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GUEST COMMENT The Reinvention of retail – oblivion or opportunity?

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Apocalypse now – but it is an opportunity that many are already taking advantage of
Apocalypse now – but it is an opportunity that many are already taking advantage of
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How ASOS, GOAT, Primark and Nordstrom have managed to turn the retail apocalypse into something positive – and you can too

 Viktoriya Trifonova, Senior Insights Analyst & Writer, GlobalWebIndex
Viktoriya Trifonova, Senior Insights Analyst & Writer, GlobalWebIndex

Many articles and analyses proclaim we’re set for a “Retail Apocalypse” to continue throughout 2020, as ecommerce continues to penetrate consumer lives at scale.

 

It makes for a startling headline, but the future of physical retail may not be as catastrophic as the phrase seems to imply. Quite the opposite – it’s only now we see businesses starting to pursue the balance in the right direction. In the face of almost 9,000 closed stores this year in the U.S. and UK combined, newly emerging retailers born online are desperate to plant the seeds of their physical footprint.

 

Among other things, this new kind of retail represents an evolution in the relationship between online and offline shopping. Now we’re starting to see a fresh kind of coexistence emerge, one where the movement between the digital and real worlds is seamless. But above all, recognizing the inherent advantages of a physical footprint.

 

Refocusing on What’s Tangible

The growth of ecommerce was pegged to destroy traditional shopping as we know it. And while its growth has certainly made a dent on high street, we’re seeing a resurgence offline that points to more complicated motivations for why people are drawn to one shopping environment versus another.

A bespoke survey we conducted in September 2019 among online consumers in the UK and U.S. showed that 73% still prefer to shop for clothes and apparel in-store. The fact that this figure doesn’t fall below the 70% mark even for the digitally-native Gen Z aged 16-22, illustrates that offline fashion has a truly cross-demographic appeal.

 

In some ways, it’s like claiming that cloud kitchens, restaurants that only have an online presence, are replacing restaurant dining. While they are undoubtedly disrupting the food industry, cloud kitchens co-exist with restaurants simply because they offer completely contrasting experiences. Nothing can replace the joy of eating out at a restaurant, the same way as nothing can replace a good old-fashioned dose of shopping therapy.

 

Consumers want to try the products they buy, and this is the primary reason why they’ll keep coming back. For example, 7 in 10 fashion buyers shop for clothes in-store because they can try what they’re buying and 63% do so because they can touch and feel the products.

 

One interesting, yet underdeveloped, potential integration of the tangible with the digital is augmented reality (AR). This technology allows consumers to virtually “try on” products without visiting stores. Some brands, like ASOS and GOAT, have already developed different “try-on” AR features. But with only 8% of fashion buyers shopping online because they like to virtually try on products via AR, this remains secondary to the tangible connection of actually putting clothes on in a physical store. While the technology is promising, it’s highly underdeveloped when compared to the true tactile experience of touching and wearing clothing.

 

Experience 2.0

AR is just one potential pillar of a new, more experiential kind of retail, where experiences are prized above transactions. We can see from our global data that a status brand can be trumped by a unique experience. In fact, consumer attitudes centred around buying as an experience show steady increases since 2012. And although experiential retail is not a new concept, technology and the consumer are constantly reimagining its meaning.

 

Redefining physical spaces as hangouts is what we’re most likely to see booming in 2020. Fashion brands need to transform their stores to grab the attention of consumers and keep them there for longer. We found that more than three-quarters of fashion buyers want to see some kind of experience in apparel shops.

 

Although younger generations are more tech-savvy and digitally-oriented, technology alone won’t be enough to enrich the physical shopping experience. Gen Z and millennials stand out from the average fashion buyer in the UK and U.S. for wanting features like bars, spa centres, and bakeries in fashion stores, which Primark has tapped into with its new Birmingham store concept. The branch features a blow-dry bar, beauty clinic, Disney-themed café, and “snap-and-share” room.

 

Nordstrom’s much-anticipated New York City flagship store opened recently, and embodies this concept of the new retail experience. Boasting seven food and beverage options and a beauty spa inside, it represents the evolution of a traditional retailer into a more immersive space.

 

For younger shoppers, this is the perfect hangout spot, showing that in reality, so long as brands remain relevant to consumer expectations, the online/offline divide actually disappears.

 

Reviving the Physical Footprint with Direct-to-Consumer

Le Tote and other direct-to-consumer (DTC) brands like Everlane, Allbirds, and Rothy’s are shaking things up even further, moving away from pure-play digital offerings.

 

Le Tote, a personalized clothing and rented fashion company born online, is a prime example. In August 2019 the company acquired New York’s oldest department store, Lord & Taylor, for $100 million. To put this into perspective, this is a seven-year-old company buying a part of a nearly 200-year-old conglomerate.

 

Le Tote is acquiring 38 stores, with plans to triple that number in the next two or three years, giving the brand inventory and a new avenue to connect with the consumer. A non-traditional deal to say the least, but one that validates just how important a physical footprint is for fashion brands amid a turbulent retail landscape. Whereas in the financial sector we’ve seen traditional banks acquiring fintech companies to access the digital infrastructures they lack, the landscape seems somewhat flipped in the world of new retail. A digitally native company buying a legacy retailer means the old bricks turn gold in the digital world.

Facilitating New Opportunities in the B2B Space

Importantly, the prospect of DTC revolutionizing the online-to-offline model hasn’t gone unnoticed by the business-to-business space. Ecommerce tech platform Shopify, which has been instrumental in helping DTC brands bypass retailers and wholesalers and sell to consumers directly provides one such example. Having recognized the vast opportunity for physical retail on the horizon, Shopify is expanding on its offering by adding services such as multi-channel returns and exchanges, in-store pickup and fulfilment among others.

 

But Shopify is not the only company trying to cater to the brick-and-mortar demand in a unique way. A new co-retailing concept, Re:store, opened doors in San Francisco to bring niche DTC brands offline and immerse consumers in their products. Importantly, solutions like Re:store and short-term lease companies like Appear Here solve a fundamental problem that some legacy brands are still struggling with, namely binding and inflexible lease structures for physical stores.

 

Physical retail as we know it is undergoing rapid transformation, however, 2020 isn’t likely to see an “apocalypse” – at least as far as consumer interest is concerned. By tapping into what’s most desired among consumers, we could see a retail renaissance. Technology will be a part of this, but it has to come as part of a renewed focus on what’s tangible and emotional about shopping.

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