The Future of the Retail Store

A RETAIL DIVE PLAYBOOK

The retail ecosystem isn’t what it

used to be. Retailers from a decade

ago are in sharp contrast to what

you see today: There were more

stores, regular foot traffic and a

vast amount of square footage per

customer. Today’s retail landscape is still made up of

brick-and-mortar stores — though fewer of them — but

now includes myriad options that allow consumers to

wield their purchasing power without ever setting foot

in a store.

According to a 2015 U.S. online shopping report from

Mintel, nearly 70 percent of adult consumers shop

online at least monthly.1 About 33 percent shop

online weekly. These numbers can be expected to

climb, as retailers make it increasingly convenient for

consumers to do the bulk of their shopping online,

without ever setting foot in a store.

With the increase in online shopping, are brick-and-

mortar stores doomed to extinction?

Not likely, although the rapid changes in retail technol-

ogy have redefined how retailers need to strategize their

success for the future, where physical stores are on the

downswing, and online options are on the upswing. In

fact, a recent Wall Street Journal article, citing research

from Green Street Advisors, notes that retailers would

need to close hundreds of stores if they want to see the

same levels of robust prosperity that they saw in 2006.2

Despite the increase in online shopping, some retailers

are increasing their brick-and-mortar presence3 while

others are taking a hard look at where they can improve

on the in-store experience, or reinvent themselves as a

distribution hub for consumers who want to combine

their online and in-store experience.

“ Stores are now serving multiple purposes, and new

purposes are constantly being imagined,” says Adheer

Bahulkar, partner in the retail practice of A.T. Kearney,

a global strategy and management consultancy.

“ Stores are points of sale, distribution centers, they

are showrooms, they are event or brand experience

centers, and they are entertainment hubs. Each of these

purposes can entice a different set of customers to the

stores.”

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Nearly 70 percent of adult consumers shop online at least monthly.1 About 33 percent shop online weekly.

The Retail Store as an ExperienceThough a large portion of consumers is taking to apps

and websites to shop, shoppers still want to see and

touch the merchandise they’re considering. That said,

savvy retailers are upping the ante on in-store offerings

to entice and increase foot traffic. Stepping foot inside

a store today isn’t just about browsing the merchandise,

it’s a full-on sensory experience.

“ Retailers like Rebecca Minkoff are using local events,

like yoga classes, as well as the latest amazing technolo-

gies such as virtual showrooms, to create unmatchable

event and brand experiences that build loyalty and

create a destination for customers,” Bahulkar says.

Changing the experience of a store doesn’t just mean

offering new services, but also new conveniences. Vicki

Cantrell, senior vice president, communities, and

executive director of Shop.org for the National Retail

Federation, nods to grocery giant Kroger as a retailer

that has put the money and research into figuring out

how to give their shoppers as frictionless and conve-

nient grocery shopping experience as possible.

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“ They have put a ton of money and technology in place

that helps understand the checkout line,” Cantrell says.

“ They’re reduced it by leaps and bounds. Through

technology they figure out how many people they have

in line — it’s a very automated way to get customers

through the process in the most seamless way possible,

and has, in fact, reduced the time to such a degree that

customers have noticed. And that builds loyalty.”

What’s more, an increasing number of retailers are

using augmented reality or virtual reality to entice

consumers into stores, and ratchet up the fun of

in-person shopping.4 Shoe entrepreneur Toms offers

shoppers a chance to slip on a virtual reality headset

and experience a Toms shoe distribution — part of

their one-for-one mission statement — in remote

parts of the world. Makeup retailer Sephora offers

consumers an augmented reality experience that

allows them to “ try on” different shades of lipstick

via their app, which can then be purchased in store or

through the app.

These technologies are still budding on the retail

scene, but, says Cantrell, they’re catching on faster

than originally thought. “ The early adopters are

doing the development work [of these technologies],”

she says. But once these technologies are nailed down,

they’ll be more ubiquitous throughout retail and more

turnkey.

But where retailers are still need to innovate is in

combining the in-store experience with the details

often gleaned from online shopping — what a consumer

is searching, what’s in their cart, what they’ve bought in

the past — for a more personalized, intimate shopping

event.

“ There’s a disconnect between what a consumer gets

in terms of a merchandising and sales experience

“There’s a disconnect between what a consumer gets in terms of a merchandising and sales experience online, and what they get when they walk in a store.” - Jennifer Sherman, vice president of strategy and product for Kibo

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online, and what they get when they walk in a store,”

says Jennifer Sherman, vice president of strategy and

product for commerce software provider Kibo. That

offers a tremendous opportunity for savvy retailers to

empower their retail associates with the technology to

learn who the customer is, rather than try to figure it

out based on what the customer may have in hand or is

perusing at the in-store moment.

“ Store associates armed with the mobile technology to

see a holistic view of the customer’s online and in-store

shopping history, including past purchases, shopping

habits, cart abandonment and more, would be able

to make much better merchandising suggestions and

offer a better shopping experience.” That, Sherman

says, is what will convert in-store traffic to actual

purchases.

A.T. Kearney’s Bahulkar notes that virtual trial rooms

automatically transfer items that that the customer

is interested in trying, and advanced mirrors can

recommend overlay and matching items at the ease of a

touch screen, while tablets and kiosks allow consumers

to browse and complete transactions in-store.

“ The trick is to let technology disappear and focus

on storytelling,” Bahulkar says. “ Blatant attempts to

push sales via discounts and coupons are usually not

effective. Carefully curated recommendations and

thoughtful ways to convey the brand and product

story to a customer — at the right time — can have

huge impact on converting a sale.” Further, reading the

customer, employing the right analytics, and having

the store associate — with knowledge of product avail-

ability — guide the customer to the sale, “ are all required

to create the right immersive experience,” he notes.

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The Retail Store as Distribution Center

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Besides offering new features and services, retail stores

today are also showcasing to consumers just how well

they can cater to convenience needs. Consumers, after

all, have always, and will always, clamor for conve-

nience. Same day delivery, in-store pickup, ship-from-

store: All of these new delivery options provide that

convenience, and retailers are experimenting with

the best options. Wal-Mart, says Bahulkar, recently

partnered with Uber and Lyft to deliver groceries

to consumers’ doorsteps. CVS, he adds, is looking at

curbside pickups to give customers a convenient alter-

native to in-store pickup.

But these offerings also come at a cost, one that

consumers and retailers alike are still trying to

decipher. “ Customers are still trying to figure out what

convenience matters to them and what convenience

they would be willing to pay for,” Bahulkar notes.

“ Retailers are also trying to figure out the cost impact

of providing convenience, and at what point it becomes

a losing transaction.”

Creating a brick-and-mortar store that can double as

a distribution center, however, hinges on one precise

combination: Having the technology that can properly

track inventory and offer robust omnichannel fulfill-

ment functionality, and having an employee base that

pays attention to it.

“ Technology is principally related to inventory

control,” says NRF’s Cantrell. “ And that’s really

important because if you have retailers who have, based

on their heritage, multiple channels — store, online,

catalog or wholesale channels — having the technology

to see inventory across your channels, is being able to

have inventory visibility across potentially different

systems.”

Cantrell cites electronics retailer Best Buy’s in-store

pickup process as one that has the combination of

technology and manpower in sync. When a consumer

orders something online, the technology checks to

ensure it’s in store and can be ready by a specific time.

“Customers are still trying to figure out what convenience matters to them and what convenience they would be willing to pay for.”- Adheer Bahulkar, partner in the retail practice of A.T. Kearney

An in-store staffer, then, is “ paying attention to the

request, acting on it and communicating it,” Cantrell

says. “ And when the customer comes in they have

a great experience because they walk up to a staffed

location, their package is there, they have an easy

checkout, and they get an incentive of some sort to

either stay in the store or shop at a future time.”

But inventory accuracy is not enough if the retailer

doesn’t have the technology infrastructure in place to

efficiently route and optimize all fulfillment channels.

“ To effectively offer omnichannel strategies such as

ship-from-store and in-store pickup, retailers need a

flexible distributed order management solution that

routes orders the most efficient way possible, whether

that be by location, cost or customer preference,” said

Kibo’s Sherman.

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“To effectively offer omnichannel strategies such as ship-from-store and in-store pickup, retailers need a flexible distributed order management solution that routes orders the most efficient way possible, whether that be by location, cost or customer preference.” - Jennifer Sherman, vice president of strategy and product for Kibo.

Competing No Matter the Size

Implementing and employing the technologies needed

to take retail stores from a dying breed to the place to be

is often a tall order, both in capital and manpower. For

larger retailers, absorbing the cost and time to take on

such a task is feasible. Even though small- to mid-sized

retailers might not always have the same capabilities,

they don’t have to be left out of the loop.

“ No matter what size you are, you have to operate to

your strengths,” says NRF’s Cantrell. And for small- to

mid-sized retailers, that strength lies in relationships.

She adds that while popular media is awash with stories

of big retailers losing foot traffic, it’s not the same story

for smaller, community retailers. “ It doesn’t matter

what technology you have, if you screw it up once the

customer gets in the store, or you haven’t built the rela-

tionship, or you haven’t given them a great experience,

the customer is not going to come back.”

What helps smaller retailers compete is their flexibili-

ty. “ The advantage that the smaller retailer has is they

can be more agile,” Kibo’s Sherman says. “ It’s a segment

that allows for experimentation, and allows them to

much more nimbly change business models, providing

they have equally nimble retail technology.”

Instead of trying to tackle all of the new technologies

out there, it’s better for smaller retailers to single out

those technologies that best fit their brand, and invest

in that, says A.T. Kearney’s Bahulkar. He cites apparel

retailer Bonobos, which has an e-commerce-based

direct-to-consumer delivery model. Even when the

retailer opened up physical stores, they didn’t try to

deliver products to consumers in store. “ While the

transaction may occur in the physical store,” he notes,

“ the delivery still happens through their e-commerce

delivery model.”

Cantrell adds that in today’s environment, retailers

of any size can start a business with little to no in-

vestment, consigning or drop-shipping from another

retailer. Think it, and they can do it. “ There are a lot of

options there never were before.”

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ConclusionWhen it comes to the retail experience, retailers have

to determine how they want to meet those consumer

demands — either through the experience aspect of a

shopping trip or enabling consumers to do the bulk of

their shopping wherever they may be, in-store or not.

By focusing on their consumer and the needs of their

brand, and applying the right technologies, they can

navigate the ever-shifting retail environment.

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AboutKibo is the strategic merger of industry leaders, Mar-

ketLive, Shopatron, and Fiverun. With a combined 40

years of innovations, Kibo joined forces to help retailers

and branded manufacturers unify the consumer ex-

perience. Kibo is a complete omnichannel commerce

platform, delivering the lowest total cost of ownership

and the fastest time to market. With predictive tech-

nologies and enterprise performance, we can help you

achieve increased sales. No matter the challenge, Kibo

powers your success.

Sources1. http://www.mintel.com/press-centre/technolo-gy-press-centre/nearly-70-of-americans-shop-online-regular-ly-with-close-to-50-taking-advantage-of-free-shipping

2. http://www.wsj.com/articles/department-stores-need-to-cull-hundreds-of-sites-study-says-1461520952

3. http://www.cnbc.com/2016/04/01/10-retailers-defying-wave-of-store-closings.html?slide=5

4. http://phys.org/news/2016-04-retail-virtual-reality-fun.html