Hybrid model spells opportunity for brick-and-mortar stores

by Ajay Lalu: Co-founder and director, Consumption Information Real Time (CIRT).
As the world struggles back to something like normality, retailers need to look at the role of brick-and-mortar in an increasingly omni-channel world.

It's common cause that the COVID-19 lockdowns caused ecommerce's share of retail sales to speed up.

Online sales in the United States doubled its percentage of total sales from 9.6% in 2009, to 19.6% in 2019 - with a spectacular jump to 25.5% in April 2020.

South Africa was no exception, with online retail growing by 66% in 2020 to reach R30.2 billion, more than double the R14.1 billion reached in 2018, according to World Wide Worx MD Arthur Goldstuck.

However, since then, online's share in both the US and here has dropped, and brick-and-mortar stores are expected to regain more market share as pandemic restrictions continue to be relaxed and people learn to live with the virus.

In short, to paraphrase Mark Twain, reports of the death of in-store shopping have been greatly exaggerated. More to the point, we need to recognise this is not really an ecommerce versus in-store shopping competition, but rather the unstoppable adaptation of retail to changing consumer expectations.

One of the constants to bear in mind is the human need for social engagement and entertainment. In-store shopping fits in with that need because shopping is also an opportunity to meet up with friends over lunch or a coffee. Additionally, in-store shopping offers something that online cannot: for men, the opportunity to take the purchase home immediately (54%) and, for women, the opportunity to see/feel goods physically (66%).

There's an argument to be made that the lasting impact of COVID on retail will be the accelerated development of a hybrid retail environment that provides what customers want using all available channels - the so-called omni-channel approach.

The first important thing to appreciate here is that customers definitely want a consistent experience across all channels. That means the growing personalisation available online will have to become more of a feature in store - the retail brand experience cannot vary.

Technology will play an ever-growing role in achieving these roles. On the shop floor, the ability to recognise customers will become more important, but even more so will be the consistency between what is on the digital shelf and the real-world shelf. Back-end systems will thus have to be thoroughly integrated - as always, silos are the major challenge for the digital business.

An important real-world channel

Brick-and-mortar shops can also be used to improve the online experience by providing a venue from which online customers can collect or return goods, speeding up the process and removing some costs from the retailer's overhead. In this regard, the brick-and-mortar shop acts as a fulfilment centre for the online customer but also a way of strengthening the brand by making it concrete.

Getting people (especially digital shoppers) into the store is a skirmish won, but winning the battle will require more. One element that needs special attention is checkout and payment; this is one area where online has an edge: it's very quick and there are no queues.

The adoption of autonomous-checkout technology has been slow in the South African retail sector despite the opportunity to provide a significantly enhanced in-store experience that more closely resembles one of the best aspects of online.

Perhaps the best way for retailers to begin thinking about the role their brick-and-mortar properties can play is to see them holistically as an ecosystem that includes the logistics/fulfilment side of things.

Some potential disruptors on the horizon

There are a few trends that are going to play a role in how the omni-channel environment develops over the short- to medium-term, and retailers need to bear them in mind.

An uptick in fuel prices owing to the war in the Ukraine will make free or nearly free deliveries unaffordable. Pure-play online retailers may find themselves particularly at risk and will have to rethink their business models quite profoundly.

Conversely, those with brick-and-mortar stores may find the ability to fulfil online orders without drastically raising costs will help maintain customer loyalty.

As costs inevitably rise owing to fuel cost increases and supply chain disruptions globally, consumers are going to be using the internet to find the best deals.

My earlier point about the consistency of the experience means that pricing in-store and virtually must be congruent.

Retailers will be under pricing pressure, and this will force them to push back into their supply chains for bulk discounts from their suppliers. But perhaps even more importantly, and this talks again to the personalisation issue, those who can offer special offers targeted to individual consumers will be the winners.

Brick-and-mortar stores as standalone entities are going to remain under threat, but those that form part of a well-thought-out and adaptable omni-channel strategy will increasingly become a key strength.

Republished with permission from ITWeb Limited
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