Voor de ‘Insights Scientist van het jaar’ award zijn de artikelen gebundeld in de publicatie MOA Topic of the Year 2019: Surviving the Retail Revolution. Een mooie brug tussen de wetenschap en de praktijk is het artikel van Lizet van de Kamp dat ook ingaat op de vraag of fysieke winkels nog wel bestaansrecht hebben.
How to survive in the age of digital transformation
Lizet van de Kamp
This first quarter in 2019 there has been an above average number of bankruptcies among retailers. Is this a trend in the retail market as more and more consumers are purchasing online and using e-commerce business models in their everyday lives? In this paper Ipsos starts with sharing the changes in retail landscape, with the role and need for e-commerce models, but also the changing role and need for physical stores. Based on Ipsos Global Trend studies, thought papers from our experts and our work with a multitude of retailers and brands, we are keen to share our top 10 survival tips for retailers with a physical location.
Setting the scene
The world is changing at a rapid pace due to continued developments in digital technology and advances in e-commerce. This means that the way we shop for products and services is also evolving. Technology has created a digital retail landscape that is unrestricted by geography and the normal dynamics of bricks and mortar stores. Physical stores are also changing as they not only integrate technology in-store but also connect with the digital world to increasingly deliver a seamless omni-channel offering. As a result, we need to understand these changes and their implications.1
Initially it started when banks and travel companies where due to technology it was possible to organise your own travel or banking without the need to go to a branch, due to the digital transformation there was a big shift from physical towards the Internet. Nowadays, shopping streets look quite different from the way they used to be. Retailers, such as Schoenenreus, Free Record Shop, V&D, and very soon Coolcat left the scene. Q1 2019 also shows there are more bank- rupt retailers than in Q1 2018. It seems like the battle between on- and offline retail has been won, in favour of online shops.
So on one hand we see physical stores closing, but on the other hand we see online stores opening physical ones. Coolblue, Zalando, and also Amazon in other countries are opening brick-and-mortar stores to have a presence. But these stores have different roles than before. Therefore, saying physical stores are dead is, indeed, too short sighted. The question remains though: ‘What is their added value?’ In other words: how do physical stores survive within a digital world?
To answer this question, we must first understand the implications the transformed retail landscape brings to both consumer, seller and retailer.
The changing retail landscape
A lower cost of entry for new brands
E-commerce isn’t merely shopping for the same product via a different channel. By having a lower cost of entry, the digital environment is attractive to new companies to open up their ‘digital doors’ and thus extends our retail choices.
A complicated purchase process
Before the arrival of the Internet, you had one option: to buy your products at a physical store. The choice was small and information even smaller. E-commerce has expanded and complicated the buying process, especially for non-FMCG categories, categories with a higher spend. First, consumers search online for the category as a whole and some product more specifically, then they get inspired by reviews and bloggers, go to the actual online store for advice, search for the best deals, and before they decide they again consider all product’s specifications. This process is complicated to follow for consumers, but also for the manufacturer to understand all the touchpoints consumers interact with, and the retailer who sells the products.
New user-disruptive e-business models evolve every day
Direct to consumer
Direct to consumer models offer the opportunity to contact the shopper directly and thus builds a relationship with the consumer. A good example of this is the relatively new food box industry, with some strong market leaders such as Hello Fresh. They have revolutionised the way people buy and prepare their meals.
Consumers expect more and more direct and instant connection with brands and retailers. Social media, and chat and app services ensure 24/7 availability. The combined use of Facebook and KLM is a good example of this where you get a quick response with for example complaints.2
The location features on smartphones offer new opportunities for products and services. ‘Heineken Now’ delivers an ice-cold beer within 45 minutes right to your doorstep, and Uber, a car service that instantly provides you with the nearest taxi instantly.
It is even possible to determine the origin of a certain product. Take ‘Koopeenkoe’ for example, here the buyer can locate the exact paddock the cow came from.
Especially generation-Z favours personalised services and wants to be part of something unique. It is becoming ever more mainstream to personalise your trousers or shirts with your own logo, like Levi’s or Nike. The FMCG sector has also caught on to this phenomenon. It started with the successful Coke campaign back in 2013 to ‘design your own can’, and other food & drink companies followed such as Tony Chocolonely or Heineken. It has become even more interesting since personalisation has been taken to the next level as it is now possible to design the best food menu based on your DNA, it is especially developed for you.3
Convenience, convenience, convenience
In the end, people want convenience. Ipsos has seen this trend for quite some time, with Netflix where you can sign up to watch unlimited movies & series for a small fee and Bloomon guarantees to always have fresh flowers at your home, delivered at a convenient time. Now in the Netherlands we also have ‘Swapfiets’: a bike delivery system that brings a bike to you wherever you are. You’ll own a bike that never breaks down. Plans start as low as 15 euros per month.
Also, physical locations need to understand how they can make life more convenient for their shoppers. Convenience is for some to pick up groceries at a for them convenient time through ‘click & collect’ models, but also other time-saving mechanisms such as self-check will help reduce, for example waiting times. AH to go is experimenting this with “Tap-to-Go” where you do not even have to have cash with you.4
What is the physical store’s added value?
While digital channels inspire, inform and allow for efficient purchase, physical stores let us see and touch a product (basically the 5-senses), while getting advice at the same time. They provide Experience, Expertise and Efficiency. This is what differentiates offline to online stores.5
Omni-channel retailers have altered the use of physical stores to ‘meeting places for like-minded people’.6
How physical stores can survive
As we are now aware of the differences between online and offline retailers, physical stores need to distinguish themselves. The next couple of tips will help them in their process.
Develop a clear strategy
We all know success stories of proactive retailers who keep reinventing themselves and therefore stay relevant to their customers. They know exactly why their customers keep coming back. Therefore, when developing a new strategy always keep these key questions in mind.
- What is your competitive advantage against a similar formula?
- What are your most important values?
- What is your store’s most important aspect?
- Why does your store matter?
- Why would consumers rather buy at your store instead of another one?
Be aware of negative publicity
At Ipsos we work for a variety of clients and their brands. We know that brands, also retail brands, with a strong Brand Mental Network are better equipped to growth. Our R&D shows the following 4 learnings: 1) Brands that come to mind first, have more connections; 2) brands that come to mind first, have more positive connections; 3) brands that come to mind first have more distinct and emotional associations and, 4) last but not least brands that come to mind first are more likely to have a higher market share.7
When we do our Brand Mental Network analyses for retailers, by looking at spontaneous associations related to the retail brand, we see publicity around bankruptcy popping up as negative associations, which can have a negative effect on your brand as it can hinder customers to visit your branch already, impacting future growth. So be aware of the impact of news such as bankruptcy, lower than minimum wages for your employee’s, etc.
Consider smaller store formats
Urbanisation is a global trend which we also see in the Netherlands. The number of households is increasing, there is an increase of single households and the population is aging. Also most job opportunities, culture, schools, and hospitals are more and more clustered in cities. Central locations become more popular due to this trend. This results in a higher price for A-locations in combination with relatively smaller objects on offer which can challenging developing a store.8
Some retailers are successfully adopting this urbanization trend. Praxis is expanding with smaller store formats, Praxis City, with only a selection on offer appealing to urban citizens.9 Also Ikea is internationally looking and opening branches in city centers (the current announcement is 30) to expose customers to their brands and have a strong e-commerce linkage in stores.10
Turn your store into something meaningful
Turn your store into a nice place that people enjoy visiting and one they will miss when they haven’t been there for a while.
The international cycling brand Rapha has done an excellent job at this. Cyclists who have bought their gear online, can pick them up at the physical store, while at the same time enjoy a cup of coffee and talk to other enthusiasts. The brand has transformed their stores into clubhouses where cyclists love to become members off.11
Another example is Schorem, a barbershop in Rotterdam. Here stylish, tattooed, bearded and moustachioed hairdressers work while entertaining their male clientele with a nice drink and a real taste of Rotterdam humour. These hairdressers have turned their business into a place ‘for men, by men’. A place where their customers love to pop round and spend some time.12
Join forces with other authorities and retailers
Advocate free parking at shopping malls
Stravo research shows that free parking triggers a rise in sales among shoppers. After all, visitors coming by car, buy more than those coming by bike for the simple reason that they can transport more. At places where parking fees were introduced, the number of visitors dropped by 20% and sales fell by 30%. Even people in smaller cities and towns get increasingly annoyed by the rising parking expenses. This results in people buying more products online instead.13 Ensure close connections with local politics and combine efforts with other players who aim for the same goal. Thus driving traffic to the Highstreet.
Join forces with new (online) initiatives
There are also initiatives by start-ups who are keen to combine forces in order to drive traffic to the city centres. There is an initiative in Groningen by Zupr which claims to provide “The online link to offline sales”. They developed an online platform, where you can check where offline products are available and in stock. All very locally, to make it convenient to pop to the city centre to buy items they can also buy offline.
In Amsterdam there is a similar kind of initiative: BIJONS. Their goal is chiefly to support local entrepreneurs and make them findable. The site features a simple ‘search-and-find’ function, accepted payment methods and (CO2-neutral) delivery at any desired moment, anywhere in the city.14
These online initiatives, that make offline shopping easier and more convenient will help drive traffic to your stores. Besides smaller independents, larger retailers such as Decathlon already make use of online techniques to drive traffic to stores by showing whether certain items are in stock at a specific location, so you can immediately have a look and buy what you need.
Focus on your people in the store
The atmosphere of a store and customer advice are crucial to customers. In other words, store personnel highly influences the customer’s experience. So, invest in talent, training and development of your employees. Likewise, don’t forget to measure the customer experience regularly and steer and train your employees accordingly.
Invest in digital solutions in your stores (but don’t overdo it)
Digital transformation has become 2019’s buzz word. Every business, retailers as well, must engage in ‘digital transformation’. This can be done via Interactive screens, Smart Mirrors, Scan-and-go and Location-based messaging. But is this all necessary?
Technology isn’t a reason to visit a store, but it can make shopping a more enjoyable experience. It is a means to an end. So, make sure to make functional use of technology. For example, self-checkouts could be the solutions to long queues.15
Deep dive into consumer trends & needs
There is a huge amount of FREE data available online. Use these to deep dive into recent trends. Ones that may influence your brand, location and product range are: an ageing population, rise in single-person households and growing housing costs.
Use customer data
Having data in your hands gathered online gives you a great insight in online purchase behaviour, buying preferences, shopping history, and more. Additionally, you could use Social Media and Rating & Review data, ideally in combination with customer service data to understand what people say, and use this information to improve, for example, your product offering or service. And of course, if you have one, you can use your loyalty card holder base to ask some specific questions and run specific analyses.
For physical stores there are also techniques such as shopping counts or came- ras to understand your customer through observations and analysize who is entering, and where hot/cold spots are in your shop. Understanding bottle necks in the customer journey will help to improve them and generate better return in the long run.
And finally: use non-customer data!
The Holey grail is not looking only at the data you own or can have access to. It may also be valuable to understand why a competitor is doing better, and what you can learn and do based on these insights. Basically, don’t focus merely on your own data, but likewise compare it with the market and ask-non-customers, to understand the customer journey, so you can better leverage your investments to growth.
In conclusion: Physical stores must deliver on Experience, Expertise and Efficiency
The physical store is by no means dead. But it is evident that digital technologies and e-commerce set a challenge for the brick-and-mortar store. To retain your purpose as a physical store you must be apply these tips to remain relevant for shoppers. It starts with having a clear strategy for your retail brand. Moreover, data coming from customers or non-customers can help with this. Shoppers want to visit a location that will be more meaningful, creating a reason for the visit and where staff expertise can play a key role in the consumer’s journey. But also digital techniques, before or at the store, can contribute to a convenient, smooth and efficient experience. Once they have found you, their experience must be excellent. Only then will they return and spend even more. Remember to deliver on the 3 E’s: Experience, Expertise and Efficiency.
1. Ipsos views, The Evolution of Shopper Behaviour, May 2018, Stuart Wood
2. Ipsos Retail Performance, ‘How Food Shopping Habits are being Transformed by Tech’, January 2018, Tim Denison.
3. Ipsos More, Keeping it Fresh; Being on Trend in Food and Drink, January 2019, Pippa Baily.
5. Global Consumer Insights Survey PWC/Ipsos paper: The Evolution of Shopping behavior, 2018.
7. Ipsos, Thought piece on: The Map for Brand Growth; 2017, Eleanor Thornton-Firkin; Jon Harper & Claudia Meillat.
8. Ipsos, Global Trends: Fragmentation, Cohesion & Uncertainty, 2017.
10. https://retailtrends.nl/news/53234/ikea-opent-stadswinkels-in-wereldsteden and https://retail-trends.nl/news/54770/het-nieuwe-ikea-opent-dertig-stadswinkels
15. Ipsos, Moving the needle in Mobile Payment, August 2018, Jeff Repace & Reena Roy.