail parks."

Service-oriented retail

A US example of how to use physical outlets to make shopping more convenient is up-and-coming men's outfitter Trunk Club. "We exist because guys hate shopping," says its CEO Brian Spaly. Styling itself as "the future of service-oriented retail," Trunk Club builds relationships with its customers where a team of personal shoppers get to know the client and select clothes for them. The outlets are venues where customers can meet a personal shopper and try things on — often those appointments are set up on-demand at very short notice.

Of course the profit margins of upmarket apparel retailers allow them to fund personalized, connected relationships with customers that may not be an option in other less lucrative segments. The example of ScrewFix demonstrates that there are other ways to win profitable business by using digital infrastructure as a differentiation for bricks-and-mortar outlets. Other examples will likely be discussed at next week's SuiteWorld event, which Diginomica writers are attending.

Although it will require courage and imagination for established traditional retailers to survive the transition into the digital age, it's clear that some will survive well while others will have to reconfigure for success.

Photo credit: © iStockphoto / shank_ali