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The New Age of Brick-and-Mortar

Much has been said and written about how the world is moving towards online retail and the imminent demise of ‘brick and mortar’. With the forecast of online retail to reach $306 billion in the US alone this year, this prophecy is not entirely surprising. But while it may be true for exclusive ‘brick and mortar’ players, for retailers having both online and offline presence the future might not be that bleak.

In fact there have been reports of pure play online players moving into the brick and mortar world. Case in point being Amazon’s rumored plans to open a store in Manhattan and its deal with Future group; one of India’s largest retail groups. As per this deal, both firms will develop a new line of products across categories to be exclusively sold at Amazon and Future Group's retail stores. Very.co.uk, the online department store, is also placing the focus on the brand’s click and collect offering. These retailers are not the only ones who are moving off line from online, there are many others as well who have joined the bandwagon.

Think about your own shopping experience in the last three months. Serendipitous shopping, immediacy and getting to try the product before purchase is what drives offline shopping, whereas convenience, lower price point, crowdsourcing of product information is what customers love about online retail.

Could retailers create an experience that provides the customers the best of both worlds?

So what does a retail store 2.0 look like?

Imagine the following scenario: You want to buy a gift. You have narrowed down your decision to buy the best android smartphone available in the market. Now, this is easier said than done. There are so many options available in the market and you decide to turn your attention to the best online adviser, Google. After a few searches and reading customer reviews, you find the right phone and the right online retailer which is providing the best price.  But you are still not 100 % sure since you haven’t tried the product yourself. To add to it, you are already late. You don't have the time to wait for the standard delivery and you don’t want to pay for the express delivery either.

What if the retailer allows you to place your order and collect the phone from a nearby collection center the very same day? Would this option delight you?

It gets better. So, you place the order and travel to their collection center. To your surprise it is nothing like the collection center you imagined. You notice that it is indeed a collection center but a with a small store front. It has product displays and trial options, though the products seem to be limited in number unlike a traditional retail outlet.

You try out the phone you have ordered, and after playing around for a good 15 min you are happy to collect it and head back. Since the collection associate knew that you were on your way this morning, she already has your phone packed and ready to be picked up. While waiting in the queue for collecting the order you happen to see the headphone that you were looking for, on one of the product shelves. You scan that item using the retailers mobile app and place an order which will be delivered to you in three days, all this while standing in the queue. You reach the end of the queue and the associate gives you the order and informs that you can return the product at the same place and receive an immediate refund just in case.

Well, if I were the customer and the above scenario played out for me I would definitely be a very happy customer. I feel that retailers who have a current online dominance have a better chance of successfully moving to the above model. With the wealth of data they have, these retailers can control operational costs and will still be able to provide the online price advantage in the following ways:

  1. With data around customer purchase behavior they will know exactly what to stock and where, hence reduce the cost of managing excess assortment. This would be slightly difficult if you consider the marketplace business model in which the retailers do not control the inventory,but still feasible. There is also the fallback option of touch screen enabled ‘endless aisles’ to further optimize the physical stock.
  2. Figure out the optimum number of collection points required and its strategic location. This is important so that you keep the costs down . This analysis will also be useful for deciding the first few locations for the pilot phase.
  3. Knowing when the customer will turn up, means that you can actually do just in time inventory keeping.
  4. Given that you know what clicks for a given customer group, collection associates will be better equipped at converting upsells and cross sells.

As ThoughtWorker Mark Collin mentions in his blog Delivery 2.0 : Blurring the lines between retail and delivery we are helping SF Express do something similar in China.

SF Express is trying this approach and changing their business model from delivery service to retail. They are acquiring physical presence in the form of 'Post Offices' which are a both a delivery hub and a local convenience store. But they are not operating on a basis where the store has to be stocked full of goods. Instead they have a core range of goods supplemented by an endless aisle concept. Customers can also actually scan an image of the product through the digital Kiosks in the store and get it delivered next day, either to the post office or to their home.

Thus equipped with data and the willingness to challenge the status quo, the traditional in-store retail is here to stay, but with a slightly different experience, of course.

What do you think? Do you see value in such an experience?  

Learn how we can help convert data into actionable insights: ThoughtWorks Big Data Analytics practice.