Guest Post by Jason Dooris
Australia’s big name retailers are jumping on the digital bandwagon in a big way. Traditionally, bricks and mortar players were scared of the big bad internet eating away at their profits. But this is changing. Most, if not all, major players have now adopted some kind of digital or ecommerce strategy.
But more change is coming. The adoption of ecommerce en masse and evolving consumer habits mean physical locations will also need a serious rethink, as marketers come up with new ways of converging online and offline and as stores become technology-enabled distribution and engagement centres.
A quick look at the Australian retail space shows an environment of seismic change, driven by consumers and by digital. Tech-savvy consumers want personalisation, engagement, access to brands across multiple platforms and instant gratification. Meanwhile, ecommerce is currently a $17 billion growth industry, which, according to NAB, only represents 7 per cent of the total retail pie, but this figure is growing each year.
According to PwC, around the globe, 54 per cent of consumers buy products online via their PC at least once a month, although the figure is still higher for brick and mortar locations, at 70 per cent. The local environment, meanwhile, is complicated by new competition from international retailers like Zara, H&M and Topshop.
As recently as 2013 I was reading articles that referenced the “absolute death” of brick and mortar retail, with some predicting an end to supermarkets altogether, amid the closure of bookstores and other physical retail locations. Thankfully, the old fears that digital will kill off brick and mortar are fading. The above figures might seem like a threat to the offline retail space, but savvy operators recognise physical store locations play an important role in the consumer mindset, particularly when you think of concepts such as ‘consumer experience’. The key is figuring out how to combine online and offline to create a seamless customer journey, as well as discovering how to transform physical spaces into experience hubs.
Take Dick Smith Electronics, for instance. The brand is undoubtedly a king of retail, a physical behemoth which is one of the most highly recognised sellers of retail consumer electronics in the country. But take a quick look at the brand’s website and you can see online only deals for computers, printers, TVs, mobile phones and any number of products. But the company’s physical space remains as strong as ever, with the company reporting strong sales across both online and offline in the last financial year. The brand’s half yearly results show impressive 9 per cent sales growth, driven by increases in both online sales and store sales. The internet has not killed the physical space, but that space does have many new roles to play, not least of which is that of a showroom, the physical store is where consumers can touch, test and experience the retail appliances which they have comparatively researched online.
Australia seems to have moved past the bricks versus clicks protectionist model. Most players have moved towards a view that sees bricks and mortar strategy and digital strategy as two different but complementary marketing streams with differing business goals. This is a mighty step forward from where we were a few years ago but we need to develop further still, towards viewing online and offline as one and the same, as a single entity. This means that rather than simply adding digital capabilities to exist alongside the physical space, retailers need to transform their physical spaces as well, to create merged, seamless, convergent retail experiences for consumers. PwC figures indicate that 68 per cent of people globally have browsed products at a store then bought them online afterwards, while 70 per cent of people have browsed online then bought the products in store. This indicates a complex interplay, and suggests the physical location remains ever important.
Think about this: A consumer enters a brick and mortar retail appliance store like Dick Smith or Harvey Norman and is welcomed by a message on their smartphone. They view the store’s products visually while promotions and extra information are transmitted to their device. The customer scans and pays for products via their phone, then collects their order as they leave. Where is the digital here? Where is the brick and mortar? The person has used their smartphone to buy in store without the need for a checkout. The experience is seamless. The integration markedly improves the customer journey, while producing a whole host of valuable data. In the US, for instance, major brands like Macy’s, Apple and JC Penny have installed iBeacon technology in their store for this very reason, to create an interplay between the physical space and their online presence.
In its ‘Total Retail 2015: Retailers and the Age of Disruption’, PwC has argued stores will increasingly transform into experience hubs: physical locations that move beyond mere utility and embrace entertainment and engagement. Bloomingdale’s in the US gave this a try when they implemented Me-Ality, an immersive technology system which reads moisture on your skin to take your exact measurements and recommend the perfect pair of jeans.
But the brick and mortar experience doesn’t necessarily need advanced technology. It might be as simple as recognising the experiential benefit a physical store provides within a brand’s broader omnichannel approach. A great example of this is the campaign Ikea and Airbnb launched last year, giving people the opportunity to sleep the night with their family in the Ikea showroom in Sydney, providing people with the opportunity to experience Ikea’s products before purchasing them.
The importance of transforming the physical space will only become more important as online shopping grows and convergence technologies become more readily available.
On a final note, brands should keep their sights firmly squared on developments in consumption habits when tailoring their multichannel approach. At present, two core concepts are driving developments in retail: instant gratification and customisation. The success of the Domino’s Pizza Tracker app and the Uber track-your-taxi business model and the Netflix instant movie framework are clear indicators that retailers should be focused on delivering products immediately to consumers, and if that’s not achievable, they should be providing customers with as much real-time information as humanly possible.
Jason Dooris is the CEO of Atomic 212 Group.