The number of empty stores in high streets and shopping centres has dramatically increased over the past year, with one in seven lying vacant after lockdown. With people of all ages becoming accustomed to online shopping during the pandemic, store closures look set to continue – especially as data shows online sales continue to take a large chunk of retail footfall. Covid-19 has accelerated an existing trend, and while many of these closures are due to business failures or acquisitions, retailers struggling to sell stock, burdened by the disruption of multiple lockdowns, are at risk of permanent closure too.
Gap is the latest high street retailer to announce that it’s abandoning brick-and-mortar, closing 81 stores in the UK and Ireland in a move to online-only retail. But shutting down stores is not something that should be taken lightly – and to close all of them is jumping the gun. That’s because having physical, visible locations offers something online retailers can’t: not only the opportunity to see and touch products, but also support for delivery capabilities. In this sense, they complement an online offering.
Keeping up with demand
From a consumer’s perspective, every good experience raises the bar of expectations. Delivery speed of online orders is no different – a fast and secure service must be a priority. But meeting this demand is a major challenge. A study from McKinsey looked to Germany –whose ecommerce network is evolving rapidly at a speed similar to the UK’s – to take stock of the situation. The study calculated that for a business to provide Amazon-like same-day fulfilment to the 20 largest cities, they would need to establish 11 new distribution centres – all at a huge cost.
However, add a network of stores close to centres of the population into the equation and the situation changes. What if you could use these locations to avoid much of the cost and time delay of buying new warehouses? Using these stores as distribution nodes has the potential to be a better alternative. McKinsey’s case study reveals that broadening the role of 30 stores could provide similar rapid order fulfilment capabilities to Germany’s top 20 cities, but at a much lower cost.
Delivering a fluid experience inevitably leads to higher customer satisfaction – and in the world of ecommerce, where there’s a wide pool of competitors, a reputation for quality service is vital.
Supporting a harmonised experience
The same sentiment is echoed by Gartner: it suggests that stores must diversify to a mix of traditional, fulfilment and experiential locations. Put simply, the future of the store is as a hub that supports the provision of a “harmonised” retail experience – one where every stage of the consumer journey, from selection to purchase and use, is consistent and completely fluid.
Location is a key part of delivering on this experience. Stores provide huge brand exposure given their position in the heart of city centres and local high streets. In fact, pre-pandemic research found that a new store location actually increases a retailer’s website traffic by 37% in the following quarter. But location goes even further to complement an online offering. The closer stores are to their customer base, the faster retailers can ensure customers get what they want, where, when and how they want it – whether it’s click and collect or same day delivery. While investment is needed, the cost required is far less than establishing new bespoke distribution centres.
A connected approach
Rapid delivery is the new normal, but the technology requirements should not be underestimated. As the store’s purpose expands, the ability to connect across systems, channels, stores, partners and devices is key.
The right technology and processes need to be in place to achieve this. Process mining and management can help avoid bottlenecks that either slow down service or increase cost (or both). API management in a hybrid cloud/on-premise technology environment can help connect different parts of the business more easily. In practice, this means linking together warehouse, stock, point of sale, ecommerce, billing and customer service channels. The customer sees one experience and the technology used to deliver it needs to stay ahead of that expectation.
Tapping into the digital-first mindset
Brick-and-mortar’s days aren’t numbered, nor is it working in opposition to the online retail world. Rather, its challenge is to change, as the expectations of it have changed. Its presence can do much to deliver on customer demand across channels. By re-thinking the overall purpose of existing sites and expanding these into distribution hubs, you can tap even further into the digital-first mindset that now characterises many consumers.
Oliver Guy, Senior Director, Industry Solutions at Software AG