The Store of the Future: A Mashup of Brick and Mortar and Digital

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One of the big business debates of 2018 is whether we’re in the midst of a retail apocalypse or a retail renaissance.

More than 660 retailers filed for bankruptcy in 2017. That was up about 30 percent from the previous year. The number of store closings – over 7,000 – also set a record. Such figures are proof, some argue, that brick-and-mortar retailing is as relevant to 2018 as VHS.

You could also argue that the surviving brick-and-mortar retailers have absorbed these recent lessons and emerged stronger. As of May 2018, retail employment was still at a historical high of 15.3 million. For every high-profile bankruptcy there was a new entrant (often an online retailer crossing over to brick and mortar) or a quiet expansion for an existing brick-and-mortar retailer. “There are times when some companies are challenged, and other companies come out of it,” said Sucharita Kodali, an analyst with Forrester Research. “Usually companies have peaks and then they decline but then other companies come and take their place.”

In other words, consumers aren’t abandoning their local stores. Some 87 percent of retail sales -- measured in dollars -- still occur in a brick-and-mortar location. But consumers are losing patience with retailers that don’t offer a seamless omnichannel experience. Shoppers want the in-store experience to be more like online. They also expect to be able to search online to see what’s in stock at their local store or pick up an online order at the store. “Not every single store lets you do that yet,” said Jill Dvorak, senior director of digital at the National Retail Federation. “It’s still a mixed bag.”

A Better In-Store Experience

Consumers don’t order online because they hate shopping in-store. They do it because it saves time. A recent survey showed 52 percent of consumers said they shopped online because it’s convenient. Nearly unlimited selection and liberal return policies are other reasons consumers cited for shopping online.

Still, 79 percent of consumers regularly shop in a store, according to a 2017 survey by the National Retail Federation. Among the reasons consumers like brick-and-mortar better: the ability to touch and feel merchandise like food and clothes. Consumers also see shopping as a form of entertainment, at least some types of shopping, some of the time. “What did you do as a teenager? You went to the mall,” said Dvorak. “It was a place to walk around and something to do in terms of looking at things and interacting with brands and product. It's a social experience to shop.”

Since consumers don’t have to leave home anymore to shop, retailers need to improve that in-person experience. Well-trained sales associates equipped with tablets can help solve problems that search engines can’t. In-store apps can help shoppers choose the right makeup shade. Interactive mirrors in fitting rooms can illustrate what the same item in a different color might look like. AI systems can suggest companion items -- like a top that customers frequently purchase with a pair of pants a consumer is considering.

Brick-and-mortar retailers can also mimic the endless customization available online. Some are already dabbling in “pretail” by using 3D printing to create items in store – sneakers, for instance – in the size and color a consumer demands.

Faster and More Seamless Purchases

Consumers don’t want to choose between online and brick-and-mortar. They want the best of both experiences. Imagine you’re looking for a new polo shirt. In an ideal world, you could buy one online and wait two days or so for it to show up in the mail or you could search all your local stores, buy one online and have it waiting for you when you show up. This option – sometimes called click and mortar – is increasingly popular. The NRF found that 68 percent of consumers have tried online shopping with in-store pickup.

Kodali said she expects consumers to get used to in-store pickup in coming years as the option becomes standard. Retailers might even work together to do so. “You may order something, and it will get shipped to someone else’s store instead of the store you ordered from,” she said. In such instances, brick-and-mortar stores might form alliances to provide the same level of consistency in fulfilling orders that consumers are used to online.

Another option is to check online to see if the item is in stock and buy it in person. That is especially attractive if the consumer knows that they’ll be able to quickly make their purchase. Here, digital is addressing one of the biggest pain points in retail – long lines. Self-checkout dates back almost three decades, but since 2016 some retailers have offered a speedier alternative – self-checkout via smartphone app. The initial apps let consumers scan items and were checked by a human as they left the store. The latest iteration is even better: Consumers merely put items in their shopping bag. Cameras and sensors record the actions and add the items to the consumer’s online shopping cart.

There are other ways digital tools can help consumers speed through the store and other experiences they can offer shoppers.

Augmented reality can help shoppers easily find items on shelves. AR might present the scene in black and white, for instance, and highlight the item with color. With the consumer’s permission, retailers could also sync data from their loyalty programs and past shopping records to help consumers find what they’re looking for.

For retailers, digital creates a new canvas to offer in-store experiences. In some forward-looking stores, consumers can virtually try on different color clothes with the aid of a smart mirror. Smart walls can also suggest new styles and let customers order champagne while they browse. Smart mirrors can also let customers try different looks that are superimposed over their faces. The shoppers can then get those photos emailed to themselves. Mannequins can sport beacon technology to let shoppers know, via their smartphones, what the mannequins are wearing and how to find the items in store.

To attract the attention of younger shoppers, some stores are experimenting with in-store theater. “Living advertorials” are a mix between a traditional retail store and a magazine. They feature displays that have typically been confined to shop windows. One pop-up shop featured a graffitied police car that was made to look like it had crashed through barricades. Such tableaus are created with social sharing in mind and designed to prompt consumers to photograph their experiences. Others are experimenting with flash sales advertised on social media and in-store DJs. VR is another lure for shoppers; some retailers offer VR experiences that aren’t created to sell items as much as draw consumers into the stores. One retailer, for instance, recently turned its shop windows into an interactive pool scene and let shoppers ride a virtual water slide.

Different Rates of Digitization

Such experiences offer a new way for retailers to enchant shoppers. The good news for them is that so many of their rivals are behind the curve. A 2018 survey found that just 3 percent of retailers had completed digital transformation projects. The gulf between consumer expectation and reality was reflected in an American Consumer Satisfaction Index survey in which consumers rated online retailers higher than their brick-and-mortar counterparts.

That’s just another sign, in case retailers need one, that if retailers don’t start catching up with their digital rivals then consumers will go somewhere else or, even worse, stay home.

Successful retailers will offer a seamless shopping experience between brick and mortar and online, bringing the best of both worlds to the consumer.

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