What's in Store?

This content was originally posted November 27, 2018.

If you’re like I am, your inbox has been jammed with offers for Black Friday and Cyber Monday since last week. It is a bit overwhelming to be honest, but I have to remember that I’ve made purchases from every single company on the list, and I’ve opted into communication, so I have no one to blame but myself. These retailers are doing their jobs, some more effectively than others.

What really stands out about this year’s pre-Christmas retail email deluge is the convergence of offers. The lines between online and traditional retailers are becoming blurry. This reminded me of a post I saw on LinkedIn recently. An acquaintance shared a Forbes article “Never Say Never: Wayfair Opening Its First Store”[1], with the following comment:

Pure-play retailers are realizing that the cost of acquiring customers online is much more expensive than acquiring them in a physical store.

This caught my attention at the time because of my interest in retail and because my business – TerraProForma – is focused on activating the connection between mobile and physical locations. Field tests of our first product – Play the Field™ – demonstrated our ability to convert mobile activity into measurable results at a casino destination and we’re now exploring additional applications of our technology, including retail.

Why are we interested in retail?

According to US Census data, retail sales reached $5.7 trillion in 2017. Shopping is not trivial. It has real economic impact. Readers may be surprised to learn that 91% of retail sales in 2017 were transacted in bricks-and-mortar stores, and that even as late as 2025 it is estimated that 80% of transactions will be in physical locations.[2]

In an excellent article that appeared in Forbes “Physical retail isn’t dead. Boring retail is,” industry expert Steve Dennis concludes that “….physical retail isn’t dead… it is quite healthy.”[3]

Dennis suggests that the upper and lower ends of the sector are driving this growth at the expense of what he describes as the “undifferentiated and boring middle.” In his opinion, value focused merchants and those offering “unique product and more remarkable experiential shopping (including great customer service, vibrant stores and digital channels that are well harmonized with their stores)” are succeeding.

At TerraProForma we see an opportunity to use our blended technology platform that includes for-fun games, location, and content management to enable offers to help retailers and their landlords offer an enhanced experience to consumers.

Changing Retail Landscape

You don’t need to be an economist or a retail expert to observe the changes in the industry. Most everyone is aware of well publicized closures of retail giants like Sears and headlines predicting the death of retail. Readers might not know that new store openings are on the rise. Growth and expansion can be viewed in the lower end (dollar stores, discount retail) and in the upper end (Nordstrom) of the market. Successful retailers such as Walmart, Lululemon and Nike all have a clear value proposition and make an effort to enhance the experience they’re offering discerning customers.

Technological innovations are also driving change in retail. Self-checkouts will be familiar to some. They’re available now at most grocery chains, large drug stores and shops like Walmart. Amazon Go offers a check-out free experience where purchases are charged via the app you use to enter the store, supported by surveillance technology. Walmart is testing “Scan and Go” technology, eliminating the need for a check out.[4]Personally, I appreciate being able to check stock availability online before venturing to a store, a service available at diverse outlets such as Canadian Tire, Chapters, The Bay, and Urban Outfitters.

“Historically” online vendors like Amazon and Wayfair are opening physical locations and/or investing in companies with on-the-ground locations – such as Amazon’s acquisition of Whole Foods. We’ve been in the Amazon Books on 34th Street in New York and found the store quite different in terms of stock and layout, compared with other book shops we frequent. The Amazon retail concept is to implement the online experience in a physical location. The shop is driven by the products that are best sellers online and provides a pick-up and drop off point to support the online business by making it more convenient — effectively mediating some of the shortcomings of the online experience. The retail experience at Whole Foods, from products to service, is also changing as a result of its new parent company’s influence.

Just as online retailers are using physical locations, traditional bricks-and-mortar outlets are blending online shopping with their physical destinations. My grocery store, for example, allows you to order online and pick up in store. Premium parking is reserved for customers using this service. My grandfather ran the family grocery business, J.F McGrath & Sons, into the 1970s. A big part of that operation was filling and delivering weekly grocery orders – made by phone. Today, you can order what you want from The Bay online or SportChek and pick it up in the shop, eliminating the shipping fees; just as we used to order from a catalogue and then pick up in store. A leader in this area was (ironically) Sears. It seems everything old is new again.

The Power of Destination

The reality of the convergence between online and retail was very present for me yesterday. That morning we lined up at a shop to take advantage of a Cyber Monday door-crasher offer in a physical location. We purchased one item in store. The second item, I was told was on offer online only, and already sold out. Clearly there are some bugs to work out.

There were reports of traffic jams in shopping areas on Friday, due to enthusiasm for Black Friday sales. I can personally attest to the issues at Halifax Shopping Centre. Returning to my acquaintance’s LinkedIn comment about the cost of acquiring online customers as the driving force behind online retailers exploration of physical locations, you can see the power of a destination shopping event. Whether an urban downtown location or a suburban shopping super center, people are drawn to these hubs.

The considerations for businesses located in these hubs is how to stand out from the competition and be relevant to their customers?

My daughter and her friends said the Black Friday shopping experience fell flat. There were simply too many people, not enough staff, and only a few “loss leader” deals to get you in the door. We’ve explored the importance of the customer experience in past blogs and will consider this question further in the future.

Activating Convergence

The power of destination is real, the ability to merge online and physical experiences is also proving to be tangible. The opportunity is to create 12-month sustainable relationships with customers, and so move beyond the hype of events like Black Friday and Cyber Monday.

Retailers need – for their survival and growth – to address the opportunities that the new technologies both require and make possible. In the same spirit, customers now require and demand this.

End Notes

[1] August 1, 2018, Warren Shoulberg [2] Forbes, March 19, 2018, “Physical Retail Isn’t Dead. Boring Retail Is”, Steve Dennis

[3] Forbes, March 19, 2018, “Physical Retail Isn’t Dead. Boring Retail Is”, Steve Dennis

KARA HOLM