As the Economist wrote earlier this year, the world post-lockdown is not quite all there. The economy will take time to recover, unemployment is seeing record highs, and as some parts of retail are bouncing back, we are seeing that some stores across the UK have sadly closed their shutters for the last time. Consumer behaviour has shifted, permanently, with accelerated acceptance of digital, that is unprecedented. Recent reporting from both the US Dept of Commerce (1) and Deutsche Bank (2) show that ecommerce penetration jumped 70% in eight weeks in 2020, and grocery online sales reached levels only expected in late 2023.
With the shift online, where does this leave the stores? Recent, precipitous drops in footfall, when partnered with increasing rents, and challenging business rates, have left businesses with a significant store footprint feeling the pinch. Those that didn’t also have a mature ecommerce business may not have made it through the first half of 2020. So, what is the role of the store in a world where everyone is shopping online?
First and foremost, this in by no means the end of the high street. For every retail business that has struggled, there is a new online or wholesale brand that has decided it needs to own the end-to-end consumer experience, and are moving away from a strategy of wholesale or B2B2C. These businesses are now able to get prime placements in malls and highstreets across the country. What we can predict is that they will be more strategic in their investments in the physical estate, with fewer stores. Companies will be investing in geographic and socio-economic modelling and a more considered choice of which stores to open where. Stores will also take a bit more space, and will consider hygiene and social distancing requirements – bigger stores, larger entrance and exits, wider aisles.
As companies look to be more strategic about their store estate, they will also change how they measure the success of a store. Online businesses moving into retail have a different perspective on how they measure the success of a store. It’s not purely about sales through a til, but how many sales were influenced by a store across all channels. Sale attribution – often a huge point of contention when companies have large numbers of stores, concessions and franchise partners, are not important when you operate a truly integrate, omni-channel business. Stores success won’t just be measured on sales, but also on engagement, and simply the ability to put the brand in front of people and offer access to your product, material, or product experts. The logical conclusion is that the whole store economic model will shift.
With the drop in footfall, stores will have to be much more aware of customers missions and reasons to visit. As much and online shopping is booming, there will always be things that don’t translate into a screen. The feel of the fabric, the way the colour looks against your skin, the opportunity to discover a new brand, or the surprise of discovering that hidden feature. Stores have already been experimenting with hidden features, although not every store will have a secret room hidden behind a bookcase, a slide, a giant floor keyboard, or somewhere you can sleep to “test” a mattress. But new store formats like Glossier have used stores to continue the online experience, with advisors who can show customers the best way to apply product. In short, stores brands will feel more like experiences, and with social distancing requirements meaning that booking into a store, perhaps with friends, will start to feel more commonplace.
Through all of this, trying to find what works for your different customer segments is going to be key. Businesses will see stores as a key to better understanding customers, and the idea of test & learn, prevalent in online retailers, will also become very common in physical stores. Stores will change more often, which will mean moving away from fixed installations. Tills will be replaced by mPOS, and as stores test and learn, data capture on customers, their behaviour and their preferences will become a critical role for the business. You’ll also see much greater support for omnichannel, with stores increasing in back office storage for click and collect.
The future is genuinely exciting, as brands and retailers experiment with new formats, new technologies and new experiences, delivered in a way which is efficient and not hugely expensive. The key will be to iterate fast, and to find models that consumers like, and are consistent with how your brand wants to be perceived. Then lean in and invest.
Andy Halliwell is senior director, retail, at Publicis Sapient